Is EU "Fair Share" Dead?

European Union "fair share" proposals that would tax a few hyperscale application providers to help fund broadband upgrades by internet service providers remain uncertain. Some expect a finalized proposal by the summer of 2024, but aside from the ISPs themselves and some EU regulators, there seems little support. 

The European Commission held a public consultation on the "fair share" model in October 2023 and a majority of respondents, including academics, some regulators and most stakeholders except the large network operators who proposed the model, expressed opposition. 

In principle, the additional costs could be borne by the app firms (assuming they simply take a hit to their earnings); consumers (who will pay higher subscription fees) or business partners (advertisers, employees, other value chain partners). 

It seems doubtful the affected firms would simply take a financial hit and try and not attempt to recover the costs elsewhere. 

Some might point to South Korea, where the “sending party pays” approach was pioneered for large content suppliers. Withdrawal from the market also remains a possibility, at least for some services and apps less central to affected firm revenues. 

Twitch, the South Korean gaming service owned by Amazon, shut down at the end of 2023 and some observers say costs imposed by South Korea’s “fair share” payments by content providers to internet service providers. 

That is difficult to assess since there is no public information on the payment structure, assumed to be some form of a fee on earned revenues in the South Korea market or traffic volume or both. 

The South Korean "Fair Share" rules, under the Service Stabilization Act, only apply to a specific set of large content providers/ 

The law focuses on the five largest content providers in South Korea, based on daily user numbers and traffic share. As of 2023, these companies include Google; Netflix; Meta (Facebook, Instagram, etc.); Naver (South Korean search engine) and Kakao (South Korean messaging app). 

Those five companies are estimated to represent over 41 percent of all South Korean internet traffic.

The rules apply to firms with a minimum of one million daily users and representing at least one percent of South Korea's total internet traffic.

Small and medium content providers, including startups and individuals, are not subject to these rules. 

Before Twitch, Pandora TV went out of business because they could not afford to pay the network fees, says South Korea’s Open Net. That might not be the case, as Pandora TV suffered with revenue issues and does not appear to be covered by the law.