Original URL: http://www.theregister.co.uk/2010/12/08/eu_infrastructure_payment_demands/

EU telecoms to Apple, Google: 'Pay up!"

You break, you pay

By Rik Myslewski

Posted in Networks, 8th December 2010 21:51 GMT

European telecoms want Apple, Google, and bandwidth-sucking service providers such as video streamers to help pay for improvements needed to support steadily increasing loads on their networks.

Phone companies' infrastructures are straining under the demands of data, video, music, and other bandwidth munchers, and Bloomberg reports that an impending "cold war" between network operators and network users is a hot topic at the Le Web'10 conference now underway in Paris.

Apple, Google, Facebook, Yahoo!, and others are benefitting from the billions that telecoms are pouring into network upgrades, and France Telecom, Telecom Italia, Vodafone, and others think that it's time for those service providers to pay what the telecoms believe is their fair share of the upgrade costs.

Telecom Italia CEO Franco Bernabe complained that the strain on network operators' bottom lne "is set to compromise the economic sustainability of the current business model for telecom companies," Bloomberg reports.

France Telecom CEO Stephane Richard was more direct: "Service providers are flooding networks with no incentive [to limit bandwidth]," he said recently. "It's necessary to put in place a system of payments by service providers as a function of their use."

Cesar Alierta, CEO of Spain's Telefónica, said earlier this year that Google, Yahoo!, and others "use Telefónica's networks for free, which is good news for them and a tragedy for us," adding "That can't continue."

The solution, from the telecoms' point of view: share the financial pain by rejiggering fee structures to squeeze more payments from the web companies who benefit from the telelcoms' infrastructure upgrades.

Not so fast, says Giuseppe de Martino of the French online-video provider Dailymotion: "If telecom operators want us to share in their expenses, perhaps we should talk about sharing subscription revenues as well."

Bloomberg also points out that European telecoms are not exactly being driven to the poorhouse. France Telecom's domestic data revenue, for example, was up a healthy 24 per cent in its third fiscal quarter, swollen in part by the fact that the company is the number-two iPhone purveyor, behind only AT&T in the US.

Telecoms have also found another source of increased revenue: users. Vodafone, for example, has declared that tiered pricing is inevitable in their drive to bring in more income from bandwidth-hungry users.

Richard of France Telecom couched his company's plans in careful corporate-speak: "We are progressively going to switch from the unlimited approach that has been the trademark of our industry to something which is more sophisticated," he said at Le Web'10.

It's not only the users' euros but also their loyalty that's the grand prize in this dust-up. As one analyst told Bloom, referring to the European telecoms: "They want a bigger piece not only of the pie but also ownership of the customer. There's clearly a big battle."

But at the end of the day, the question isn't whether service providers such as Apple, Google, et al. or users will be the source of telecoms' infrastructure-upgrade funding — the telecoms want both to pay.

What remains to be seen is how much a telecom will be able to charge a user before that customer jumps ship to a competitor, and how successful telecoms are in restructuring carriage deals with service providers.

That "cold war" is sure to heat up in coming months. ®