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European Telcos Bark that Netflix and Big Tech Must Pay Fair Share–But Their Bark Lacks Bite

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Calls for major streamers and big tech to pay their “fair share” for carriage of their services over mobile broadband networks are nothing new, but operators are ratcheting up pressure as the industry enters the next phase of 5G, AI, IoT, and Web3 expansion.

Speaker after speaker at Mobile World Congress heralded a new era of cooperation and openness with US-based big tech at the same time as pleading for the heaviest data traffic streamers to pay their way—and urging regulators to step in if they do not.

Mats Granryd, Director General of GSMA laid the groundwork in the opening address in Barcelona. “We are working toward an open digital ecosystem [in which] telcos are becoming supercomputers. However, we need a much more balanced ecosystem. It means everybody collaborating with their fair share of effort.”

Beyond vague and possibly empty threats at not being able to deliver next-generation mobile broadband infrastructure without greater financial contribution, it is not clear what leverage the mobile industry actual has.

“I don’t want to go to my customers and say ‘You have to pay for your Netflix streams in future,’” said Deutsche Telekom’s CEO Tim Hoettges in a keynote. “Why can’t the streamers and hyperscalers contribute a little bit to the effort and infrastructure which we are building here in Europe? A fair share discussion is one which we should have in the open among all players.”

He suggested that just six companies generate more than 60% of traffic on Europe’s telco infrastructure and called for a “partial regulation” in this area; otherwise, he said, “we will produce the network where we have all the capital cost and all the profit goes somewhere else.”

Figures from Deutsche Telekom suggest that in 2022 European operators spent Euro55 billion on network infrastructure in Europe and hyperscalers—meaning Alphabet, Google, Amazon, Microsoft, Apple—spent Euro19bn on the European continent. Eighteen billion Euro of that was in data centers and just 1 billion Euro in connectivity.

“Is it a fair deal that all these hyperscalers and streamers are using our infrastructure for free?” asked Hoettges. “Shouldn’t there be a fair sharing between the money we invest in the infrastructure and the one they are monetizing?”

Orange claimed that five of the largest “online traffic generators” account for 55% of daily traffic on European telco networks. This represents approx. Euro15bn in cost born by European telcos each year.

“The entire sector is at a crossroads,” said Christel Heydemann, CEO, Orange.“It requires huge investment that some telcos are no longer able to fully absorb and are selling assets off. It is paradoxical that infrastructure is better value as a standalone business than within the telco sector.

“My peers would agree that regulators and policy makers have a major role to play to balance this unsustainable situation. After all, it is in our common interest that telcos keep investing to support new digital services.”

Heydemann said that more than Euro 600 billion had been invested into the continent by telcos to drive connectivity over the last decade.

“It is time to recognise that the telco industry has invested massively and played a huge role in the economic uplift of countries. Fair play rules start by acknowledging the unbalanced situation today.”

She called for a new European framework that would deliver a fair contribution from what she called the “large online traffic generators.”

“[European telcos] are all willing to set the proper commercial framework with large online traffic generators,” Heydemann said. “Such a framework would allow value creation for everyone and to further accelerate the digital services our customers need. Therefore, we welcome a public consultation to tackle this.

“We are not asking to change European net neutrality principals nor are we asking for a new tax mechanism but we do believe that the fair and direct contribution to network costs will help create the better conditions we urgently need to keep investing privately rather than requiring public funding.”

There was some skepticism about all these from seasoned mobile industry observers.

Andrew Collinson, Executive Director & Chief Research Officer, STL Partners said that telcos pleading for someone else to pay for it all is a familiar theme.

“I suspect these arguments are more about creating a better environment for investment. I don’t think they will get Google to pay for mobile data. It is about getting into the minds of regulators and governments. It’s more of a warning to the EU and member state governments that mobile technology investment is necessary to coping with the big themes of the next ten years like climate change and regionalization.”

Paolo Pescatore, Founder at PP Foresight noted that the debate was around “the fair share of costs, how data is being used and consumed, and who should fund that.”

For Deutsche Telekom, the exploitation of telco networks as a dumb pipe is symptomatic of an existential threat to Europe’s telco operators. He pointed out that fragmentation and competition within the European market was leaving operators at a massive disadvantage on the global scale. “We have to rise above petty state hoods. We need a single European market. We need one European digital identity and one European spectrum policy to compete against American and Asian markets.”

He claimed per capita spend in 5G in Europe was the lowest among other mature markets, and blamed the regulatory framework, too much competition, and a lack of spectrum in some countries, rather than operators.

He also noted that 92% of Europe’s data from mobile networks is not stored in Europe “but on servers outside the continent or on servers owned by foreigners.”

That’s a problem, he intimated, if the next big growth in revenue and services is going to be from leveraging data with AI.

“Dependency is easy, sovereignty is not,” he says. “We have to wake up. Politicians and telcos have to get out of our comfort zone. Do you believe that in five years MWC should take place in Europe or in the US? Will European telcos even be relevant in future?”

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