The so-called “fair share” debate received much attention at this year’s Mobile World Congress (MWC) in Barcelona. Telecoms network operators continue to argue that some of the world’s biggest streaming providers should contribute towards the costs of building next-generation broadband networks, while content providers counter that they are already investing heavily in content, supporting digital infrastructure, and providing content delivery networks (CDN) for free.

For Content Everywhere vendors and suppliers, the debate is a highly pertinent one as their technology supports MNOs, traditional broadcasters, and over-the-top providers. At MWC, we heard comments on the topic by executives from Europe’s biggest telcos, as well as by Netflix co-CEO Greg Peters and EU industry chief Thierry Breton, who took the stage the week after the European Commission (EC) launched a 12-week “exploratory consultation” on the issue.

NPAW report graphic

NPAW report graphic

The MNO view

Orange CEO Christel Heydemann reflected the view of many of her peers when she lamented the fact that European telcos are facing pressure to “squeeze capex while coping with exponential traffic growth, mainly concentrated from a handful of digital players”.

In her keynote at MWC, she pointed to recent findings that a handful of the largest online traffic generators account for over half of daily traffic on telco networks. A report compiled by Axon Partners on behalf of the European Telecommunications Network Operators’ Association (ETNO) in 2022 named Amazon, Apple, Google, Meta, Microsoft and Netflix as the main culprits here.

“My conviction…is that regulators and policymakers have a major role to play to balance this unsustainable situation,” Heydemann said.

José María Álvarez-Pallete López, the chairman and CEO of Telefónica, and Timotheus Höttges, CEO of Deutsche Telekom, regularly express similar views, as did the former CEO of Vodafone, Nick Read.

In a joint statement early last year, the then CEOs of the four telcos made clear their concerns: “Digital platforms are profiting from ‘hyperscaling’ business models at little cost while network operators shoulder the required investments in connectivity. At the same time our retail markets are in perpetual decline in terms of profitability,” they stated.

Big tech fights back

Companies such as Netflix, Google and Meta have been quick to respond, of course. Indeed, Peters from Netflix also took to the stage at MWC with the message that rising internet usage is actually a huge opportunity for all concerned.

Ferran G. Vilaró, CEO and Co-Founder of NPAW

Ferran G. Vilaro, CEO and Co-Founder of NPAW

“Some of our ISP partners have proposed taxing entertainment companies to subsidise their network infrastructure … but it shouldn’t be a binary choice between big telco or entertainment companies,” Peters said. “Some of our ISP partners are worried about rising cost, but let’s look at the stats: internet traffic has consistently grown at around 30% a year over the past five years. ISPs have managed this growth, keeping their cost flat over the same period by using efficiency gains within the network.”

He added: “Our margins are significantly lower than those being achieved by either BT and Deutsche Telekom. We could easily argue that these telcos should pay entertainment companies for the cost of the content, because a tax like that would have a significant adverse effect … But, we aren’t asking for that. I believe the better approach is for entertainment companies and operators to focus on what we each do best — creating a rising tide that will lift all boats.”

Peters also made the point that while telcos claim the extra network charges would only apply to companies like Netflix, this will change over time as “broadcasters shift from linear to streaming to get those same benefits for their customers that the internet provides”.

“We’re commercial partners with more than 160 telcos and ISPs around the globe, many of which bundle Netflix directly into their consumer offering. Consumers love these joint offerings … it shows the value that we can have through collaboration,” he said.

What about the CDN?

Meta Platforms has also waded into the debate, stating that proposals by some European telcos to impose network fees on content application providers (CAP) are not the solution.

“Network fee proposals are built on a false premise because they do not recognise the value that CAPs create for the digital ecosystem, nor the investments we make in the infrastructure that underpins it,” said Kevin Salvadori, vice president, network, and Bruno Cendon Martin, director, head of RL wireless at the Facebook parent.

Easel TV

Easel TV

As well as listing the various investments that Meta has made in content, digital infrastructure and submarine cables, the two executives pointed to its investments in CDN, “including an extensive European fibre network, enabling over 99% of user-requested content to be delivered more efficiently. We don’t charge telecom operators for this.”

Peters also noted that Netflix has spent over $1 billion on Open Connect, “our own content delivery network which we offer for free to ISPs”.

Joe Foster, CEO of Easel TV, commented that the “difficulty with network operators asking streaming providers to pay for using their networks is that you single them out from any other industry using those networks: gaming, telephony/video calls, and so on. Do you also include YouTube and all the social media providers that increasingly use video, and which are the bigger contributors of video traffic? Where do you stop?”

Bart Lozia - CEO Better Software Group

Bart Lozia, CEO Better Software Group

Without applying a fee equally to all users of the internet, Foster said, it is probably more useful for network operators to consider how they can play a bigger role in the ecosystem, “with solutions that add value and improve margins for all industries using their networks (streaming, social, gaming) to support their need.”

He added: “If network operators feel strongly that streaming providers are benefiting much more than other industry users, they may want to consider investing in the industry ecosystem, in CDN services or in innovative SaaS B2B streaming providers, which could reduce the number of players in the chain, improve margins and direct some of this industry wealth to the networks.”

Bart Lozia, CEO of Better Software Group (BSG), also made the observation that consumers are not aware of the cost burden of video streaming on networks, “nor can they control their consumption or demand more efficient delivery. Making the traffic elements more transparent can force those improvements on the part of the big streamers.”

The EU stays neutral for now

Meanwhile, Commissioner Breton indicated that he is taking an open-minded approach to the issue of “fair share” and who should fund the rollout of 5G and broadband networks in future.

In reference to the EC’s recently launched consultation, he emphasised that although it has been described by many as a battle over fair share between big telco and big tech, “that is not how I see things”.

“Of course, we will need to find a financing model for the huge investment, fairly distributed,” he said.

“For me,” Breton added, “the real challenge is to make sure that by 2030 our fellow citizens and business on our streets across the EU have access to fast, reliable and data-intense Gigabit connectivity. And for that, we need the connectivity networks of the future.”

Breton has said that the consultation on the future of the telecom sector and its infrastructure would focus on two main points: what infrastructures do we need to drive our digital transformation?; and how can we ensure that the investments needed to build this infrastructure are deployed in an efficient and timely manner?

“I would like to make it clear that we keep in mind at all times the principle of net neutrality — which remains a founding principle of European legislation in terms of connectivity,” he added.

Streaming trends

Video business intelligence and predictive analytics specialist NPAW released the findings of its 2022 Video Streaming Industry Report, which reveals that although global streaming adoption continued growing overall in 2022, “the myriad content options launched in the past two years mean that individual services on average captured a smaller share of users’ daily watching time.”

For the second year in a row, providers saw a year-on-year increase in the total number of video plays while daily consumption per user and service continued to drop for both VOD (-12%) and linear TV (-23%). Sports content again emerged as a major driver of viewer interest.

Meanwhile, viewing on big screens keeps gaining traction, while streaming quality of experience stabilised for VOD and continued improving for linear TV, the report added.

Ferran G. Vilaró, CEO and co-founder of NPAW, said that “with competition growing fiercer by the minute, it’s business-critical for streaming services to provide the right content and a superior streaming experience if they want to attract and retain users and maintain growth. To do so, they need to leverage their platforms’ data to the fullest extent, implementing advanced analytics solutions that combine technical performance monitoring and user journey insights.”