U.S. tech giants face pressure from Europe's telcos to pay for building the internet
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Loading... - Ainsley Murphy
- 28 Oct 2022
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Telecom groups are pushing European regulators to consider implementing a framework where the companies that send traffic along their networks are charged a fee to help fund mammoth upgrades to their infrastructure, something known as the “sender pays” principle.
Their logic is that certain platforms, like Amazon Prime and Netflix, chew through gargantuan amounts of data and should therefore foot part of the bill for adding new capacity to cope with the increased strain.
“The simple argument is that telcos want to be duly compensated for providing this access and growth in traffic,” media and telecoms analyst Paolo Pescatore, from PP Foresight, told CNBC.
The idea is garnering political support, with France, Italy and Spain among the countries coming out in favor. The European Commission is preparing a consultation examining the issue, which is expected to launch early next year.
‘Free riding’
The debate is hardly new. For at least a decade, telecom firms have tried to get digital juggernauts to fork out to support upgrades to network infrastructure. Carriers have long been wary of the loss of income to online voice calling applications such as WhatsApp and Skype, for example, accusing such services of “free riding.”
In 2012, the European Telecommunications Network Operators Association lobby group, which counts BT, Vodafone, Deutsche Telekom, Orange and Telefonica as members, called for a solution that would see telecom firms strike individual network compensation deals with Big Tech companies.
But it never really led to anything. Regulators ruled against the proposal, saying it might cause “significant harm” to the internet ecosystem.
After the coronavirus outbreak in 2020, the conversation shifted. Officials in the EU were genuinely worried networks might crumble under the strain of applications helping people work from home and binge films and TV shows. In response, the likes of Netflix and Disney Plus took steps to optimize their network usage by cutting video quality.
That revived the debate in Europe.
In May 2022, EU competition chief Margrethe Vestager said she would look into requiring Big Tech firms to pay for network costs. “There are players who generate a lot of traffic that then enables their business but who have not been contributing actually to enable that traffic,” she told a news conference at the time.
Meta, Alphabet, Apple, Amazon, Microsoft and Netflix accounted for more than 56% of all global data traffic in 2021, according to a May report that was commissioned by ETNO. An annual contribution to network costs of 20 billion euros ($19.50 billion) from tech giants could boost EU economic output by 72 billion euros, the report added.
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