Models to support investment in the network infrastructure in Europe: what is the way forward? – WS 01 2023

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20 June 2023 | 10:30 - 11:30 EEST | Auditorium A1 | Video recording | Transcript
Consolidated programme 2023 overview / Workshop 1

Proposals: #30

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Session teaser

The debate on whether online services should contribute to telecom operators’ infrastructure deployments is not new. However, it recently regained prominence in Europe with renewed calls from telecom operators to make technology companies pay for network usage. The session will examine the concerns raised by various stakeholders in relation to these proposals, such as the risk of internet fragmentation, increasing costs for users, and possible degradation of the Internet experience. The discussion will also consider if there are other models that can support investments in the network infrastructure in Europe.

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Rapporteur: Francesco Vecchi, United Nations University – CRIS

  1. Interconnection:
    The EU aims at achieving universal connection to 5G by 2030 to support the consistent growth of content while ensuring competitive access through a structured regulatory system. Universal coverage and high-quality connectivity must be achieved to fight against discrimination and secure the digital transition, a process led by communication operators and publicly listed tech companies that are, respectively, investing in rural and remote areas and in data centers. However, laws of physics are not a social construct: 5G connectivity performances are bound by the speed of light and, at some point, the distance between devices will need to shrink. Finally, IoT traffic, connecting devices, e-Government services are paramount challenges and need new solutions, such as different investment models, more mergings, more competition in platform players, and a sustainable financial capacity.
  2. Neutrality:
    Neutrality is crucial in the EU regulatory framework. The Internet is based on permissionless innovation: as long as one speaks the Internet protocol, innovations can be proposed without any legal or public permission. Moreover, the Internet is not entirely public: peering transit, Internet exchanges and private Internet are all run by non-public players, and they all have their own data storage and other infrastructures. This is one of the causes of the Internet’s fragmentation, but redirecting traffic could lead to Internet quality problems.
  3. Price increase:
    In the latest period, revenues for Internet companies were raised because of a decrease in the cost of infrastructures. Even though an increase in individual customers’ prices might not be ideal in such a highly regulated market as the Internet, their overall impact may be positive since other services prices would be balanced.

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>> ANTONIO MANGANELLI: Okay. So I would like to share some slides. So if – can you see them?

>> I think they’re coming up.

>> ANTONIO MANGANELLI: Good morning, everybody, I’m Antonio Manganelli, I’m here to moderate the models to support investment. And the panel is Verena Weber and Maarit Palovirta and Peter Koch. And I will give you three or four minutes to set the scene of this debate, and just to talk very generally, just to give the – as I said, to give the scene to the following speakers. The fact that you are talking about the Internet, there’s infrastructure, the backbone of the digital infrastructure. They support infrastructure, the better services, but also they are innovation, there’s a lot of innovation in network infrastructure. The network infrastructure has positive externality in the overall economies and the individual ecosystem. So the industry and society level, that’s why in the past there were also legal monopoly.

Now there’s universal service obligation, which is a lot of evolution. And there’s opportunities and businesses which are highly regulates in the consumer protection point of view and also because of the externality and the social impact that they have also – they are also subject to industrial policy targets. So there’s some target of investment in the EU that you know, the Digital Agenda first, and then the – the digital compass at last which set some investment targets.

And that’s the same reason for which – when there are some market – market failures because the infrastructure cannot develop in all the areas there’s some public subsidies which have been growing past years. There’s a huge economy of scale, especially in the access network, that implies that the average cost of units for, the FTTH, significantly increased. So the cost of deployment increased very much, as much the coverage is getting closer to 100%, which is in theory one of the targets of the policy at the European level.

And to finalize the setting of the scene some market dynamics, the context we can see that the revenues in the last years, in the telco markets and the market utilization are quite decreasing, which anyway is not common for all telcos in the world. The data in Europe is much worse than the Japan and the US, than, of course, compared to digital platform, anyway, are doing other business. But there’s the same actors in the same digital system.

And the revenue depends on the decreasing prices which is quite evident, comparing the average per user in Europe with Japan and the USA and also the price, the price variation in the European level and in some European countries in the last ten years.

And contrasting to the needs of this investment, we can see that this economic dynamics brings the average investment per capita in Europe to be lower than in other parts of the world, as well as the ratio between cap ex and revenues.

