European telecom companies want big tech in the United States to pay for the internet, but tech titans are fighting back.
Tensions between European telecommunications firms and U.S. Big Tech companies have risen as telecom executives put pressure on regulators to make digital behemoths pay a portion of the cost of building the internet’s backbone.
European telcos argue that large internet firms, primarily American, have built their businesses on multibillion-dollar investments in internet infrastructure made by carriers.
Google, Netflix, Meta, Apple, Amazon, and Microsoft currently account for nearly half of all internet traffic. Telcos believe these companies should pay “fair share” fees to account for their disproportionate infrastructure needs and to contribute to the rollout of next-generation 5G and fiber networks.
Last month, the European Commission, the EU’s executive arm, launched a consultation on how to address the imbalance. Officials are seeking feedback on whether internet behemoths should make direct contributions to telco operators.
Big Tech firms argue that this would amount to a “internet tax,” undermining net neutrality.
During the Mobile World Congress in Barcelona, top telecom executives came out swinging at tech companies.
They bemoaned the fact that billions of dollars were spent laying cables and installing antennas to meet rising internet demand, with no corresponding investments from Big Tech.
“Without the telcos, without the network, there is no Netflix, there is no Google,” Michael Trabbia, chief technology and innovation officer for France’s Orange, told CNBC. “So we are absolutely vital, we are the entry point to the digital world.”
Tim Hoettges, CEO of German telecom group Deutsche Telekom, showed audience members a rectangular illustration representing the scale of market capitalization among different industry participants in a Feb. 27 presentation. This map was dominated by American behemoths.
Hoettges questioned why these companies couldn’t “at least a little bit” contribute to the efforts and infrastructure being built in Europe.
BT’s chief technology officer, Howard Watson, believes a fee for large tech players has merit.
“Can we get a two-sided model to work, where the customer pays the operator, but also the content provider pays the operator?” Watson told CNBC last week. “I do think we should be looking at that.”
Watson compared it to Google and Apple’s app stores, which charge developers a percentage of in-app sales in exchange for using their services.
Attempts to implement network fees have been heavily criticized, not least by technology companies.
Netflix co-CEO Greg Peters called proposals to make tech firms pay internet service providers for network costs an internet traffic “tax” that would have a “adverse effect” on consumers on Feb. 28 at MWC.
Requiring Netflix, which already spends heavily on content delivery, to pay for network upgrades would make it more difficult to develop popular shows, according to Peters.
Carriers already receive money to invest in infrastructure from their customers, who pay them through call, text, and data fees, according to tech firms, and by asking internet companies to pay for carriage, they effectively want to be paid twice.
Consumers may end up bearing the costs imposed on digital content platforms, which could “have a negative impact on consumers, especially at a time of price increases,” according to Matt Brittin, Google’s head of EMEA, in September.
Tech companies also claim that they are already investing heavily in European telco infrastructure, such as subsea cables and server farms.
The “fair share” debate has sparked some concern that net neutrality principles — which state that the internet should be free, open, and not prioritize any one service — may be jeopardized. Telcos insist they are not attempting to undermine net neutrality. Technology companies are concerned that those who pay more for infrastructure will have better network access.
According to Google’s Brittin, fair share payments “could potentially translate into measures that effectively discriminate between different types of traffic and infringe on end users’ rights.”
One suggestion is to require individual bargaining agreements with Big Tech firms, similar to the licensing models used in Australia between news publishers and internet platforms.
“This has nothing to do with net neutrality. This has nothing to do with access to the network,” said Sigve Brekke, CEO of Telenor, told CNBC on Feb. 27. “This has to do with the burden of cost.”
Carriers complain that massive amounts of data from tech behemoths have clogged their networks. To alleviate the strain on network traffic, one solution is to stagger content delivery at different times.
Digital content providers could better time the release of a new blockbuster movie or game, or compress the data delivered to relieve network strain.
“We could just start with having a clear schedule of what’s coming when, and being able to have a dialogue as to whether companies are using the most efficient way of carrying the traffic, and could certain non-time critical content be delivered at different times?” Marc Allera, CEO of BT’s consumer division, told CNBC.
“I think that’s a pretty, relatively easy debate to be had, actually, although a lot of the content is global, and what might be busy in one country and one time may or may not be busy in another. But I think at a local level is certainly a really easy discussion to have.”
He suggested that the concept of net neutrality be updated.
The debate over “fair share” is as old as time. Over-the-top messaging and media services like WhatsApp and Skype have been “free riding” on telecom networks for over a decade.
There was one notable difference at this year’s MWC: the presence of a high-ranking EU official.
The European Commission’s head of internal markets, Thierry Breton, stated that the bloc must “find a financing model for the huge investments required” in the development of next-generation mobile networks and emerging technologies such as the metaverse.
Breton stressed the importance of maintaining net neutrality and arguing that the debate should not be framed as a “binary choice” between internet service providers and Big Tech firms.
According to Paolo Pescatore, tech, media, and telecom analyst at PP Foresight, Breton’s presence at MWC appeared to reflect the bloc’s sympathies toward Big Telecom.
“The challenge in Europe is it’s not that clear cut because you have an imbalance,” Pescatore said. “The imbalance is not down to Big Tech, it’s not down to streamers, and it’s not down to telcos. It’s down largely to the old, out-of-date regulatory environment.”
He described a “perfect concoction that is unfavorable to telcos” as a lack of cross-border consolidation and stagnant revenues in the telecoms sector.
“A potential landing zone for resolution is a framework for telcos to negotiate individually with the tech firms that generate the heaviest traffic,” Ahmad Latif Ali, European telecommunications insights lead at IDC, told CNBC. “However, this is a highly contested situation.”
(Adapted from CNBC.com)
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