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Original Article: https://www.cnbc.com/2023/03/10/no-networks-no-google-telcos-urge-eu-to-charge-big-tech-for-internet.html

Tensions between European telecommunications firms and U.S. Big Tech companies have crested, as telecom bosses mount pressure on regulators to make digital giants fork up some of the cost of building the backbone of the internet.

European telcos argue that large internet firms, mainly American, have built their businesses on the back of the multi-billion dollar investments that carriers have made in internet infrastructure.

Google, Netflix, Meta, Apple, Amazon and Microsoft generate nearly half of all internet traffic today. Telcos think these firms should pay “fair share” fees 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 arm, opened a consultation last month examining how to address the imbalance. Officials are seeking views on whether to require a direct contribution from internet giants to the telco operators.

Big Tech firms say this would amount to an “internet tax” that could undermine net neutrality.

What are telco giants saying?
Top telecom bosses came out swinging at the tech companies during the Mobile World Congress in Barcelona.

They bemoaned spending billions on laying cables and installing antennas to cope with rising internet demand without 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.”

In a Feb. 27 presentation, the CEO of German telecom group Deutsche Telekom, Tim Hoettges, showed audience members a rectangular illustration, representing the scale of market capitalization among different industry participants. U.S. giants dominated this map.

Hoettges asked attendees why these companies couldn’t “at least a little bit, contribute to the efforts and the infrastructure which we are building here in Europe.”

Howard Watson, chief technology officer of BT, said he sees merit in a fee for the large tech players.

“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 drew an analogy to Google and Apple’s app stores, which charge developers a cut of in-app sales in return to use their services.

What have U.S. tech firms said?
Efforts to implement network fees have been strongly criticized — not least by tech companies.

Speaking on Feb. 28 at MWC, Netflix co-CEO Greg Peters labeled proposals to make tech firms pay internet service providers for network costs an internet traffic “tax,” which would have an “adverse effect” on consumers.

Requiring the likes of Netflix — which already spends heavily on content delivery — to pay for network upgrades would make it harder to develop popular shows, Peters said.

Tech firms say that carriers already receive money to invest in infrastructure from their customers — who pay them via call, text and data fees — and that, by asking internet companies to pay for carriage, they effectively want to get paid twice.

Consumers may end up absorbing costs asked of digital content platforms, and this could ultimately “have a negative impact on consumers, especially at a time of price increases,” Matt Brittin, Google’s head of EMEA, said in September.

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 sparked some concern that the principles of net neutrality — which say the internet should be free, open, and not give priority to any one service — could be undermined. Telcos insist they’re not trying to erode net neutrality.

Technology firms worry that those who pay more for infrastructure may 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 infringe the rights of end users.”

One suggestion is to require individual bargaining deals with the Big Tech firms, similar to Australian licensing models 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.”

Short-term solution?
Carriers gripe that their networks are congested by a huge output from tech giants. One solution is to stagger content delivery at different times to ease the burden on network traffic.

Digital content providers could time a new blockbuster movie or game releases more efficiently, or compress the data delivered to ease the pressure off networks.

“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 the net neutrality concept needs a bit of a refresh.

Not a ‘binary choice’
The “fair share” debate is as old as time. For over a decade, telecom operators have complained about over-the-top messaging and media services like WhatsApp and Skype “free riding” on their networks.

At this year’s MWC, there was one notable difference — a high-ranking EU official in the room.

Thierry Breton, head of internal markets for the European Commission, said the bloc must “find a financing model for the huge investments needed” in the development of next-generation mobile networks and emerging technologies, like the metaverse.

Breton said it was important not to undermine net neutrality and that the debate should not be characterized as a “binary choice” between internet service providers and Big Tech firms.

Breton’s presence at MWC appeared to reflect the bloc’s sympathies toward Big Telecom, according to Paolo Pescatore, tech, media and telecom analyst at PP Foresight.

“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.”

A lack of cross-border consolidation and stagnating revenues in the telecoms sector created a “perfect concoction that’s unfavorable to telcos,” he said.

“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.”