European telcos claim Apple, Google should pay for network improvements

A group of European carriers is arguing that companies such as Apple, Google, and Facebook should help pay for the multi-billion dollar network investments needed to support their bandwidth-intensive services, according to a Bloomberg report. “Service providers are flooding networks with no incentive” to cut costs, said France Telecom Chief Executive Officer Stephane Richard last month. “It’s necessary to put in place a system of payments by service providers as a function of their use.” Richard addressed the issue at the “Le Web” conference in Paris this week, and has joined with Telecom Italia CEO Franco Bernabe and Telefonica SA CEO Cesar Alierta in arguing for a new business model. Bernabe said that the disparity between investments and revenue “is set to compromise the economic sustainability of the current business model for telecom companies,” adding that Apple, Google, Facebook, and Skype “increasingly look like integrated operators in the telecom network sector.”

The article sites IDC as estimating that the number of mobile data connections in western Europe will rise by an average of 15 percent a year to 270 million in 2014, while overall end-user revenue will fall about 1 percent a year. Canalys adds that carriers’ average spending on network infrastructure over the same period will jump 28 percent to roughly $3.8 billion. Companies like Google and Yahoo! “use Telefonica’s networks for free, which is good news for them and a tragedy for us,” Alierta said in February. “That can’t continue.” Perhaps unsurprisingly, the service providers themselves don’t agree with the carriers’ position. “Currently about 40 percent of our expenses go to networks anyway—servers, peering, our content delivery network, and other resources,” said Giuseppe de Martino, legal and regulatory director for Paris-based online-video service Dailymotion SA. “If telecom operators want us to share in their expenses, perhaps we should talk about sharing subscription revenues as well.”

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