Telcos renewed their calls for Big Tech companies to help pay for their network infrastructure this week, describing the current situation as “unsustainable” in a letter to the EU. Recent data reveals that the proportion of internet traffic related to Big Tech’s services has grown by 33% since before the pandemic, and now accounts for more than half of all traffic.
Europe’s biggest telcos have called for a more ‘equitable solution’ to network infrastructure costs, warning that the region’s 5G roll-out might be affected by a lack of resources. (Photo by Sean Gallup/Getty Images)
On Monday, Europe’s largest telecommunications companies launched a renewed appeal to the European Union (EU) to compel social media and streaming services to contribute to the costs related to network infrastructure. The joint letter – signed by the CEOs of Telefónica, Orange, Deutsche Telekom, and Orange – warned that the region’s plan for a “Digital Decade” was at risk if its biggest internet service providers (ISP) had to shoulder these costs alone.
“Telecom operators have invested massively to upgrade their network infrastructure and increase capacity and thanks to this, communications and the Internet have continued during the Covid-19 crisis in Europe despite the surge in peak fixed and mobile traffic,” the letter said. “Continued investment is fundamental to ensuring the unrestricted access and participation of citizens in our digital society.”
The letter also said that “the current situation is simply not sustainable” and the “investment burden must be shared in a more proportionate way”.
Big Tech’s share of internet traffic
More than half of all network traffic in 2021 (57%) was attributable to Google, Netflix, Facebook, Apple, Amazon, and Microsoft, according to data from Sandvine, an application and network intelligence company.
This represented a 33% increase in total traffic from 2019, and the latest figures show that it is the first time where the total network traffic of these six companies was larger than all other service providers combined.
More specifically, streaming applications such as Youtube and Netflix took up almost a quarter of all total network traffic, based on Sandvine’s data. Netflix’s share of traffic in 2021 was buoyed by the popular Squid Game series which was one the most-watched shows in the United Kingdom.
One of the key arguments in the joint letter to the EU was that ISP providers are suffering from a “perpetual decline in terms of profitability” which, in turn, would have a direct impact on their ability to deliver infrastructure development for widespread connectivity across the region.
Apart from Deutsche Telekom, the three other telecommunications companies have seen their share price tumble in the past five years. Data from Google Finance shows that Telefonica’s share price is down by more than 50%, while Orange and Vodafone have seen theirs slip by 25% and 30% respectively.
Against this backdrop of declining profits, the four ISP providers pointedly warned that “further infrastructure development” was at risk, in reference to the European Commission’s plans for a “Digital Decade” which set out proposals for widespread 5G connectivity. “Without an equitable solution, we will not get there,” the letter said.
Data from Ericsson’s 2021 Mobility Report shows that 5G penetration levels across Europe remained low, with 6% in Western Europe and just 1% in Central and Eastern Europe. While these figures are set to increase exponentially by 2027, such optimistic projections may be hampered by the lack of resources for a wide-scale roll-out.
As the struggle between Europe’s ISPs and Big Tech over sharing the costs of network traffic continues, all eyes are on South Korea for a potential landmark legal precedent. In October last year, the South Korean ISP SK Broadband filed a lawsuit against Netflix, arguing that the streaming service had to contribute to increased network costs and maintenance caused by the surge in traffic due to record-breaking viewership figures of the Squid Game series.
Lawmakers in the country are now reportedly preparing a bill that would force content service platforms to contribute to network infrastructure costs. If passed, the bill would have repercussions on the regulatory landscape for social media across the globe.
