Tensions between European telcos and US tech giants have risen as telecoms bosses step up pressure on regulators to force the digital giants to shell out some of the cost of building the internet backbone.
European telecommunications companies argue that large Internet firms, mostly American, have built their businesses on multibillion-dollar investments made by operators in Internet infrastructure.
Google, Netflix, Meta, an apple, Amazon and Microsoft generate almost half of all Internet traffic today. The telcos believe these firms should pay a “fair share” to account for their disproportionate infrastructure needs and help fund the rollout of next-generation 5G and fiber networks.
The European Commission, the EU’s executive body, opened a consultation last month exploring how to address the imbalance. Officials are seeking input on whether to require Internet giants to contribute directly to telecom operators.
Big tech firms say it would amount to an “internet tax” that could undermine net neutrality.
What are the telecom giants saying?
CEOs of leading telecommunications companies spoke out against technology companies during the Mobile World Congress in Barcelona.
They bemoaned spending billions to lay cables and install antennas to handle the growing internet demand without corresponding investment from Big Tech.
“Without telecommunications, without the web, there is no Netflix or Google,” Michael Trabbio, chief technology and innovation officer at France’s Orange, told CNBC. “So we’re absolutely vital, we’re the entry point into the digital world.”
In his presentation on February 27, CEO of German telecommunications group Deutsche Telekom, Tim Hetges, showed audience members a rectangular illustration representing the scale of market capitalization of various industry players. The American giants dominated this map.
Tim Hoetges, CEO of Deutsche Telekom, delivers the keynote address at the Mobile World Congress.
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Hötges asked the audience why these companies could not “contribute at least a little bit to the efforts and the infrastructure that we are building here in Europe.”
Howard Watson, BT’s chief technology officer, said he sees benefits in fees for the big tech players.
“Can we make a two-way model work where the customer pays the operator and the content provider also pays the operator?” Watson told CNBC last week. “I really think we should look at it.”
Watson drew an analogy with Google and Apple’s app stores, which charge developers a cut of in-app sales in exchange for using their services.
What are US tech companies saying?
Efforts to introduce a network charge have been heavily criticized – not least by technology companies.
Speaking at MWC on February 28, Netflix co-CEO Greg Peters called proposals to make tech firms pay ISPs for network costs a “tax” that would have a “negative impact” on consumers.
Greg Peters, co-CEO of Netflix, is speaking on the future of entertainment at Mobile World Congress 2023.
Joan Cross | Nurphoto | Getty Images
Peters said that if companies like Netflix, which already spend heavily on content delivery, have to pay for network upgrades, it will make it harder for popular shows to grow.
Tech firms say that carriers already receive money for infrastructure investments from their customers — who pay them for calls, texts and data — and that by asking Internet companies to pay for their transportation, they’re effectively getting paid twice.
Matt Brittin, Google’s head of EMEA, said in September Matt Brittin, Google’s head of EMEA, said that consumers can cover the costs associated with digital content platforms.
Tech firms also say they are already making big investments in European telecommunications infrastructure, including submarine cables and server farms.
Rethinking “Net Neutrality”
The “fair share” debate has raised some concerns that the principles of net neutrality, which states that the Internet should be free, open and that no one service is given priority, could be undermined. The telecommunications companies insist that they are not trying to violate net neutrality.
Tech firms worry that those who pay more for infrastructure may get better access to the network.
Google’s Brittin said the fair share payments “potentially turn into measures that effectively discriminate against different types of traffic and violate the rights of end users.”
One proposal is to require individual negotiations with major technology firms, similar to Australia’s licensing models between news publishers and online platforms.
“It has nothing to do with net neutrality. It has nothing to do with network access,” Sigve Brekke, CEO of Telenor, told CNBC on February 27. “It has to do with the cost burden.”
A short-term solution?
Operators complain that their networks are overloaded with the huge output of technology giants. One solution is to stagger content delivery at different times to ease the load on network traffic.
Digital content providers could more efficiently time the release of a new blockbuster or game, or compress the data delivered to lighten the load on networks.
“We could just start with a clear schedule of what’s going to happen and when, and being able to have a dialogue about whether companies are using the most efficient way to deliver traffic, and whether certain non-critical content can be delivered at different times,” CNBC said in a statement. BT Consumer Director Mark Alera.
“I think it’s a pretty easy discussion, although a lot of the content is global and what might be busy in one country at another time may or may not be in another. But I think that at the local level, of course, it is very easy to have a discussion.
He suggested that the concept of net neutrality needs some updating.
Not “binary choice”
The “fair share” debate is as old as time. For more than a decade, telecommunications operators have complained about the overcrowding of messaging and media services such as WhatsApp and Skype on their networks.
There was one notable difference at this year’s MWC — a high-ranking EU official was in the room.
Thierry Breton, Commissioner for the European Union’s internal market, delivers a keynote speech at the Mobile World Congress in Barcelona.
Angel Garcia | Bloomberg | Getty Images
Thierry Breton, the European Commission’s head of internal markets, said the bloc must “find a financing model for the huge investments needed” in the development of next-generation mobile networks and new technologies such as the metaverse.
Bratton said it was important not to undermine net neutrality and that the debate should not be characterized as a “binary choice” between ISPs and big tech firms.
Breton’s presence at MWC seemed to reflect the bloc’s sympathies for Big Telecom, according to Paolo Pescatore, technology, media and telecoms analyst PP Foresight.
“The problem in Europe is that it’s not as clear because you have an imbalance,” Pescatore said. “The imbalance is not due to big tech, it’s not because of streamers, it’s not because of telecommunications companies. This is largely due to an old, outdated regulatory environment.”
The lack of cross-border consolidation and stagnant revenues in the telecoms sector have created “a perfect mix that’s not good for telecom companies,” he said.
“The potential landing zone for the solution is the basis for individual telecom negotiations with the technology firms that generate the most traffic,” Ahmad Latif Ali, head of European telecoms at IDC, told CNBC. “However, this is a very controversial situation.”
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