Europe considers making big tech companies pay to build the internet

Europe considers making big tech companies pay to build the internet

A senior official in Europe called the CEO of Netflix Inc. And tell him to make his product worse.

When binge-watching became a global pastime at the height of the pandemic, one of Europe’s top officials called the CEO and co-founder of Netflix Inc. And tell him to make his product worse.

Inland Market Commissioner Terry Britton wanted Netflix to reduce the quality of its videos to free up bandwidth, fearing Europe’s networks would come under pressure. Reed Hastings complied, cutting data production by about 25% for a month. So did YouTube.

It doesn’t matter that there was little evidence of network overload, or the fact that Netflix actually adapts video quality based on the capacity of the network you’re on. Politicians were alarmed by the prospect that millions of miles of cable and tens of thousands of antennas under their jurisdiction were at the mercy of Silicon Valley, when Europe became dependent on internet access to live and work through Covid-19 lockdowns.

So the EU fought an argument that domestic broadband operators have been making for a decade: Should big tech companies be involved in the telecom infrastructure they use?

Broadband operators argued that the rewards of suddenly carrying a 40% increase in traffic and a doubling of initial traffic during the pandemic went to US tech platforms, while they were stuck paying the bill. The Stoxx 600 Europe telecoms index has lost a quarter of its value in the past five years, while the NYSE FANG+ index, which tracks the biggest tech stocks, has more than doubled.

Policymakers are now beginning to share carriers’ concerns that if Europe continues to leave all investment to telecom operators, its digital network and the companies built at the top could lag behind those in the United States and Asia.

“It is time to find out whether our regulation and regulation of the infrastructure supporting our digital space is relevant,” Britton said in an interview with Bloomberg this month. One of the questions, he said, included “who should pay what”.

Technology companies are rushing to refute these arguments. They’re already investing in infrastructure: Meta and Alphabet have spent billions laying underwater cables between continents, adding tens of billions of dollars to Europe’s economy, according to Meta-funded research. Netflix has installed thousands of server boxes in more than 700 cities in the European Union, compressing video and storing it locally so it doesn’t congest networks. In an effort to get more people online — and Facebook — Meta CEO Mark Zuckerberg has backed tools and initiatives to speed up communications launches.

“We are partnering with European Internet Service Providers to make networks more efficient,” a Netflix spokesperson said. “We operate more than 700 buffering locations in Europe, so when consumers use their internet connection to watch Netflix, content doesn’t travel long distances. This reduces traffic on broadband networks, saves costs, and helps deliver a higher quality experience to consumers.”

Customers are the ones paying “either at the price or for worse services,” if Europe adds streaming fees, Matt Britten, Google’s head of EMEA, said at an event in Brussels.

For a few years, carriers and suppliers have been the hottest stocks themselves, offering consumers the latest gadgets. I paid millions to send text messages on Nokia phones with the Orange and Vodafone logos.

But after the launch of the iPhone in 2007 and the advent of social media, the ground began to shift. The likes of BT Group plc have spent billions laying fiber optic cables and installing antennas so their customers can continue to download apps and stream videos from other companies.

Large countries like France, Spain and Italy, as well as key European parliamentarians, are backing a push to have streaming sites like Netflix and YouTube pay their “fair share” to support infrastructure upgrades. But other influential countries such as Germany, Denmark and the Netherlands are more cautious. Even some who support the general concept don’t know how to make it work. Some officials question whether the problem is a lack of investment by major tech companies, or rather, the fragmentation of the telecom market itself.

In the US, there are now only three large mobile phone companies, while the European Union is home to nearly 40 large players, whose mergers have been blocked, making it almost impossible to keep up, the telcos say. This has raised concerns that Europe may be left behind: just 2.5% of mobile connections were above 5G in Europe in 2021, versus 14.2% in the United States and 28% in China, Japan and Korea, according to GSMA Intelligence, the phone’s research arm. Global mobile business group. In time, operators say, it could mean losing out on the next big 5G company, or industrial investments.

“We have to consider that telecom markets in Europe are much less attractive than in the United States,” said German Andreas Schwab, who led the negotiations on the Digital Markets Act in the European Parliament. “This is an issue that we have to deal with as 5G expansion is essential,” he added, adding that “there is no doubt that some non-telcos have huge business” running on telecom operator networks.

Europe’s largest telecoms operators such as Vodafone are constantly talking about the need for consolidation – and the EU’s appetite to allow it will now be tested again with the planned merger of Orange SA and Masmovil in Spain.

Ideas include getting companies to pay for the amount of data they use; Creation of a fund – possibly supervised by governments – to invest in infrastructure; Or – in a proposal backed by Spain’s Telefonica – requiring tech companies to negotiate direct deals with carriers.

This is not a question of ‘You’re big American platforms, please honor us, because you’re so huge,’ said Juan Monteiro-Rudel, head of public policy at Telefonica, in an interview. What we’re talking about is paying for our service.”

Only a handful of companies are in the eyes of phone companies: Britain’s BT said four-fifths of the data clogging its cables can sometimes be paid by just four companies, in a filing to the digital regulator Ofcom, which reviews net neutrality rules. It aims to ensure that ISPs do not control what users can and cannot see on the Internet. The review also looks at investment incentives.

A report commissioned by European communications lobby group ETNO found that 56% of global traffic from 2021 was generated by Google, Meta, Netflix, Apple, Amazon and Microsoft.

Although experts question how accurately companies identify the source of the data, it is clear that usage is only likely to increase. And more data lines keep flowing: TikTok’s traffic across the BT network has grown twenty-fold in the past year, the company said. TikTok representatives did not immediately respond to a request for comment.

For now, European carriers are avoiding lawsuits such as SK Broadband Co, in South Korea, which has sued Netflix claiming that the rush to watch the hit show Squid Game means the operator must be liable for millions of dollars in high network costs. Korea has also passed a so-called Netflix law that holds online content providers to account if they fail to maintain stable services, according to local news agency Yonhap.

BT CEO Mark Allera likened the “fair use” push to the way Netflix still pays to ship thousands of DVDs to old school subscribers.

“Internet neutrality applies a set of regulations to what should be a free country to operate in the way it sees fit,” he said in an interview. On the responsibility of the big tech platforms, he asked, “Do they have any stake in the game, any contribution they make to these once-in-a-generation networks that effectively create all the value and use for it?”

“I think there’s a bigger role than there is today — and it’s close to zero.”

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