Solving a problem that doesn’t exist: Amazon on the implementation of network usage fee in EU

“The idea of an Internet Levy is seeking to solve a problem that in reality does not exist. It would increase costs for small businesses, drive up the cost of living for European consumers, undermine net neutrality and Europe’s Digital Decade targets. It is an idea that has been looked at before and rejected, and should be rejected again,” Amazon said in a recent blog which responds to the demand for implementing network usage fees in the European Union (EU).

The discussion for imposing such a levy can be traced back to March this year when the EU released a consultation paper discussing whether content platforms should share the costs of telecom infrastructure development with telecom companies. These costs are termed as network usage fees, or, as Amazon calls it, an ‘internet levy’. 

Why it matters:

Just like in the EU, network usage fees are also being debated in India, with India’s telecom regulator, TRAI (Telecom Regulatory Authority of India) publishing a consultation paper on the regulation of OTT communication platforms in July this year. How the EU situation shapes up will set a precedent for the way regulators across the globe will address telcos’ demand for network usage fees. 

Key points raised by Amazon: 

Content creates demand for data: 

“Content companies like us create is exactly the sort of thing people want to access and creates the value of the connectivity that telecom operators sell to their customers,” it argued stating that telcos and content platforms share a symbiotic relationship. It says that it has spent $12 billion in licensing and producing original content. 

Already spending on infrastructure: 

It says that it is currently investing over $10 billion in expanding connectivity through Project Kuiper. Project Kupier is “a low-Earth-orbit satellite network that will provide fast, reliable, and affordable broadband to unserved and underserved communities in Europe and worldwide.” It mentions that it is also collaborating with Vodafone in Europe and Vodacom in Africa to help extend the two companies’ coverage of 4G/5G networks. 

Further, it says that between 2017 and 2021 it has invested more than €21 billion in cloud and edge infrastructure (data centers that deliver cached content to users). 

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• Why is the EU asking Big Tech and telcos to submit their investment plans?
• European Union’s Proposal To Get Big Tech To Pay Interconnection Fee Threatens Net Neutrality

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Helping reduce network traffic:

Amazon says it has placed its infrastructure in six EU regions and over 120 Content Distribution Network (CDN) points of presence in 25+ cities across 19 European Member States. This, it says, brings Amazon’s content closer to customers and reduces the amount of traffic on telecommunication networks and transit providers. It says that it employs routing algorithms to optimize content delivery for performance, availability, and cost for customers. 

Internet levy would negatively impact smaller businesses:

“We are concerned that an Internet Levy, similar to other costs, would likely be passed onto customers,” it says. Amazon explains that such a levy would raise the cost of Cloud and Content Delivery Networks (CDNs, a network of servers that distributes content by storing it close to where each end user is accessing the internet) which would be harmful to startups powered by cloud services providers across various industry sectors. As a result of this, such a levy may affect not just the content industry but the economy at large.

“Imposing such additional costs on cloud providers would likely discourage cloud adoption in Europe, jeopardizing the EU’s Digital Decade objective of ‘75% of EU companies using Cloud/AI/Big Data’ by 2030,” it further explains. Amazon says that an internet levy would ultimately lower the quality of internet services, limit the selection of content/services available for customers (because only those providers that can pay the fee will be able to exist), and harm innovation. 

Negative impact on customers:

Amazon says that internet levy can have negative consequences on “the cost of living, as well as on the quality and diversity of the digital services made available to EU customers.” It mentions that the same was also observed in South Korea when the country adopted network fees in 2020. It says that the European Consumer Organization (BEUC) has also warned against the negative impact such a levy would have on customers. 

It further mentions that those who argue in favor of internet levy are ignoring the fact that the speed at which data traffic is growing is falling. Even though traffic is increasing (albeit at a slower rate), its growth does not lead to proportional network costs or create congestion on telcos’ infrastructure.