The European Commission's Digital Networks Act (DNA) aims to boost digital infrastructure investment and promote competition. These goals have our support. However, some concerning proposals have emerged; large telcos are seeking regulations that would make them a government-backed monopoly-in-the-middle capable of extracting rents from digital service providers by exploiting their control of last-mile access. This would allow them to invent artificial reasons to charge cloud and content providers to deliver content for which customers have already paid.
Such a scheme threatens net neutrality by creating a new toll booth on the internet and contradicts existing telecoms regulations designed to prevent abuse. It also undermines the European Commission's own Digital Decade objectives of fostering competition and unblocking the adoption of digital services by European SMEs.
Solving a problem that does not exist
The internet is a global network of networks, and IP interconnection holds them together. IP Interconnection has always largely been based on settlement-free peering — where internet networks agree to exchange traffic directly and each only pays for its own infrastructure and equipment. The European Commission is now considering a dispute resolution mechanism for IP interconnection — a solution in search of a problem.
Multiple assessments, including BEREC’s, The Body of European Regulators for Electronic Communications, 12-year body of work, conclude there is no IP interconnection market failure.BEREC’s 2023 assessment was unequivocal: “There is no evidence of a competition problem or a market failure to the detriment of end-users regarding IP-interconnection.” Nothing has changed to merit reconsideration. A 2025 CCIA-commissioned Plum study[1] indicates that, from millions of European peering connections, there have been fewer than a dozen disagreements in the last decade; less than 0.001% of peering agreements.
A self-inflicted blow to Europe’s digital future
As they own the only routes to their customers, telcos could use a dispute resolution mechanism to artificially add friction and cost to interconnect for all participants.
This is network fees by a different name, undermining a collaborative environment where peering is based on free market dynamics. Europeans have already rejected the network fees concept many times, and the recent EU-US trade deal makes clear that the EU will not adopt or maintain network usage fees. The increased friction and cost would not just impact cloud service providers, content delivery networks (CDNs), and their customers, but challenger telcos too. Smaller telcos and other industry players have voiced concerns in their call for evidence responses, warning that a dispute resolution mechanism would hand larger telcos a tool to manufacture disputes, extort inflated interconnection fees, and quash challengers[2].
European courts have already determined that dominant telcos have abused bottleneck control over interconnection by imposing capacity restrictions and degrading service quality to force payment. A dispute resolution mechanism would amplify their ability to force payment from the internet ecosystem, driving up online services costs and slowing adoption of innovative services such as AI, particularly amongst cost-sensitive European SMEs.
Content providers and CDNs invest in local storage and compute capacity to bring data closer to end-users, reducing telcos' costs. Applying a dispute resolution mechanism to public CDNs would also advantage large telcos’ own CDN services. That is what is at stake in Italy, where the telecom regulator (AGCOM) is recasting CDNs as something other than a cloud service to subject them to electronic communication legislation and apply a dispute resolution mechanism. This ignores CDNs’ purpose of storing content in convenient locations, rather than to transmit data. This is another attempt to create a framework for network fees through regulatory means, which will mean businesses who use public CDNs to place content close to users will pay higher prices, experience degraded service quality, or both.
A recent report from Analysys Mason, commissioned by AWS, looks in detail at what happened after South Korea imposed fees for IP interconnection. The analysis found that this led to reduced global connectivity and investment, hindering access to digital services and economic competitiveness.
The myth of convergence
The premise of ‘convergence’ between cloud and telecoms, the basis for expanding telecom regulations, is flawed. Telcos, using their transmission services and network infrastructure, including last-mile connections, provide end-users with network connectivity. Historically, these operations involved high barriers to entry over scarce infrastructure. This required strong regulatory oversight to ensure universal access, fair data carriage, and reduce distortions on end-users.
In contrast, cloud service providers like AWS provide data storage, compute power, analytics, and AI services in a highly competitive, innovation-driven industry characterised by rapid technological advancement. Cloud services are not a substitute for telecoms services. Cloud customers depend on last-mile connectivity from telcos; cloud companies help telcos create demand for their telecom services.
Large telcos argue that their use of cloud equals ‘convergence’ between the cloud and telecoms industries. That is simply not the case. Manufacturers, banks, governments, and other industries use cloud extensively — yet no one thinks cloud services should be regulated like pharmaceuticals because pharmaceuticals use a lot of cloud services. This is just an argument of convenience. Telcos use cloud as any other industry; to replace on-premises servers with virtualised cloud infrastructure for compute and storage needs.
The current framework already ensures fairness. When telcos develop cloud services, they operate under cloud regulations, and when cloud providers offer telecoms services, they must comply with telecoms regulations. The fair and functional system is properly calibrated for cross-industry ventures. Telcos are free to compete in cloud should they desire.
Applying telecoms regulations to cloud services based on a false premise will cause unintended consequences, stifling innovation in cloud technology to the detriment of EU consumers and businesses. Impeding innovation contradicts EU competition law and Europe's overall digital strategy, creating barriers to technological progress that competition policy seeks to prevent. Telcos want to tip the playing field in their favour. However, as the German Monopolies Commission stated in its response to the European Commission’s call for evidence: “There is no economic or regulatory justification for this,” and that a dispute resolution mechanism applying to interconnect “Would cause lasting damage to the entire internet ecosystem.”
Europeans deserve a thorough fact-based assessment
Before moving forward with any dispute resolution mechanism or extension of telecom legislation to cloud, we believe it’s important for the European Commission to: (1) demonstrate a clear market failure harming European consumers; and (2) conduct and publish a comprehensive impact assessment of proposed new regulations, particularly in light of the its Single Market Simplification Strategy proposal — to cut red-tape by 25%, reducing bureaucracy and boosting growth. The impact assessment should evaluate the potential effects on consumers, businesses, and innovation across the digital economy, describe the economic implications of the new regulation, and quantify the economic impact of the asserted market failure. We believe it should also consider whether the dispute resolution mechanism amounts to the same network fees idea that Europeans have rejected many times. If that assessment concludes that a dispute resolution mechanism does not serve the interests of European consumers and businesses, the European Commission should reconsider its approach.
[1] Plum Consulting (2025): “Exploring the negative impacts of legally mandated dispute resolution in IP interconnection”.
[2] Arelion, Axera, DE-CIX, Transatel and Wireless Connect, for example, all maintain that the current system works well, and caution against harmful regulation.