But as I said, these dynamics of revenue does not depend on the decrease on the quantity of the service and the demand of the service provided because there is a growing, or as we know, a growing computing average growth rate in the Internet traffic is increasing over the last years, even though, say, the increasing is decreasing, but is still increasing very much.

And you can see another trend is in the last, let’s say ten years we are looking at a medium range, the social Internet traffic is concerned compared to previous dynamic in the traffic patterns and the traffic flows, in the Internet ecosystem.

The last point is to some regulatory dynamics that are and maybe we can talk later on – they are talking between this and the market dynamics that in Europe, there is a very intense pro competitive access regulation, which is intense price competition in the Internet services and there is, of course, in place, as we know the first one with the electronic communication is the legislative framework and the net neutrality rules, which in a nut shell prohibit completely commercial discrimination and unreasonable technical discrimination.

This is framed in the open Internet regulation. We can see that these regulation are quite different than what we observe in other parts the world and also what we can observe in other part of the ecosystem. It’s much more soft – soft handed, both in terms of pro competitive regulation and the approach in the competition and the merger which is changing a lot. There’s still some asymmetry.

So I will leave the floor to the panel, and I will give the floor to – I think the right order is Verena Weber from the OECD for the introductory remarks.

>> VERENA WEBER: Good morning, everyone. Can you hear me well.

>> Yes, we can.

>> VERENA WEBER: So just to introduce myself for those for whom my face is not that familiar. I’m Verena Weber, I’m working at the OECD, where I’m responsible for the communication and the infrastructure and service policy unit. We are looking at everything that is related to broadband statistics, telecom regulation and policy and we are also doing country studies. So we are comparing different parts the world and the nice thing about the OECD, you can talk about the different areas what do we see in Europe, versus North America and west Asia, et cetera.

So a couple of thoughts from our perspective, at the OECD, we started a project on looking at investments in broadband infrastructure. We are not done yet, but, you know, I hope that for the next session that he with might have in the coming year, I will be able to show you the numbers as well.

What is important from our point is to see what is the overall objective of this. So what we can see across the OECD is, you know, the digital transformation affects all sectors of the economy, affects the societies in our countries. And without connectivity, there’s simply not such a thing as digital transformation. So, like, from a public policy perspective, what we need, is that we get coverage that reaches everyone, that we get high-quality connectivity, you know, with the increasing use of different digital tools and technologies such as the IoT and the AI, and the third issue and this is, I think what we are here today for, is how do we ensure continued investment in broadband networks. So this is our starting point.

So from our point of view, it’s quite important to look holistically at investments in networks and there are a couple of trends I want to mention that we see. So Antonio has mentioned obviously important actors are communication operators that are, you know, doing really the heavy lifting at this effort. So what we are doing at the moment and unfortunately I can’t give you the results yet. We are checking the financial performance. We did a financial performance check back in 2019, where the actors had quite a good margin.

If we want to bring connectivity to everywhere, maybe we have to enlarge our view. So in enlarging our view, we see, you know, that a couple of things are changing the market structure. So we see a continuous rise in tower companies. So those companies are an important player because, you know, they take some of the investment needs off from the operator towards the tech sector of the industry. Across the OECD, we see they have a healthy growth, healthy margins and that’s a part to watch. At the same time, we do see that there is a financial asset provider, such as private equity that go in the market. What is interesting to know is these companies often invest more in the rural and remote areas in OECD countries. We do see this in Germany, Colombia, Chile, and so that’s a trend we are seeing.

Interestingly, that model is different, because those guys are typically investing in wholesale access network, and this is one additional thing to think about when we talk about how can we ensure investments by different players on the longer term.

Then we obviously have and Antonio mentioned that the publicly listed tech companies. What we do is they invest in data centers. They invest in submarine fiber cables and that’s an additional source of investment that we are seeing there. So they are not only pushing their traffic over the networks. They increasingly invest in network infrastructure as well. And finally, and this is an important point is that we see increased investments by the public sector. So we have never seen so much money basically flowing into the deployment of broadband, especially in rural and remote areas. So think about the United States. We see 65 billion being invested in broadband in rural and remote areas.

