Need for OTT Payment for Network Use Questioned at Debate

Making content providers pay telcos to carry traffic may not be a good idea, several speakers said Thursday at a streamed Information Technology & Innovation Foundation event on the future of the internet in Europe. The European Commission has been consulting on the future of e-communications in the bloc, and one aspect of the inquiry is "fair compensation" for ISPs that carry traffic of major content producers (see Ref: 2303220017]). One question is whether this is even a problem, and whether regulation could have unintended consequences, said Analysys Mason Manager-TMT Strategy Shahan Osman.

The consultation isn't about fair contribution but about the future of connectivity, said European Telecommunications Network Operators Association Deputy Director General Alessandro Gropelli. The EC is concerned about how connectivity is developing in Europe and how to create a solid connectivity layer to stimulate the European and global internet, he said. The EC is seeking input on network-as-a-service since fiber and 5G will open many opportunities. The inquiry also asks how public funding could contribute, including via a universal service fund. As a subset of those questions, the EC is considering whether there's an imbalance in the costs of network and content providers.

European telecom companies are working to take connectivity to the public cloud (network-as-a-service) and are concerned that everything that becomes a service will then be opened up to global competition, Gropelli said. They also view the European market as fragmented, weakening their ability to compete globally in the service layer. Telcos want an end to what they consider asymmetric regulation, in which the telco traffic market is tightly regulated under EU law but big tech isn't: The only way to fix that is through fair contribution.

Online traffic is growing and tilting toward a small number of content providers, said Breugel Senior Fellow Scott Marcus. Whether that's good or bad is debatable, but the key question is what it implies for costs. Marcus noted he studied the issue 10 years ago and found that total network costs remain relatively stable. Even with augmented reality services, it's unlikely costs will rise because they will probably be used mostly at home on fixed fiber networks, he said: The EC may be on the "wrong course."

The issue isn't just data growth per se but who invested in making all that traffic bearable for the networks and whether that same entity has an opportunity to monetize the investment, said Gropelli. The other issue for telcos is what they're investing in: If they put money into network rollout and coverage, shouldn't they also be able to invest in the service layer? Network operators want to be able to negotiate compensation with content providers, he said.

Referring to regulatory asymmetries between content providers and networks, Marcus noted the former face many new rules under the Digital Services Act and Digital Market Act. Those measures don't deal with fair compensation but could tilt the discussion, he said. Asked whether such negotiations could take place within the framework of EU net neutrality rules, Marcus said European politics aren't at a point where those rules could be amended. Gropelli said that operators maintained from the start that they don't want changes to net neutrality requirements, and there's no appetite to reopen them.

Marcus recommended "hard thinking" about what the right model for commercial negotiation might be, or whether it's needed at all. Everyone wants better networks going forward, but putting a tax on traffic isn't the way to do it, said Osman.