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Cloudflare opposes Europe's plan to make Big Tech help pay for networks

Prefers open peering – from which it profits

Cloudflare has decided to oppose the European Union’s proposed network usage fees that would see generators of internet traffic required to help telcos pay for their network builds – but not for entirely altruistic reasons.

The EU’s thinking is grounded in the fact that most of the content passing over carriers’ networks comes from Content and Application Providers (CAPs) – Europe’s term for the likes of Netflix and YouTube which pour data onto the world’s networks, leaving carriers to deliver it to users. Telcos complain that they end up having to spend billions on new networks, while CAPs cream the profits.

In February 2023 the EU therefore commenced a consultation into whether CAPs should contribute to the cost of the networks on which they rely to deliver services to consumers.

Big Tech hates the idea of such "network usage charges," arguing that it already pays for submarine cables and other network infrastructure. In the one jurisdiction where such charges have been made law – South Korea – litigation over their legality is ongoing.

Cloudflare's objection to network usage charges stems from its assessment that Europe's big telcos don't practice open peering – voluntary interconnection with other networks without charge. Rather, Cloudflare suggests, Euro-carriers prefer to pay transit networks to carry data among networks.

Doing so can introduce some extra network hops, which isn't optimal. But because it's hard for every network to peer with every other network, transit networks are useful and important. Cloudflare would rather its European users could get to its services directly, and can live with some accessing it over transit networks.

But Cloudflare worries that the EU's network usage proposal would effectively set a price for transit.

The org's senior manager for public policy in Europe, Petra Arts, and director of network strategy, Mike Conlow, argue in a blog post that "Once there's a price for interconnection between CAPs and telcos, whether that price is found via negotiation, or more likely arbitrators set the price, that is likely to become the de facto price for all interconnection."

"After all, if telcos can achieve artificially high prices from the largest CAPs, why would they accept much lower rates from any other network – including transits – to connect with them?" the pair ask.

The Cloudflare post adds that the firm already sees carriers give transit traffic a rough ride on congested networks.

"By targeting only the largest CAPs, a proposal based on network fees would perversely, and contrary to intent, cement those CAPs' position at the top by improving the consumer experience for those networks at the expense of all others," Arts and Conlow argue. "By mandating that the CAPs pay the large incumbent telcos for peering, the European Commission would therefore be facilitating discrimination against services using smaller networks and organizations that cannot match the resources of the large CAPs."

Big Tech – the CAPs – would therefore emerge with arrangements that mean their traffic gets better treatment than other bits and bytes. And seeing as the EU has proposed network usage charges as part of a raft of measures designed to improve connectivity, Cloudflare's pair assert that the plan for network usage fees is a dud.

"Contrary to its intent, these proposals would give the biggest technology companies preferred access to the largest European ISPs." Arts and Conlow wrote.

Cloudflare prefers settlement-free peering, which it says is less likely to create congestion at interconnection points.

"We believe regulatory intervention that forces content and application providers into paid peering agreements would have the effect of relegating all other traffic to a slow, congested lane," Cloudflare's post concludes. “Further, we fear this intervention will do nothing to meet Europe's Digital Decade goals, and instead will make the internet experience worse for consumers and small businesses."

One thing Cloudflare's post doesn’t address is the EU's reason for contemplating network usage charges: carriers' belief they can’t carry the capital expense of network builds alone.

But the post does contain some language hinting at its attitude. It describes Europe's big carriers as "a set of previously regulated monopolies who still constitute the largest telcos by revenue in Europe in today's competitive market." ®

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