Digital Networks Act: backdoors for network fees and more

The European Commission has finally published a draft text of the Digital Networks Act (DNA), possibly one of the most important legislative initiatives this year, which will replace the 2018 European Electronic Communications Code (EECC). 

The EECC was adopted in 2018, and Member States were supposed to transpose it into their national laws by December 2020. Ultimately, it took six years to transpose, with the European Commission itself acknowledging that full transposition “was only completed in 2024” (DNA (4)). 

Reaching an agreement on the DNA will be challenging, to say the least. With the DNA, Member State autonomy to manage radio spectrum is set to decrease. A major (and expensive) switch from copper to fibre networks must be completed by 2035. Finally, consumers and the internet society are likely to push back against yet another attempt to introduce de facto network fees through a “voluntary conciliation mechanism”.

Less Member State autonomy on radio spectrum use

Currently, radio spectrum is a scarce public resource managed primarily at the Member State level. National authorities retain significant powers over areas such as radio spectrum allocation, auction award conditions, and licence duration (in line with EU constraints). 

The DNA proposal will adjust this by arguing that “national borders are increasingly irrelevant in determining optimal radio spectrum use” (DNA (71)) and pushes for coordination at the EU level. The DNA also promotes shared spectrum access as the default, through a “use it or share it” approach. 

While these proposals create more predictable conditions (through more harmonised, longer-term spectrum rights) for industry players, Member States, however, are unlikely to happily and easily give up discretion. 

EU-wide satellite licensing 

The DNA also outlines the establishment of an EU-level satellite spectrum authorisation (Articles 36–45), meaning easier rules for European satellite operators to work across the EU, where previously authorisation happened at the Member State level.

This might also mean tougher conditions for satellite service operators from outside the EU. With the EU openly stating it favours European-origin technology, what could previously have been agreed at Member State level would have to be decided with the dedicated pan-European authority. SpaceX, in particular, could have a harder time securing authorisation in Brussels than, say, Rome.

Jupiter and bull: no ex ante competition rules for electronic communications (eventually)

As expected, the DNA’s text promises to make telecom mergers easier and to reduce the overall regulatory burden.

Unlike digital services (regulated through ex ante instruments like the Digital Markets Act), the telecommunications sector is set to eventually be treated under competition law only (DNA (20)):

“It is necessary to reduce ex ante sector-specific rules in the future as competition in the markets develops and, ultimately, to ensure that electronic communications are governed only by competition law.”

Loopholes for de facto network fees

European telecom operators have long lobbied for the introduction of network fees, also nicknamed “fair share”, on content providers that generate high traffic on their networks. The tricky part: a large share of telecoms’ revenue and growth comes precisely from the internet traffic driven by the very same content providers. Without popular content services, the demand for telecoms services would be much lower.

In addition, telecom providers’ business models already revolve around charging consumers for their services. Appetite comes from eating, and telecom operators continue pushing for fees on content providers, without much afterthought about how this will affect consumers (extra costs are typically passed onto them).

The idea of “fair share” has been dismissed for a number of times. Initially, therefore, the European Commission softened its approach by rebranding it as “new IP interconnection dispute resolution mechanisms”. The initial bold and unpopular idea of simply charging content providers was reframed as the need to introduce public authority oversight over disputes between telecoms operators and content providers.

After a large group of European stakeholders - from civil society and consumer organisations (the DNA's text recognises that “internet community and consumer groups opposed changes to the open internet rules that would, in their view, risk leading to a two-speed internet”) to Member States - criticised the proposal of new dispute resolution mechanisms as unnecessary and harmful, the very same idea is still carved into the DNA’s Articles 191–193.

An increasingly popular mechanism for forcefully introducing ideas that the European public dismisses is always the same in Brussels: first, after adopting the legislation, introduce follow-up guidelines (which can be stricter than the legislation itself). Second, introduce a “voluntary” mechanism (or guidelines) that companies are expected to subscribe to unless they want to face even greater scrutiny. Third, make sure the voluntary mechanism is vague enough to have more power over those companies. Finally, you’ve completed the full 360, and the idea the public dismissed is still introduced, just under a different name.

This is precisely what's happening with the idea of fair share/network fees in the DNA's proposal:

• Article 191 outlines that BEREC  (Body of European Regulators for Electronic Communications) will first draft guidelines.
• Article 192 states that, at the request of one of the providers (think: telco operator), a meeting shall be held under the oversight of the national regulatory authorities.
• Within a week, the national regulatory authority shall inform BEREC about the case, and within 2 months, BEREC shall issue an opinion on the case (Article 192 (1) (2)).
• Within 3 months, the parties shall convene again, with the national authority providing a summary of the views, with recommended next steps and content for agreement (Article 192 (3)). 

What happens if no agreement is reached? The DNA’s Article 192(3)(d) refers to “options proposed by the national regulatory authority for effective cooperation". The definition of “options” is vague and opens the door to forcing de facto network fees on content providers - without needing a political agreement.