We are the recovery funds in Europe where the money goes into infrastructure. So setting the scene, like, you know, my place, let’s look holistically at the different actors, let’s look at how these actors can work together and how we make the best out of that mix, to ensure long-term investment in networks.

Thank you.

>> ANTONIO MANGANELLI: Thank you, maybe we can go to Maarit.

>> MAARIT PALOVIRTA: Thank you very much, just to introduce my name is Maarit and I’m the senior director environmental affairs at ETNO. For those who don’t know ETNO, we represent about 70% of all network investments in Europe. To fixed and mobile networks. So let’s say the majority of network investments.

And a big thank you to Antonio. I think Antonio gave a very good snapshot on some numbers on what the telco sectors are. So that makes my job easier.

Networks, of course, are the foundation for our digital society, and economy. Having said that, and I think Antonio’s numbers back that up nicely. Having said that, I agree fully with Verena that we need to look at the Internet ecosystem. So it is, of course, also clear. We need to use the networks and keep the networks running and there’s a whole lot of different type of content. Antonio showed a graph. We currently have kind of a focus on 50% of the content seems to come from a group of players but we also have a lot of other content.

We have IoT traffic, connecting devices. We have eGovernment services, many crucial things that, of course, run through the networks. But then looking at where we are in Europe today in terms of our connectivity infrastructure. So we are in the middle of a big transition, actually. So if you look at where we were ten years ago, we were really still running on copper networks. We are largely on 3G. So video content was not coming through, et cetera, et cetera.

In terms of policy targets we had a EU target of 30 megabits per second, which today seems rather ridiculous.

We are trying to take a leap towards fiber, towards 5G and I think also in terms of industrial policy that the decision-makers have put as ambitious targets. We want everybody to be connected to 5G, or rather gigabit technology. Let’s stay technology neutral by 2030.

And if we look at the numbers on where we are in terms of these targets today in Europe, about 55% of Europe is currently covered with fiber. So 55%. 73% by 5G. But this is not the real standalone 5G. This is built on 4G and there’s quite a bit of investment to be made there.

If we look at the content, we have a constant growth of content between 20 and 30%. We did a study with Arthur D Little and they focused 20 to 30 beta traffic increase until 2030. And so this is a little bit where we are.

And if we look at the investments going forward, so we believe that there are several – there is the coverage gap. So already we see that we are not where we really should be in terms the coverage. So both 5G and fiber. And, of course, in order to bridge the gap, we need some investments. We did a study with Analysis Mason. And they focused that 10% of all European citizens will not have access to gigabit service if it continues the way it is.

Wick consultants say there’s more money needed. Then we have the capacity. So with this ever increasing content and you may debate the exact rate, but it is increasing. It means also that telco networks have to invest in capacity. You need to build more towers, more antennas and you need to make the content more robust in order for the end users to have good quality content and have a good experience. This is a parallel investment that is all the time happening. And it is related to the content issue. So how much data traffic is in the networks?

And then third pillar, I would raise in terms of investment needs is the innovation and transition that the sector is going through at the moment. So the vision for the sector and this is something we put forward very, I think, clearly, also in the European Commission consultation that closed in mid-May is that we see the sector moving into a fully networked kind of virtualized environment, where cloud will play a major role and everything will be software defined rather than hardware defined.

And we are really moving away from the legacy networks and going towards this fully digitalized space. And this is, of course, a huge opportunity. Our members want to invest in that, but that also means that there will be more competition. We see new players stepping in. So already we are competing with the platforms, for example. I mean very basic example, text messages versus WhatsApp and now cloud and other areas but then vertical industries are coming into the picture. So we do see increasing competition.

So those kind of things is where we see the investment challenges, if you like for our sector. And as this session is called the models to support investment. So we need to look for solutions. So my first thoughts in that regard is that, yes, we need different investment models. There are many existing in Europe. We have things like network sharing. We have things like – well, you have seen maybe joint ventures for fiber rollout in many countries, different kinds of commercial agreements, et cetera. But from our point of view, this has not been enough. It is not enough to really, from investment and reach the rich targets we have set for ourselves in Europe.

