European telcos cry foul over OTT traffic—again
Telcos have been crying that they are being treated unfairly by Big Tech for at least a decade and the record seems to have stuck. MWC in Barcelona provided another chance for European operators to vent their frustration and this time they are armed with the provisional backing of the European Union.
“Most of the telco providers are exhausted,” said Bocar Ba, CEO of the Samena Council at the rhetorically titled ‘Is It Time for Big Tech to Pay Their Fair Share?’ conference session. “If nothing is done soon, they could face the same problem for another decade.”
EU's digital divide widening?
Because European telcos are required to invest in covering rural populations of each member state with high speed broadband “the digital divide is actually widening in Europe” because at the same time their revenues are declining.
Last February the EU drew up a lengthy to-do list in a white paper for the next EU Commission, hoping to make the bloc more competitive on the global telecoms stage.
his was followed in September by a report on the EU’s competitiveness that effectively argued for a single telecoms market. It encouraged the EU to adopt harmonised rules regarding spectrum allocation, cybersecurity, and consolidation at the EU rather than member state level.
Author Mario Draghi had also bought into play the idea of fair contribution: charging content and application providers to use the networks that carry their data.
From assessment to action
Referencing the two documents, Laura Ballarin Cereza of the European Parliament said that if 2024 was a year of assessment then “2025 should be a year of action.” Data traffic is skyrocketing at 35% a year while the market cap of telcos declined 31% in the last decade, she said.
She claimed that just six companies generate 60% of global internet traffic. “This is a huge imbalance in relation to the contribution of infrastructure costs. Euro200 billion is needed to meet the digital target of coverage across Europe. A more balanced ecosystem is needed.”
Telco execs at the event repeatedly warned that investment required to sustain the network infrastructure is outpacing the funding model. It would take U$D450 billion to bridge the digital divide between those connected to mobile services and those who are not worldwide, with the bill for Africa alone estimated at U$D108bn.
“Telcos are investing billions every year in networks, fibre expansion and spectrum licencing,” said Ba. “Yet their revenue is stagnating, the revenue per user is declining and the cost of 5G Advanced rollout is increasing. Meanwhile Big Tech cloud providers and content aggregators are thriving from internet connectivity without directly contributing to internet costs. It is a question of sustainability and fairness,” he said.
Shahid Ahmed, NTT Data, EVP New Ventures and Innovation, suggested that Big Tech could not be forced to pay mainly because Netflix, Amazon, Google and others would simply pass on increases to their customers.
“I don’t think putting a tax burden on OTT companies will be adopted by them,” said Ahmed, who also advises the FCC. “If we do, I think it will negatively impact the consumer, whether through increases in price or a lowering of content quality,” he suggested.
Opening up the EU for telco cartels
He favoured working with two principles in the EU proposals. One was to judge the competitiveness of a market based on innovation, product and services, not on price alone. “The second is to open up the regulatory framework so companies can merge and partner to offer better services at a more economic price, one that allows them to do more investment and coverage. To me those are the two tenants that will allow the telcos to continue more capital expansion and provide better services to consumers.”
He noted that in the US, the FCC had for years incorporated a Universal Service Fund onto customer telco bills which was ringfenced to expand the broadband network into rural areas of the States.
Likewise, the EU is trying to balance the needs of digital consumers with the needs of its citizens in an age where high speed connectivity is like electricity or clean water, but in a much more fragmented marketplace.
Ballarin Cereza suggested it was reasonable to look into “a voluntary agreement from content providers and network operators”—at those who benefit the most should play the most active role in the network’s expansion and maintenance.
She said the aviation industry provided an example of how this would work in practice. “There have been years of discussion and now we need to accelerate the discussion because we need to take further steps to close the digital gap.
“We are not naïve. We know there are obstacles that Big Tech will play. We would also encourage efficiency measures like compression technology as a complementary means to reduce network overload while maintaining quality.”
It is noteworthy that, unlike previous editions of MWC, there were no keynote speeches from any content aggregator or streamer. If they were present, Netflix, Amazon Prime, YouTube, Disney and Warner Bros. were keeping a low profile. But then, they may already have won the argument.
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