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DT vs Meta case: the need for a rebalance in the Internet ecosystem

The Cologne Regional Court has ruled in favor of Deutsche Telekom (DT) in its more than three-year dispute with Meta.

The litigation originated in 2020, during the pandemic, when Meta unilaterally decided to terminate its ten-year data transport contract with DT. It is worth remembering how the special circumstances of the pandemic, with the population confined to their homes, increased data traffic on telecommunication networks to unprecedented levels, while the companies providing the most popular digital services achieved record revenues and profits in this period.

Despite suspending payments to DT, Meta continued to send large volumes of data from its services to Deutsche Telekom’s network. Telekom filed a lawsuit in July 2021 to enforce the contract and demand payment for the data transport service. Three years later, the court has ruled in favor of DT and ordered Meta to pay for the data traffic transport service on its network in Germany.

Recognition of operators’ claims in the ruling

The ruling recognizes several key aspects of the claims that operators have been making in recent years in their relationship with large Internet companies. We would like to focus on two fundamental aspects: the imbalance in bargaining power between telecommunications operators and large Internet companies, and the right of operators to obtain payment for the IP data transport service they provide to these companies.

Imbalances in bargaining power between the different players in the Internet value chain

First, the judgment recognizes the current imbalance in the bargaining power of the different players in the Internet value chain, most notably between telecommunications operators and large Internet companies. Despite Meta’s allegations, the usual argument put forward by internet companies that operators’ control of the access network gives them bargaining power that prevents them from reaching fair agreements is rejected by the court. On the contrary, the court points out that it is Meta which, with its content, holds this bargaining power. No operator can afford not to rely on the content of the big internet companies.

DT has continued to provide the data transport service to Meta throughout the period of the dispute, despite Meta’s unilateral termination (in terms of price, but not in terms of service provision) of the contract. It had little choice but to behave otherwise, as is the case for any other operator. It is not only the obligations arising from net neutrality regulation in Europe that leads to this situation, but rather the commercial unfeasibility of giving up this content – would DT’s customers have kept their subscriptions if Facebook, Instagram, and WhatsApp were not accessible on DT’s network? Net neutrality regulation only reinforces the dominance and imbalance of bargaining power in the internet value chain. The regulation created to safeguard the Open Internet has become an instrument that reinforces the gigantic global market power of large internet companies, thus having the opposite effect to its objective by jeopardizing the very principles of the Open Internet.

As has been shown so far in other situations in the relationship of large Internet companies with other players in the sector, such as the negotiation with newspapers, without regulatory support and intervention, few sectors, certainly not telecommunications operators, can hope to sit down and negotiate and reach a fair agreement with the large Internet companies. Until this imbalance disappears, the market failure is clear.

Recognition of operators’ right to payment for data transport services

The second aspect highlighted in the Cologne court’s judgment is the recognition of the operators’ right to obtain payment for the data transport service they provide to large Internet companies. It is always surprising when the opposite is asserted and defended. Advocating that large Internet companies should get a free service under arguments such as the defense of an Open Internet is inconsistent with the basic operating rules of any economic activity. Associating essentially a B2B service with Open Internet advocacy is a self-serving distortion of the widely accepted principle of Open Internet advocacy. The Cologne court has not given credence to these arguments and recognizes the right like any other company to charge for a service, and the violation by Meta’s unilateral decision to stop paying DT.

The litigation has lasted 3 years. Recourse to the courts to obtain a fair resolution of an abuse of position by large internet companies cannot be the only mechanism to which telecommunications operators must resort. The ruling shows the need to provide an EU regulatory framework which, by resolving the market failure identified, establishes a simple right and obligation for internet giants and telecom operators to comply with requests for negotiation to conclude fair agreements for IP data transport services, and the possibility of recourse to arbitration if an agreement cannot be reached.


Today, this model is the only way to restore balance to the Internet ecosystem, as the Cologne court ruling has shown. Addressing this proposal is becoming increasingly urgent and necessary.

 

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