• Europe’s telcos are on a collective mission
• They want the largest digital traffic generators to contribute to their network costs
• And have been banging the drum louder and louder this year
• Now 16 CEOs have signed a statement pressing for EU action
• Do the telcos expect to win this fight? Or just gain leverage on other issues?

In an ongoing campaign to secure financial compensation from companies such as Meta (Facebook), Google and Netflix, which generate large volumes of data and video traffic, the CEOs of 16 leading European telcos have signed a statement calling on European Union (EU) commissioners to introduce legislation that would force the so-called “big tech” companies to contribute towards broadband network costs.

The dramatic statement – written, according to the signatories, with “a sense of urgency” – has been signed by the following chief executives (in alphabetical order, by surname): 

·  Christoph Aeschlimann, CEO, Swisscom

·  Thomas Arnoldner, CEO, A1 Telekom Austria Group

·  Victoriya Boklag, CEO, United Group

·  Edward Bouygues, Chairman, Bouygues Telecom

·  Guillaume Boutin, CEO, Proximus Group

·  Sigve Brekke, President and CEO, Telenor Group

·  Alberto Calcagno, CEO, Fastweb

·  Joost Farwerck, CEO and Chairman of the Board of Management, KPN

·  Ana Figueiredo, CEO, Altice Portugal

·  Christel Heydemann, CEO, Orange Group

·  Timotheus Höttges, CEO, Deutsche Telekom

·  Philip Jansen, CEO, BT Group

·  Allison Kirkby, President and CEO, Telia Company

·  Pietro Labriola, CEO, TIM Group

·  José María Alvarez-Pallete, Chairman and CEO, Telefónica

·  Nick Read, CEO, Vodafone Group

It lays out the case for Europe’s telcos as a group that invested a collective €52.5bn in 2020 (see page 5 of this Analysys Mason report) but “must be enabled to do more and faster” to deliver the infrastructure that is necessary to support an increasingly digital economy, help the EU countries and others in the region to achieve important sustainability goals, and be a socio-economic “lifeline”.  

Up to this point, it’s hard to see that anyone – regulators, policymakers, telcos, streaming and cloud giants – would disagree.

But the crux of the pitch, the plea, is that the telcos say they can’t afford to do what they need to do when they have to spend so much money building out capacity to carry the traffic of the big tech companies.

“To be sustainable over time, we believe that the largest traffic generators should make a fair contribution to the sizeable costs they currently impose on European networks”, with those sizeable costs estimated by Frontier Economics in its 2022 report titled Estimating OTT traffic-related costs on European telecom networks to be in the range of €15bn to €36bn.

“We must ensure that Europe does not suffer from scarcity of digital infrastructure,” add the telcos (somewhat petulantly).

The whole statement can be read here.

The publication of the statement is the latest move in a campaign that positions the telcos as hard-done-by builders and managers of vital digital infrastructure, which is unfairly exploited by companies that generate vast revenues from sending their traffic over that infrastructure without having to pay any fees to do so. The claim that “over-the-top” traffic is a costly burden to the telcos is not a new one, but it has become more pronounced during the past year or so as the telcos scramble to finance their fibre-to-the-premises (FTTP) and 5G rollouts, with many having already started the process of selling assets, such as telecom towers, to keep their balance sheets in check.

But whereas previous calls for a financial contribution from the cloud and streaming services giants have been largely ad hoc, the efforts to gain fiscal compensation from the big tech community have been more coordinated in the past year. This began with a statement issued in November 2021 by the European Telecommunications Network Operators’ Association (ETNO) lobby group, signed by 13 operator CEOs, which called for “big tech platforms [to] contribute fairly to network costs”.   

Since then, hardly a month has gone by without that rhetoric being hammered home by individual operators or industry trade groups. That campaign seems to have made an impact: In May this year, Margrethe Vestager, executive vice president of the European Commission for A Europe Fit for the Digital Age, said the EU was considering whether the likes of Amazon, Meta, Netflix et al should make a contribution to telco costs; then earlier this month the EU’s internal market commissioner, Thierry Breton, stated that a consultation would be initiated early next year that would look into whether the major data traffic generators should make some kind of contribution to the network operators. (Note that Breton was formerly the CEO of France Telecom, which became Orange, so he is likely more in tune with the telco mindset than other European politicians.)

So, the telcos already have the ears of influential players within the corridors of power in Europe but, of course, the companies being blamed for filling the networks with traffic are not ignoring current developments, or staying silent on the matter.

According to Reuters, Matt Brittin, president of EMEA business and operations at Google, is set to use an upcoming speech to deride the telcos’ efforts to secure big tech contributions to network investments as a decade-old argument that has no supporting data and a move that could have negative implications for consumers as well as “upend the principles of the open internet”.  

The telcos, of course, know that such arguments will be part of big tech’s defence, so have included references in their statement to how they have the best interests of consumers at heart and how they are “respectful and fully supportive of the need to uphold the EU open internet principles”.

It's very likely that representatives of other major “traffic generators” will, during the course of the upcoming months, remind anyone with a stake in the proceedings that without their streaming video, cloud and data traffic, which the telcos claim cost them so much for zero returns, there would be little (if any) demand for the high-speed, revenue-generating fixed and mobile broadband connections that (in these post-voice days) are the lifeblood of the telcos’ businesses.

It's a very tense, yet symbiotic relationship: Without the telcos, the big tech companies lack a way to deliver their services with any reasonable assurance or quality: Yet without big tech, the telcos’ raison d'être is called into question. That is a very crude yet representative helicopter view of the current situation.

The two sides are as far apart as ever but what has changed is that European policymakers are set to examine the landscape and see if something needs to be done.

Will the EU simply ask certain big tech companies to write regular cheques to the (mainly profitable) telcos to help them out in their self-proclaimed time of need. That would be ludicrous and unworkable – it would never get out of the courts. Might there be some kind of new digital traffic tax regime to create a centralised infrastructure fund? Only on paper, surely. Many models will be discussed but, in the real world, the time of expensive legal teams will be eaten up for likely little gain.

Do the telcos know they stand little chance of getting any money from big tech but hope their case will improve their chances of getting what they want in terms of looser EU regulations on red tape and merger and aquisition activity? That seems more likely.

Speaking of which... Vodafone’s chief external affairs officer, Joakim Reiter, has just published a blog that poses the question: “Why does the European Union allow process and obstacles to delay the installation of the modern digital infrastructure that Europe desperately needs?”

Answers on a digital postcard to Thierry Breton and Margrethe Vestager please

- Ray Le Maistre, Editorial Director, TelecomTV