The DT vs. Meta case: the need to restore balance in the Internet ecosystem

The District Court of Cologne ruled in favor of Deutsche Telekom (DT) in a dispute with Meta that lasted over three years.

The proceedings began in 2020, during the pandemic, when Meta unilaterally decided to terminate the ten-year data transfer contract with DT. It is worth remembering how the special circumstances of the pandemic, when people were confined to their homes, increased data traffic in telecommunications networks to an unprecedented level, and the companies providing the most popular digital services achieved record revenues and profits during this period.

Despite the suspension of payments to DT, Meta continued to transmit large amounts of data from its services to Deutsche Telekom’s network. In July 2021, Telekom filed a lawsuit to enforce the contract and demand payment for the data transmission service. Three years later, the court ruled in favor of DT and ordered Meta to pay a fee for the data transfer service on its network in Germany.

Taking into account the operators’ claims in the judgment

The ruling recognizes several key aspects of claims made in recent years by operators in their dealings 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 operators’ right to receive payment for the IP data transmission service provided to these companies.

Imbalance in bargaining power between different participants in the online value chain

First, the judgment recognizes the current imbalance in bargaining power of various actors in the Internet value chain, in particular between telecommunications operators and large Internet companies. Despite Meta’s objections, the court rejected the typical argument of Internet companies that the operators’ control over the access network gave them bargaining power that prevented them from reaching fair agreements. On the contrary, the court pointed out that it is Meta, thanks to its content, that has this bargaining power. No operator can afford not to rely on content from large internet companies.

DT continued to provide the data transmission service to Meta throughout the dispute despite Meta’s unilateral termination of the contract (in terms of price, but not the provision of the service). He had no choice but to act differently, as is the case with any other operator. What leads to this situation is not only the obligations under net neutrality regulations in Europe, but rather the commercial impracticability of opting out of this content – would DT customers keep their subscriptions if Facebook, Instagram and WhatsApp were not available on the DT network? Net neutrality regulation only reinforces the dominance and imbalance of bargaining power in the internet value chain. Regulation designed to protect the Open Internet has become an instrument to strengthen the enormous global market power of large Internet companies, thus having the opposite effect to that intended, threatening the very principles of the Open Internet.

As has been demonstrated so far in other situations in large internet companies’ relationships with other industry players, such as negotiations with newspapers, without regulatory support and intervention, few sectors, and certainly not telecommunications operators, can hope to sit down and negotiate and reach a fair agreement with large internet companies. Until this imbalance disappears, market failure is clear.

Recognition of the right of operators to pay for data transmission services

The second aspect highlighted in the judgment of the Cologne court is the recognition of the right of operators to receive payment for the data transmission service they provide to large internet companies. It is always surprising when the opposite is claimed and defended. Claiming that large internet companies should receive a free service under arguments such as defending the open Internet is inconsistent with the fundamental principles of any business. Tying essentially a B2B service to promoting an open Internet is a distortion of the widely accepted principle of supporting an open Internet. The court in Cologne did not believe these arguments and recognized the right, like any other company, to charge fees for the service and the violation of Meta’s unilateral decision to stop paying DT.

The case lasts 3 years. Going to court to obtain a fair resolution of the abuse of position by large internet companies cannot be the only mechanism to which telecommunications operators must resort. Ordinance Points to the need to ensure an EU regulatory framework that, by addressing identified market failures, establishes a clear right and obligation for internet giants and telecommunications operators to comply with requests for negotiations with a view to concluding fair contracts for IP data services, as well as the possibility in the event of failure to reach an agreement you should seek arbitration.

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