We would like to do many other things in our sector. We would like to see more mergers, for example. A bit of a tricky topic to be discussing. We also are trying to promote a lot of new things for the future such as the open rand. So to open some of the interfaces and have the possibility to do things differently but these still have not quite materialized. And the major constraints here in Europe tend to be regulatory. Competition policy has been strict, and has been very strict, both with regard to network sharing agreements but also, of course with regards to mergers. We still have very external regulation on pricing. They say well, why don’t you just increase the prices. We all know consumers like low prices. That’s not really a discussion topic. It’s a political choice. We know that prices are still very much regulated. Wholesale prices are regulated. We have a convenient roaming regime in Europe that is regulated and we have regulated prices for international calls. We have a lot of price regulation in Europe. They are not able to increase prices. It’s very sticky in that area.

And then of course as we said already, as competition is increasing, we need to also see, well, how is the regulation that our sector is subject to comparing with the regulation that other sectors in the ecosystem are subject to, and I’m, of course, here thinking about the platform players that have been very much part of the discussion about the investment models, and while there is some regulation and we have the DMA and DSA, really this has nothing to do with the sector regulation that we have currently for our sector. And we see that there’s very much regulatory asymmetry between the telecom operators and other parts of the value train.

And this is where we then have concluded as European operators that we need further solutions to make sure that we have the financial capacity to invest in all the three things I mentioned earlier, coverage, capacity and also the innovation to make sure that this sector still exists as we look forward to the next ten years.

So I will stop my initial remarks there. Thanks.

>> ANTONIO MANGANELLI: Thank you very much, Maarit and we turn it to Peter Koch.

>> PETER KOCH: Let me give a short introduction of myself my name is Peter Koch, I’m a policy regulator. And as such, we have no cards in the game, right?

So I was asked to shed some light on this from the perspective from the technical community and the policy sector, which I’m trying to do this might sound to some of you like an interesting discussion between the big telcos in Europe and the big platform, which from the European perspective, the US platform. We can all sit back and have popcorn and watch. But that would be a mistake.

What is at stake is more the connection between those who win and not win that battle. First net neutrality and without the quality for the end user which is supposed to grow according to what we have heard and also the plans that the European Commission has launched and have been referred to a couple of times.

So what I’m trying to do is explain a bit because I know many in the audience know but maybe our people don’t and some online will appreciate and talk about what that interconnection and what the Internet actually. Is let me start with that raise that the Internet is a network of networks.

That means that there’s no central regime for that. These networks are autonomous systems, they are connected to each other which is usually following a simplistic model and they can we can expand on that. So either you are a provider, you are a customer or you are a peer. Any two networks who choose no connect with each other or don’t, but let’s assume they do. If they do, then they will exchange traffic, usually without money flowing or you are a customer, which is what you do at home. You are a customer. You probably don’t have a choice, you have to pay your Internet provider. On the other hand, that’s the other perspective. So the Internet provider is the one giving you quote/unquote transit and getting the money from you.

This also happens a level up, smaller networks pay larger networks to take their traffic and transit with the Internet and vice versa.

Now, of course, there is also a model of so-called paid peering where traffic exchanges directly and some money flows and something is going on. This is not often very transparent, but it exists and there’s different regimes and we are not diving into this. The question is: Where is this happening? We do have – at least in Europe, we have a well-developed system of Internet exchanges where these various providers, small and large meet and can do peering but can also engage in transit peering there.

By the way, the Internet exchanges are very much a European invention and European contribution to what we now call the Internet architecture or the operations of the net.

So this is the ground layer, and this is the packet pushing. And when I say packet pushing, we should keep in mind that the Internet is layered. We have cables at the lowest layers which we will probably discuss further. And at some point we have packets that are pushed back and forth. And these are more or less independent of the services that run above them. Now, the packet pushing part is commodity which probably could frame a bit of expectation of revenue there if you compare that to your water provider or something else.

Now, that’s the packet pushing. And then one of the paradigms on the Internet is the permissionless innovation, which doesn’t mean that anybody can rip you off. That’s not what is meant. What is meant is that you don’t need to apply for developing a new service or developing a new protocol over the Internet. For as long as you speak the Internet protocol, you can do that and connect to peers that speak the same protocol and if you are lucky, you develop something very new and you spread and grow and you have and innovation and those are those that fail, but let’s not talk about them.

