Can European Telcos Afford 5G and Broadband?

Pushing harder to have the largest users of their networks pay a so-called fair share to drive 5G and broadband, European telcos have submitted an open letter to the EC to advance this crucial issue.

The latest open letter on the issue targeted EU regulators and was signed by top executives at 20 telcos, including BT Group, Deutsch Telecom, Vodafone Group, KPN, Orange, and Telefonica.

The group is pressing the EC harder for the users - content companies- that they claim make up 5% of their network data use to pay more to fund network advancement. Google, Meta, Microsoft, Amazon, Netflix, and Apple could be the most adversely affected by the creation of usage fees.

Telco group website launched to reinforce push for “A” Fair Share

Several European telcos have launched a website to educate all visitors on A Fair Share approach developed in response to the question raised by the EC about how “to ensure sustainable investment in Europe’s communications networks.” Group members include Orange, Vodafone, Deutsche Telecom, and Telefonica. Industry associations ETNO and GSMA are shown as participants.

The A Fair Share group claims it supports “a new, collaborative and more sustainable approach to investing in the future of connectivity for Europe, to deploy a solution for the benefit of all EU citizens and businesses.”

The EC and the future of connectivity

The fair share issue came to light in May as the EC was consulting on the future of the connectivity sector. Responses from many European telcos made it clear a regulatory framework where the biggest users – large content generators – had been using a disproportionate amount of bandwidth.

Can the EU meet the 2030 deadline for 5G connectivity?

The EU policy is targeting 2030 as the deadline for offering every European access to "5G-like' connectivity, which is seen by many today as ambitious. It seems like a bridge too far, given the broad support for a pay-your-fair-share approach for top bandwidth users.

CEOs of twenty telco groups wrote an open letter warning that future investments in infrastructure are “under serious pressure.” The group also called for regulatory action.

Insufficient funds for the 2030 EU deadline?

The EU itself estimates at least $174 billion euros of new investment are needed to make its 2030 deadline. The telco group claims, “the telecoms sector is currently not strong enough to meet that demand, with many operators barely earning their cost of capital.”

Europe’s digital future at risk without regulation reboot -Vodafone

The numbers according to Vodafone: The volume of traffic on Vodafone’s network has grown in recent years – with 360% growth between 2019 and 2022 alone. Nearly 50% of this traffic was generated by just four of the world’s largest digital content providers, also known as over-the-tops (OTTs). Vodafone anticipates a continued annual growth of 21–30% in peak traffic year-on-year.

In 2022, nearly 20% of Vodafone’s overall expenditure on network upgrades could be linked to managing traffic growth driven by those OTTs. The evolution of services like virtual worlds – which will also require more costly, low-latency networks to function – could exacerbate this issue.

The situation is unsustainable, wrote Vodafone. “Simply put, telcos want to continue investing in network upgrades for the benefit of Europeans but cannot continue shouldering that cost alone.”

Are new rules and regulatory frameworks coming?

Europe can address this situation with new rules that ensure those companies extracting the most value from investment in network infrastructure, such as the largest content generators, also make a fair contribution to the costs of telecoms networks.

European telcos have asserted for some time that large companies that are providers of cloud computing, video streaming, videoconferencing, and gaming have been driving a continuing surge in internet traffic that eats up network bandwidth.

A 2020 report from the European telcos' lobby – the European Telecommunications Network Operators Association - asserted over half of the global data traffic originates from the servers of a half dozen U.S. firms mentioned above.

Executives from the telco group say they seek rules that target only the largest content companies. The rules, they added, should also comply with net neutrality regulations.

Enterprise impact on international tech

The issue can impact companies on both sides of the Atlantic. “It’s an explosive debate that goes to the heart of how the internet is financed and run,” according to a post on the website of the Center for European Policy Analysis (CEPA), a non-profit, non-partisan institution in Washington, D.C., focused on strengthening the transatlantic alliance through research, analysis, and programs.

“At stake, many say, is net neutrality, the principle by which all internet traffic, from big and small companies alike, is treated equally. A European move to tax US content creators could harm transatlantic tech relations.”

Meta voiced its strong disapproval of network fees in May.

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