Netflix, Youtube, Amazon and Co: Who pays for the network?

Video streaming uses a lot of bandwidth. Should providers therefore pay for network expansion? This debate is now pending in the EU.

Video streaming accounts for a good chunk of bandwidth: Network cables in a data center Photo: Heinrich Holtgreve/Ostkreuz

1. A lobby battle is imminent in the EU. Why is?

The question under discussion is explosive because it touches on one of the foundations of the Internet: should content providers such as Netflix, YouTube, Disney+ or Amazon pay for the fact that they transmit large amounts of data through the network infrastructure? Behind this are fundamental questions: With whose money should the infrastructure of the Internet be financed? Is it now as important as the electricity or road network? And, crucial for the users: Are network providers such as Telekom or Vodafone allowed to give preference to content providers who are willing to pay?

At the beginning of the year, the EU Commission wants to start a public consultation. A process in which civil society groups, companies and citizens are allowed to make statements.

2 Where has the money for expanding the network come from so far?

The current rule in Germany and many other European countries is that customers pay for the infrastructure – i.e. network expansion and maintenance – with their Internet tariffs. On the other hand, there are regional, national and EU funding pots for broadband expansion.

3 Why is there resistance to the idea of ​​charging content providers?

Because it would make it attractive for Telekom and Co to violate net neutrality. Net neutrality means that network providers treat all data packets that are sent through the Internet the same way. So do not favor or disadvantage one type of data (e.g. video data), just as little as individual services. Net neutrality violations can take many forms. One is the zero rating: A network provider, for example Vodafone or Telekom, also offers content – ​​for example a video service. If a user streams films via this service, these are not counted against her data volume. This makes it more attractive for the customer to stream videos through this service rather than another.

4 How would the Internet change without net neutrality?

If network providers don’t have to treat all content equally, they can give preference to content that makes them more money. For example, if Netflix, Amazon and Youtube, which belongs to the Google group Alphabet, were to pay but small independent video platforms were not, the financially strong services would have an advantage. Because your videos would reach the users faster – the stream could jerk or stop for others. Network providers could even slow them down in a targeted manner. They could also offer their own services and prefer them, as described in the zero rating. All of these variants would favor the more powerful companies over small or new entrants. Proponents of net neutrality therefore also see it as a factor that favors innovation.

5 Who wants content providers to pay?

Network providers have long lobbied for content providers to pay. They started a larger attempt at the end of 2021: In a statement from 13 providers from several European countries, they demanded that the “large technology platforms also make an appropriate contribution to the network costs”. Telekom and other providers criticize an imbalance: The tech companies that provide content would pump ever larger amounts of data through the network. But the income of those who provide this infrastructure is falling. Compared to 2021 and 2013, sales for telecommunications companies fell from 265 billion euros to 242 billion euros. In fact, depending on the estimate, video accounts for 60 to 80 percent of global traffic. Paradoxically, network providers also have an interest in interesting and data-intensive content: otherwise users would not book fast – and expensive – Internet tariffs.

6 What do opponents of the proposal say?

First of all, that the content providers are already participating in the network expansion. A study by the US market research institute Mason examined how much Netflix, Google and others invested in the networks between 2011 and 2021. The result: In the period it was almost 900 billion US dollars. The money flows, for example, into submarine cables, data centers and nodes. The civil rights organization Electronic Frontier Foundation (EFF) also criticizes the demand. “Network charges are a ploy used by the largest carriers to generate monopoly revenue, eliminate competition and further consolidate their monopoly power.”

7 What is the EU’s goal?

The various bodies and representatives are sending conflicting signals. A selection: In May, Member States advocated that content providers should pay. In the same month, the Industry Committee of the EU Parliament, which is in charge of this issue, opposed it – with reference to net neutrality. The EU Commissioner for Digital Affairs, Margrete Vestager, has spoken out in favor of network charges. However, Internal Market Commissioner Thierry Breton responded – on behalf of the EU Commission – to a parliamentary question from SPD MP Tiemo Wölken: “However, it goes without saying that such a mechanism should by no means violate the established principle and rules of net neutrality.” However, that sounds clearer than it is: Breton writes “should”, not “may”.

8 What would be an alternative to having more money available for grid expansion?

For example a digital tax. “A digital tax would have the advantage that the revenue would go to the state,” says Tiemo Wölken of the taz. This means that the funds raised are subject to the control of the legislature – and not to the commercial interests of companies. The French network operator Orange, for example, has already announced that it will not necessarily use the network fees it has received to expand the infrastructure.

A tax could also be based on criteria other than data volume. About company sales. This would have the advantage that, for example, small or newly founded companies that still have low sales but offer data-intensive services would be less burdened.