So on technology, we have – so we have the peering in transit and we have the Internet exchanges and we have heard also about, like, private Internet, the big players not going over quote/unquote the public Internet. It’s not really public, it’s run by the players. They have their own connections and also having their own services pushed to the edges, which is what we have all heard about the content delivery networks which are part of the game. They are not cables. They are systems and data storage that is brought to the edges to reduce latency.

If we think about 5G or the next version of 5G with the interesting promising of very low latency, like second ranges, this is not just by increasing speed of cables or doing more bandwidth. The laws of physics are not a social construct, right? So this is all bound by the speed of light and that means at some point, you need to shrink the distance. And that means if I want to shrink the distance to the customer, I need to push the content to the edges, that’s what CDNs do. That would be increasingly necessary for the 5G for single digit millisecond latency and this is investment and this is what part of the ecosystem does and we heard the suggestion to have a holistic view, not just looking at the cables and the packet pushing.

But for the services it’s important that it’s pushed to the edges. So for a short introduction, I can leave it that way and give it back to Antonio.

>> ANTONIO MANGANELLI: Thank you very much.

Oh, okay. Thank you very much, Peter.

I think we really – Maarit, do you want to say something?

>> MAARIT PALOVIRTA: No, no, I’m trying to catch the attention. We don’t see you on the computer.

>> ANTONIO MANGANELLI: Remote moderating is not so easy.

Thank you very much, Peter. I think we completed the setting of the scene, and, sorry, I forgot to introduce myself, my name is Antonio Manganelli, and I’m professor, on competition and policy and I previously worked for the Italian ministry of economic development for digital markets and then director of European regulator communication and the CMA, the competition market authorities in the UK.

And I think we can start now the debate. And I think that we have quite a few questions in the chat online and we have a question by Daniela Altura, who I think is present in the room.

>> AUDIENCE MEMBER: Yes, good morning, everyone, my name is Daniel. I’m one of the youth ambassadors at Internet Society this year and I wanted to thank everyone for this very extensive presentation of this very important topic. First, I wanted to actually stress a couple of points that I believe to avoid consumer rights, competitive injury both from a commercial and user point of view.

First of all, I – it’s not very clear how exactly ISPs would be able to respect service level agreements and existing contractual obligations towards both commercial businesses and individuals in particular, regarding time, packet delivery and latency and what can affect this kind of measures could have in that regard.

But also, if this kind of financing mechanisms are actually – (Coughing) if this is to be carried out for the bidding and the financing of the infrastructures. So the eventual raising prices could be seen as a temporary need. In that case with connectivity providers allow causes and there’s you will have lower price at the end of that financing and agreed to respond to consumers any eventual difference of new operational costs, newly deployed infrastructure costs.

And also, I wanted to stress that there’s so many public funds to achieve this kind of –

>> ANTONIO MANGANELLI: Okay. Thank you very much. Sorry, I didn’t hear very well, but I think does anybody want to take this question? And then we can also look more generally to other – to the other questions and other issues?

>> MAARIT PALOVIRTA: Maybe I can briefly comment. I think there were various points addressed but you didn’t mention public funding in my introduction. So we do see, of course, public funding playing a role as per EU policy, public funding is, of course, reserved to market failure areas. So areas where we don’t have a commercial business case otherwise. And European Commission also has been quite publicly saying that at the moment, the split between private investment and public funding is around 95% to 5%. So 5% being the public funding.

And that this is also more or less in line with the kind of understanding the way things should be. So there’s no – we shouldn’t be crowding out private investment through public funding, because that also comes with a whole back of different challenges. Yes, it does play a role, but limited to those areas where we don’t have a business case.

I’m not sure – there were other points. I’m not sure if somebody –

>> AUDIENCE MEMBER: I can repeat some. I wanted to understand, in terms of the respect of contractual obligations and service level agreements, especially on wholesale and retail businesses.

>> MAARIT PALOVIRTA: Yes, so the way we see this and I think we have been fairly clear on that, should there be some kind of fair contribution, I will say the word, and we do think that this should – all operators, regardless of size should benefit. So big ones, small ones, everybody should benefit. We have been fairly clear on that.

We are under no illusion that, you know, one or two operators should benefit and the others not.

As you say, there is, of course, a complex network of agreements, et cetera, between the operators in Europe. Unlike the US, where they have three, we have 100 and I don’t know how many. So there are all kinds of contractual SLAs, et cetera. We do believe that should be reflected in the ecosystem. How that can be done, that’s for the policymakers to decide, but that’s a discussion, of course that, we are open to have.


