It has been proposed by some telcos that large content and application providers pay telcos a levy on the claimed grounds that internet traffic imposes costs on telcos and that content and application providers have asymmetric bargaining power in relation to the carriage of traffic. It is also claimed that the status quo is inefficient and unfair and that a levy would support network investment. 

Yet the incremental costs of traffic are low and falling, content and application providers invest in transit networks such has subsea fibre optic cables and, crucially, traffic growth involves a revenue opportunity for telcos. Demand is good, not bad, for both telcos and for network investment. 

In relation to bargaining power the market has been scrutinised and evidence of asymmetric power and abuse by content and applicant providers has not been found, indeed where concern has arisen is has involved the conduct or prospective conduct of telcos.

There is nothing inefficient or unfair about the way in which internet traffic is currently handled and there is no justification for a levy on large content and application providers. Rather than promoting investment, an internet traffic tax would discourage the development and use of applications and therefore reduce the commercial business case for network investment. The proposed tax would harm Europe’s digital transformation.