Tensions have risen between European telecoms firms and US Big Tech companies, as telecoms bosses pressure regulators to make the digital giants part of the cost of building the backbone of the internet.
European telcos argue that large Internet firms, primarily American, have built their businesses on the basis of multibillion-dollar investments that carriers have made in Internet infrastructure.
Google, Netflix, meta, Apple, Amazon And Microsoft Make almost half of all internet traffic Today. Telcos feel these firms should pay a “fair share” fee to take into account their unmet infrastructure needs and help with the rollout of next-generation 5G and fiber networks.
The European Commission, the EU’s executive arm, opened a consultation last month on how to address the imbalance. Officials are considering whether telco operators need direct contributions from internet giants.
Big tech firms say it would be an “internet tax” that could undermine net neutrality.
What are telco veterans saying?
Top telecom bosses lashed out at tech companies during Mobile World Congress in Barcelona.
They spent billions on laying cables and installing antennas to deal with growing Internet demand without the associated investment from Big Tech.
“Without telecommunications, without networks, there’s no Netflix, no Google,” Michael Trebbia, chief technology and innovation officer of France’s Orange, told CNBC. “So we are absolutely critical, we are the entry point into the digital world.”
In a February 27 presentation, the CEO of the German telecommunications group Deutsche TelekomTim Hoetzes showed audience members a rectangular illustration representing the scale of market capitalization among various industry participants. The US giants dominate this map.
Tim Hoetjes, CEO of Deutsche Telekom, delivers the keynote address at Mobile World Congress.
Angel Garcia | Bloomberg | Getty Images
Hoetjes asked attendees why these companies can’t “contribute, at least a little bit, to the efforts and infrastructure that we’re building here in Europe.”
BT’s chief technology officer Howard Watson said he sees merit in the fees for the big tech players.
“Can we get a two-way model to work, where the subscriber pays the operator, but the content provider also pays the operator?” Watson told CNBC last week. “I think we should look into that.”
Watson drew an analogy to Google and Apple’s App Stores, which charge developers a cut of in-app sales in return for using their services.
What have US tech firms said?
Attempts to introduce network fees have been strongly criticized – not least by tech companies.
Speaking on February 28 at MWC, Netflix co-CEO Greg Peters labeled proposals for tech firms to pay internet traffic “taxes” to internet service providers to make up for network costs, which would have a “disadvantageous effect” on consumers.
Netflix co-CEO Greg Peters speaks at Mobile World Congress 2023 in a keynote on the future of entertainment.
Joanne Croce | NurPhoto | Getty Images
Peters said requiring the likes of Netflix – which already spends heavily on content distribution – to pay for network upgrades would make it harder to develop popular shows.
The tech firms say that carriers already receive money from their customers to invest in infrastructure – who pay them through call, text and data charges – and that paying Internet companies for carriage By asking to, they effectively want to pay twice.
Google’s head of EMEA, Matt Brittin, said in September that consumers could absorb the costs demanded of digital content platforms, and this could ultimately “have a negative impact on consumers, especially at a time of price increases”.
The tech firms also argue that they are already making large investments in European telco infrastructure, including subsea cables and server farms.
Rethinking ‘net neutrality’
The “fair share” debate has raised some concern that the principles of net neutrality – which state that the Internet should be free, open, and should not favor any one service – may be being undermined. Telcos say they are not trying to end net neutrality.
Technology firms worry that those who pay more for infrastructure can get better network access.
Google’s Brittin said that fair share payments “could potentially translate into measures that effectively discriminate between different types of traffic and violate the rights of end users.”
One suggestion is that individual bargaining deals are needed with Big Tech firms, similar to the Australian licensing model between news publishers and internet platforms.
Telenor CEO Sigve Brekke told CNBC on February 27, “It has nothing to do with net neutrality. It has nothing to do with access to the network.” “It’s related to the burden of cost.”
Short term solution?
Carriers complain that their networks are bogged down by the overwhelming output of the tech giants. One solution to reduce the load on network traffic is to separate content delivery at different times.
Digital content providers can more efficiently schedule a new blockbuster movie or game release, or compress delivered data to reduce network pressure.
“We can start with having a clear schedule of what’s coming now, and being able to have a dialogue about whether companies are using the most efficient way of carrying traffic, and whether some non- Can time critical content be delivered at different times?” Mark Allera, CEO of BT’s consumer division, told CNBC.
“I think it’s a pretty, relatively easy debate, really, although a lot of stuff is global, and that may be engaged in one country and may or may not be engaged in another at one time. But. I think it’s really easier to negotiate on a local level, of course.”
He suggested that the concept of net neutrality needs a bit of a refresh.
no binary options
The “fair share” debate is as old as time. For more than a decade, telecom operators have complained about the “free ride” of over-the-top messaging and media services such as WhatsApp and Skype on their networks.
At this year’s MWC, there was one notable difference – a high-ranking EU official in the room.
EU Internal Market Commissioner Thierry Breton delivers a keynote address at the Mobile World Congress in Barcelona.
Angel Garcia | Bloomberg | Getty Images
Thierry Breton, head of internal markets for the European Commission, said the bloc would “have to find a financing model for the huge investments required” in the development of next-generation mobile networks and emerging technologies like Metaverse.
Bratton said it was important not to undermine net neutrality and that the debate should not be portrayed as a “binary choice” between Internet service providers and Big Tech firms.
According to Paolo Pescatore, tech, media and telecoms analyst at PP Foresight, Breton’s presence at MWC reflects the bloc’s sympathy for Big Telecom.
“The challenge in Europe is it’s not clear because you have an imbalance,” Pescatore said. “The imbalance isn’t down to Big Tech, it’s not down to streamers, and it’s not down to telcos. It’s largely down to an outdated, out-of-date regulatory environment.”
He said cross-border consolidation in the telecom sector and lack of stable revenue have “created the perfect concoction which is inimical to telecom”.
“One possible landing zone for the resolution is a framework for telcos to interact individually with the tech firms generating the heaviest traffic,” Ahmad Latif Ali, European Telecommunications Insights Lead at IDC, told CNBC. “However, it is a highly competitive position.”
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