>> AUDIENCE MEMBER: The last point was regarding the eventual raising prices for consumers, and how exactly that could affect any kind of market share.

>> MAARIT PALOVIRTA: There was an interesting study that looked at the impact on consumers of this kind of contribution. And actually, they concluded that the positive overall welfare, the positive – the welfare impact would be positive for consumers, that over time, the prices of content may go up a bit, not all content, but those impacted, but that the price decrease of connectivity services would actually be – would actually be greater than, you know, some price increases somewhere in ecosystem. So that the overall welfare benefit actually was positive.

And there was a whole lot of economics in between this conclusion and the introduction, but this is publicly available study and I think it might be interesting for you to have a look at it.

>> AUDIENCE MEMBER: Thank you.

>> PETER KOCH: I can’t raise my hand here so I will raise my voice. Because you also brought in the fragmentation aspect in your intervention, I think it’s important to also look at that, what would be potential reactions to a EU-centric regime of financial contribution to be made by service providers.

Something to keep in mind while – when I did my introduction, I said this is just the packet pushing going on by the carriers, but, of course, these days those carriers are no one-trick ponies anymore. There is the packet pushing part and if you take one word home with you today, the packet pushing should be it maybe. So the simple commodity, but there’s also a wide variety of services. So your ISD would also give you some TV streaming or what we call TV in previous decades and some other services that sometimes gets preferential treatment and it leads to the whole zero rating discussion that we’ve had that also was in collision with the open Internet or the net neutrality guidelines there.

And so there is also an incentive to push one’s own traffic that would not be subject to this contribution. And that needs to be – that would need to be discussed.

The other question is: What would the providers do and what would the customers face? And I’m not completely convinced that it’s beneficial to the customer only if providers of services would seek to escape the regulatory regime by, say, getting out of European Union to make traffic take longer routes and introduce latency and decrease quality or, say, decrease quality by using a different resolution when we talk about video streaming or such.

This is all discussed. It was made – there’s lots of contributions by the technical community, to this the European council on consumer protection agencies has submitted along these lines to the European Commission Consultation. That’s one aspect. The other aspect is the Korean example that has been discussed a couple of times where the measurements have shown that what I predicted here, and I didn’t predict because I just followed that example that actually the quality of the Internet access when it comes to accessing the services declined after introducing a similar regime in Korea.

So there is, of course, two sides to the game and not all is clear that it will be in favor of the end user.

>> ANTONIO MANGANELLI: Thank you, Peter. And Verena.

>> VERENA WEBER: Thank you, Antonio. And just to compliment what Peter said. We did the numbers for Korea. We have a report that we published last July for broadband networks for the future where basically Korea was a fascinating place, because Korea is one the leaders in connectivity, they are number one in fiber penetration. They have one the best 5G concentration. And typically, what we see is Korea is always on the top of our charts and that’s what we produce. We like to do evidence-based policy making.

So in that report, we looked at the quality of the connections, right? We looked at latency in particular. And what we saw is Korea went from being actually the best country literally like to the very end of the line. So we could actually see, you know, that basically introducing something like that the – we didn’t show any causality, but that was basically the own change that happened in terms of regulation, that that didn’t seem to be a very good way forward, let’s put it like this.

So then, obviously, you know, there’s a debate whether something similar would happen in Europe, but on a more practical view, like, I just want to take a step back. Basically, what we see in Europe is that competition works, that market works and that actually for us, you know from a consumer welfare, that it’s a good thing that if people don’t have to pay over $100 for an Internet connection which is what we see in other parts the world.

The developments we have seen in Europe that are accompanied by the policy and the regulatory framework, this is what we should acknowledge, right?

And then the next step, is there really an investment challenge open the side of the operators and if there is, you know, how can we overcome that, right and some answers I mentioned are public funds, some answer to that are different actors.

The proposed way forward, I mean, you know – and there I’m talking not on behalf of the OECD, but what is tricky by what is proposed here is that from a regulatory perspective, you know, if you are a regulator, you need to determine market failure to justify failure, sorry if this sounds a bit technical now. If you look at the market right now, it’s obviously operator that has the determination monopoly.

