Telecoms chiefs urge EU lawmakers to press tech groups on internet investment

Europe’s largest telecoms providers have called on EU lawmakers to compel Big Tech groups to contribute more to the cost of expanding internet infrastructure, as streaming and other entertainment services take up an ever-increasing share of bandwidth.

The chief executives of Deutsche Telekom, Orange, Telefónica and Vodafone accused video streaming, gaming and social media groups of piggybacking on billions of euros of investment in internet infrastructure, saying that the “burden must be shared in a more proportionate way”, in an open letter published in the Financial Times.

“We now urgently call upon legislators to introduce rules at EU level to make this principle a reality,” said the letter, which was signed by José María Álvarez-Pallete, chair and chief executive of Telefónica; Tim Höttges, chief executive of Deutsche Telekom; Nick Read, Vodafone chief executive; and Stéphane Richard, outgoing chair and chief executive of Orange.

Most telecoms groups are investing heavily to expand or upgrade services from copper to fiber and on 5G deployment, but have struggled for years with weak margins and falling valuations.

Although carriers have made similar requests to European lawmakers in the past, the companies said they were encouraged by a European Commission proposal that “all market actors benefiting from the digital transformation . . . make a fair and proportionate contribution to the costs of public goods, services and infrastructures”, made in a declaration on digital rights last month.

“I suspect we’ll see more positioning like this, particularly during the French presidency of the Council of the EU given they have been fairly critical of Big Tech in the past,” said Matthew Howett, an analyst at Assembly Research.

In their letter, the chiefs note that video streaming, gaming and social media from just a handful of digital platforms accounts for more than 70 per cent of all traffic on networks.

Their plea echoes a recent late in South Korea over who should contribute to maintenance costs incurred by broadband providers — a move that was sparked by the surge in online traffic from the successful Netflix series Squid Game. Such was the popularity of the dystopian show that South Korea’s SK Broadband, owned by the country’s largest mobile carrier SK Telecom, last year sued Netflix to cover the cost of the surge in traffic, saying that it had been forced to upgrade its network.

The quartet warned that their sector’s retail markets “are in perpetual decline in terms of profitability”, and cautioned that “network operators are in no position to negotiate fair terms with these giant platforms due to their strong market positions, asymmetric bargaining power and the lack of a level regulatory playing field”.

“Consequently, we cannot make a viable return on our very significant investments, putting further infrastructure development at risk,” they said. “If we don’t fix this unbalanced situation Europe will fall behind other world regions, ultimately degrading the quality of experience for all consumers.”

Video streaming companies have countered that they should not be singled out to pay more for a network, citing the concept of ‘net neutrality’ — the idea that network providers should not be allowed to discriminate or charge companies differently based on use or content.

They also argue that they invest heavily in their own servers to ensure they can get content to consumers without clogging up the network.

Although Deutsche Telekom’s share price has risen 12 per cent over the past five years, Orange’s has slipped 25 per cent, Telefónica’s is down more than 50 per cent and Vodafone’s is down nearly 30 per cent.

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