Tech

European carriers hope to extract wireless fees from Apple, Google

Carriers in Europe are beginning to suggest that the likes of Apple and Google …

Chris Foresman – Dec 8, 2010 7:10 pm | 61

European mobile carriers believe that online service providers, including Apple, Facebook, and Google, should be paying fees to cover their part of the rising tide of data transmitted over carriers’ networks to smartphone users. This is despite the fact that rising data use has so far boosted their profits.

Some of the largest European telecoms—including France Telecom, Telecom Italia, Telefonica, and Vodafone—have been complaining in recent months that as wireless data use increases, popular websites like Google, Yahoo, and others are using their networks “for free.”

“[It’s] good news for them and a tragedy for us,” Telefonica SA CEO Cesar Alierta said in February, according to Bloomberg. “That can’t continue.”

“Service providers are flooding networks with no incentive” to cut costs, France Telecom CEO Stephane Richard said last month. “It’s necessary to put in place a system of payments by service providers as a function of their use.”

We’ve heard this before

If these sentiments sound familiar, it’s because you heard practically the exact same complaints from former AT&T CEO Ed Whitacre years ago—only then his concern was with wired connections. His now-infamous words from 2005:

How do you think [Google, etc] are going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes?

The Internet can’t be free in that sense, because we and the cable companies have made an investment and for a Google or Yahoo! or Vonage or anybody to expect to use these pipes [for] free is nuts!

Verizon CEO Ivan Seidenberg said much the same thing in 2006. “We have to make sure that [application providers] don’t sit on our network and chew up bandwidth,” Seidenberg said following his CES keynote that year. “We need to pay for the pipe.”

Talk like that started the US down a long and twisted path towards net neutrality regulation, which the FCC is expected to unveil fully on December 21. AT&T, among others, fought tooth and nail against it, and wireless providers insisted that any net neutrality shouldn’t apply to wireless networks at all.

The current US proposal includes provisions to allow Internet service providers to use “reasonable” traffic management and “reasonable” discrimination against certain kinds of traffic. What exactly constitutes “reasonable” or “unreasonable” is unfortunately left up in the air. To make matters worse, however, neither of these provisos apply to wireless networks—in the US they are free to discriminate against traffic however they choose.

EU net neutrality better?

The situation is different in the EU, where line-sharing rules have created a more competitive broadband market than here in the States. In fact, European Commissioner Viviane Reding said last year that net neutrality was better in Europe thanks to its “pro-competitive EU regulation.”

“Prioritizing some traffic means restricting the rest, and it will be essential to remain vigilant as regards the impact this has on competition,” Reding said. But she warned that if current regulation and competition weren’t enough, the EC could intervene. “I plan to become Europe’s first line of defense whenever it comes to real threats to net neutrality.”

This summer, the Commission made good on its warnings, and launched an inquiry to determine if the competitive landscape in the EU is ensuring net neutrality. At the time, Commissioner Neelie Kroes said, “I am committed to keeping the Internet open and neutral. Consumers should be able to access the content they want. Content providers and operators should have the right incentives to keep innovating.”

But it sounds as though the EU may wind up capitulating to telcos the same way the FCC did here in the US. “[T]raffic management and net neutrality are highly complex issues,” Kroes added. “I do not assume that one approach or another should prevail. We need input from all sides so we can examine all the issues carefully, in a very objective way, strike the right balance between all the interests involved and work out what new measures, if any, may be needed.”

Carriers (both in the US and Europe) fear that increasing capital costs to improve their networks won’t be offset (enough) by increased revenues if they are forced to simply act as dumb pipes, shifting whatever bits customers request. Instead, they would prefer to nickel and dime consumers (something we have argued against for over five years) while also charging Web-based service providers additional fees.

Unfortunately, the carriers seem to forget that end users are already paying monthly fees, to have the data they request sent to them. Furthermore, service providers like Apple, Google, Facebook, Yahoo, and others are already paying for servers, network access, content delivery networks, and so on. To suggest these companies are using a telecom’s “pipes” or “networks” for free is simply not true.

“Currently about 40 percent of our expenses go to networks anyway,” Giuseppe de Martino, the legal and regulatory director of Dailymotion, told Bloomberg. “If telecom operators want us to share in their expenses, perhaps we should talk about sharing subscription revenues as well.”

In the meantime, the European carriers plan to shift to capped and tiered service plans, much as some US carriers have done in the past year or plan to do in the near future. It seems likely that Europeans can expect wireless bills to go up while the principle of net neutrality becomes a contested political issue.

Chris Foresman

Chris is an Associate Writer at Ars Technica, where he has spent the last five years writing about Apple, smartphones, digital photography, and patent litigation, among other topics.

61 Comments