From a very practical view, I wouldn’t know, you know, how you could justify, like a market failure here that would require intervention. So basically, what is supposed – we have a lot of questions. We don’t know how this could work. Maybe, you know, ETNO has an answer.

We did talk to small operators. They don’t seem to share the same position. So that’s also interesting. So we have some European operators that seem to think this is a great idea, and some others told us the opposite. There a lot of questions surrounding that. Maybe we need to find different ways to overcome the investment gaps. My country is Germany. So in Germany, like, Germany for a very long time used the copper connections that weren’t too bad. I mean, but then it was basically a strategic decision by companies whether he this want to upgrade copper to fiber. So these companies decided for a long time, this is not what they wanted to do.

So in Germany, the challenge you face is not so much the money. The challenge everyone realized this is a huge issue. We do have, as was pointed out, we do have coverage issues and quality issues in Germany. And what we are trying to do is fix these issues and the government realized and acknowledged that there is a need to do that. But in very practical times, the issue in Germany is not so much the money but the construction capacity. So actually, there are not enough construction companies that are able to dig up the roads, you know, to lay the fiber.

So, I think, that topic is quite complex. It is an important topic. We want to make sure that operators don’t go out the market. Fortunately, we haven’t seen that in Europe and we hope we are not seeing that any time soon. So far we don’t have any indication that this will happen but then we really need to look on a case-by-case basis on the countries if there are issues what are the issues and how can we overcome those.

>> ANTONIO MANGANELLI: Thank you very much, Verena. I think the topic can be looked at in different angles and we hope the European Commission has performed the consultation and maybe from that we could derive some examples. Also, as you mentioned at the beginning, which is very true, the different investment that that is done in the ecosystem. And I hope as a result of the consultation, the European consultation could be the definition of any way rand of the ecosystem and the different investment and the different actors are doing, and how much each investment is contributing to the functioning of the ecosystem as a public good.

And before – before giving the floor to Maarit to answer, because a lot has touched on her position. There is the question from online from Aleksei Suhonen, maybe you could connect the audio and ask your question?

>> AUDIENCE MEMBER: Yes, I’m in the room. I’m online and in the room.

My name is Aleksei. I live here and I work on the different aspects for a few decades. Right now, I work for an Internet Exchange Point here in Tampere and I observe the local teams, and I wanted to contribute some of those findings basically with the core idea that building the networks is not the sole privilege of 100-year-old telco.

In the early days, the biggest Internet builders were not telcos at all and later telcos acquired those company and now they are the oldest telcos in Finland.

But when it comes to rural connectivity in Finland, for example, there has been government money and other grants available to build fiber networks in rural areas, but the big telcos have been reluctant to use that money. So other initiatives have sprung up to build networks in rural areas. And then when the fiber has been built, those big telcos have been reluctant to provide Internet connectivity over those areas. So other groups have sprung up to provide the Internet over those fiber networks.

So I don’t really see issue that – big telcos can’t or don’t want to build networks someone else will show up. So I don’t see an issue there at all. The Internet finds a way.

>> ANTONIO MANGANELLI: Thank you very much. I couldn’t hear very well the question, but I think from Maarit and Peter’s expression they did. So maybe Maarit so answer to this question and also the other point and then we have a very quick response and I would have another comment.

>> MAARIT PALOVIRTA: We have heard about Germany and we have heard from Finland. I was surprised. I took the train down from Oulu and 30% of the trip, I only had 3G and I was a little bit surprised in the promiseland of 5G.

But nevertheless, I think there’s investment cases and decisions that are taken. I don’t have all the background on that. I know in countries like Denmark, the model that you had just raised that smaller telcos appears and the bigger one buys them is a very fluent model that apparently happens. So I think there’s many different things.

One thing I would like to come back to is the regulatory asymmetry. Who is regulated in the European markets the most? It’s the big telcos. We have the SMP regime. So there’s constraints that are other – that are bigger than for those smaller telcos in many cases which is probably justified in terms of competition, et cetera or at least used to be.

And what Peter brought up is the CDNs. When we look at the interconnection. And now these CDNs are, of course, coming into Europe, which have all the technical benefits. The issue is that these are proprietary networks and these companies that build the CDNs they use them for their own traffic, and they sell capacity for other players to use the CDNs and the CDNs, they are not regulated, and they are functioning in the very sim market as the telecom networks.

