EU Wants to Change Internet Market. Critics: “It’s the Trojan Horse of Oligopoly”

By the end of the year, Europe could have a new regulation in the field of telecommunications. It is called the Digital Network Act (DNA) and it is closely linked to other European regulations to protect or develop the digital market: the Digital Market Act (DMA, which regulates the large operators of the digital market) and the Digital Service Act (DSA, which regulates the online content of digital platforms).

A triad with the common goal of accelerating digital in the old continent. But this approval is somehow the lintel that holds everything together. It concerns the Internet infrastructure itself. And it has a precise goal: to try to build a modern, secure and competitive digital infrastructure, harmonizing the rules and incentivizing investments.

What is the Digital Network Act: what it regulates and what its objectives are

The Digital Network Act contains much more. It is a European regulation, not a directive. Translated: like the others, it will be directly applicable in all member states. A key piece in the European strategy for digital sovereignty. In short, it aims to simplify and standardize telecommunications rules throughout the EU, creating (or trying to actually create) a single market. Key point: it plans to encourage mergers between operators to create large European champions capable of competing globally.

One of the main changes proposed - as stated on the European Commission website - is the promotion of infrastructure sharing, to avoid duplication and lower investment costs. There is also discussion about whether to make large digital players, such as Netflix or Google, contribute financially to the maintenance of the networks, given their impact on data traffic. The DNA also aims to make authorizations for the installation of fiber and 5G antennas simpler and faster. It also proposes to reduce regulatory obligations on the prices that operators must apply to other competitors who rent the network. A clearer, but flexible, separation is encouraged between those who own the networks and those who offer services to customers.

Companies that operate only wholesale, without selling directly to end users, would have fewer constraints. DNA also wants to make the management of radio frequencies, essential for 5G, more efficient and harmonized, and increase transparency on coverage and network quality data. Although many details are still being discussed, the overall goal is to facilitate investment. But the risk, many fear in recent weeks, is that competition in the telco market will be reduced.

A reform that not everyone likes: the fears of those who fear the advent of an oligopoly

Here a completely different scenario opens up. Behind the proposals and promises of the Commission, there is an entire sector in turmoil. That of the small European national operators. The thesis of those who oppose is: behind the proposal to modernize European telecommunications, there is an oligopolistic counter-reform.

Giovanni Zorzoni, president of the Italian Internet Provider Association (AIIP), cannot save anything from the reform: "It dismantles piece by piece a competitive system that has worked better in Europe than elsewhere". In his opinion, it is not a simple technical modernization, but "a systemic twist of the regulatory framework" that "overturns the logic of open access, promotes vertical consolidation and shifts power towards a few large groups".

Ultimately, he calls it "the Trojan horse of oligopoly". How? The rule provides fewer obligations for large operators (the incumbents) to grant access to the network; a reduction in regulation of Wholesale prices (the prices that large operators decide for other operators that use their infrastructure, currently regulated by independent authorities); incentives for verticalization, that is, for operators that own both the network and the services; push for market concertation and the creation of European champions.

Zorzoni (Aiip): “A Trojan horse of oligopoly”

A rule that - ultimately - will have repercussions on consumers, who will be forced into a market with "fewer operators", that is, "less choice, less tariff transparency, more dependence on commercial practices imposed from above", explains Zorzoni. Furthermore, DNA would eliminate the double competitive pressure on tariffs, leading networks to become natural monopolies, where "the pressure today of a large number of operators will cause real competition to collapse". In short: "less competition, high prices".

According to Zorzoni, DNA is designed to favor large conglomerates to the detriment of those who have invested in their own network: "The risk is progressive expulsion from the market, or forced reduction to subordinate roles as resellers". Small "100% made in Italy" companies would be forced either to sell or disappear, replicating the fate of many traditional European sectors. The president of AIIP accuses: "There is a false narrative, promoted by those who have an interest in occupying dominant positions without having to compete with the market anymore".

The shadow behind the discussion on the “European Champions”

The European Commission, headed by the EU Commissioner for the Internal Market Thierry Breton, has been calling for years for the creation of “European champions” of telcos, capable of consolidating themselves in the internal market and competing globally, especially with the US and China. A scenario also hoped for in Mario Draghi’s agenda. But for Zorzoni this is anything but a cure. On the contrary. “It would be an evolution in a monopolistic sense that would make it possible to increase, perhaps even double, prices to users, whether they are consumers or businesses, without the latter being able to turn elsewhere for services, such as Internet access, which are now essential”.

Who would benefit? “The three largest global investment funds would probably benefit, and some hope, a fourth European financial group, but not an Italian one. DNA would guarantee them a favorable regulatory environment, fewer obligations, less competition and a central position in the distribution of public resources.”

Zorzoni: "They will make the same mistake they made with green cars"

Zorzoni is critical of Europe and the Commission, with whom he has spoken in recent years: “The feeling is that they are repeating the same pattern already seen in other dossiers, such as the green chapter in the automotive world,” he reasons. “There too, the industry had raised the alarm, but it was not listened to. They went straight ahead, ignoring the consequences, and ended up destroying one of the few industrial chains that were still functioning in Europe, giving away market shares to the usual suspects outside the Union and ultimately further encouraging concentration in that sector too. Now it seems that they want to do the same in the world of telecommunications. They are not listening to those who work in the field, those who invest, those who innovate. A centralist and dirigiste vision is imposed, disconnected from the European industrial and technological reality.”

The only way to stay grounded in reality, concludes Zorzoni, is to leave everything as it is: “If you had a car that travels 20,000 km with a liter of water, comfortable, beautiful, almost indestructible, would you feel the need to change it? The alternative proposal to something that works very well, that required 25 years of work, and that is the only liberalization that has worked in Europe simply does not exist. You do not change something that works very well”. The EU consultation is open until 11 July 2025, and the AIIP has launched the #StopDNA campaign to mobilize businesses, citizens and institutions on the importance of defending the model of liberalization and plurality of networks.