So just to point out that it is not – you know, investments happen and don’t happen for various reasons, no doubt but the regulatory framing as we have it today, it’s very much focused still on as you say the 100-year-old telcos and I think we need to change something there. The market is moving quicker than regulation.

And, you know, then there are questions on how to best do it and I think that’s been a discussion that we have been, of course, trying to have with our policymakers as well.

Maybe I will stop there, just to stay brief.

>> ANTONIO MANGANELLI: Thank you very much. Peter, do you want to say a few last words?

>> PETER KOCH: Famous last words.

>> ANTONIO MANGANELLI: For this panel.

>> PETER KOCH: There’s one more hand raised in the room here. Can I –

>> AUDIENCE MEMBER: Yes. You just mentioned that every country in Europe is different. So why are you proposing a solution that would be EU-wide, with a direct impact on how the Internet would work as Peter has explained that. We also have a worldwide impact. There are issues in certain countries for development. Does that create regulatory authority, or intervention that is not necessary. Why do you bring this into the debate?

>> MAARIT PALOVIRTA: When we talk about the European Union, it’s different in every aspect. We have a lot of digital regulation, telecom regulations in Europe, in SMPs and otherwise. It’s EU-wide because we have chosen to live in the European Union and the countries have chosen to do so. The most effective way to regulate and make sure that we have a similar framing to have, you know, not so many discrepancies is to do it at the EU level.

We did recognize whether it’s gigabit infrastructure act or access recommendation, there are different views from each country but it doesn’t mean we don’t have an EU regulation. For us, this is a European discussion. We are only discussing this from the perspective of European telecommunication market. We have a very specific market structure in Europe as I was alluding to before. US three operator, South Korea, Japan, handful of operators and Europe 120 or I don’t know the number these days. Very different consequences and investment. And very different regulatory framing. We are not trying to have a global discussion. It’s a European discussion.

We have to live with our reality, but, yeah.

>> ANTONIO MANGANELLI: Okay, Peter, do you want to say something and then I want to close from Verena, who could have a more global view on the world.

>> PETER KOCH: Well, I’m inclined to add another open question that we haven’t addressed and needs to be addressed in a continued discussion. Who exactly is affected by proposals like contribution by so-called content providers, because what we call content providers is essentially the content transporter. The provider, the original of the content is often also in Europe. We’ve had interventions and I think somebody mentioned it in the Zoom chat, we had interventions by the European public broadcasters, who would be affected by costs being – to be carried by the so-called content providers, which, of course, would build their own customers and that would in effect also then again affect the end users because the end users pay any public broadcasters as they pay any private streaming service.

There’s lots of different aspects. It sounds a bit like this is a discussion, American content versus European customers and that reminds me of situations or discussions that we had at least one and a half decades ago, similar to you need to have a certain amount of your local language from music in the radio or something. That would be a completely different debate, but the real reason behind this, I think, is still not really surfacing and we need to continue discussion and research in that direction, what are we trying to achieve actually.

And the documented lack of necessity for this documented by barrack and others and I will hand it over to Verena for the final remarks.

Thank you.

(No audio).

>> ANTONIO MANGANELLI: I cannot hear you.

>> VERENA WEBER: Can you hear me now? We need to ensure long-term investment in networks, what is the current proposal as Peter put it is the best one, you know, has to be seen. Maybe we need to be a bit more creative on what we do. And as I mentioned, we are working on this and we hope to have a study ready towards the beginning of next year. I know the EU might move slightly faster than us, but that’s what we are trying to do.


>> ANTONIO MANGANELLI: Perfect! Thank you very much. I think we run out of our time, and I think it was a very, very, interesting discussion. Of course, was not – we didn’t go to any definite point. That was not our intention or way. I think we will be discussing about this topic in – for quite – quite a few months, and hopefully the discussion will be – because the discussion has been not this panel, but it has been polarized, which is not useful to find a balance and find a solution. I hope in the next months, there will be a bit more of complementaries and position emerging and so we could find very good solution and very good outcome of the discussion.

Thank you very much to everybody, to Verena, Peter and Maarit and the audience there. Thank you, and see you next time.

>> PETER KOCH: Thank you, Antonio.