Are telecom operators victims of the cuckoo clock strategy? While they bear all the financial burden of deploying and maintaining fiber optics and 5G networks, it is other players who, by nesting in their infrastructures, truly benefit from them. Starting with the digital giants, GAFAM, and streaming specialists such as Netflix, YouTube or Spotify.
“While online internet services experienced revenue growth of 30% per year between 2015 and 2020, telecommunications services recorded more moderate growth of 2%”, observes the think tank Digiworld Institute (ex IDATE DigiWorld) . According to another study by Arthur D. Little, European telecom operators even underperform by posting only 1% annual growth between 2012 and 2021, while their North American and Asian counterparts reach 6% and 8% respectively.
For Digiworld Institute, “the telecom sector is thus experiencing stagnating revenues and declining margins, while the explosion in the use of data is forcing operators to maintain a high level of investment in their networks in order to be able to offer a certain level of quality.
In France, operators have invested more than 40 billion euros in the past three years, recalled Laure de la Raudière, president of Arcep, during her hearing in the Senate. At European level, telecom operators anticipate a multiplication of their investments by 2.5 by 2027, an increase of 300 billion euros, reports Digiworld Institute.
In its 2022 economic study, the French Telecoms Federation (FFT) points to this inequitable sharing of value. Telecom operators receive only 42% of the total revenues of the French digital ecosystem, while they provide 78% of investments, create 69% of jobs and pay 79% of taxes and duties. The digital giants contribute only 4% of investments, pay only 3% of taxes and duties and create only 11% of jobs. On the other hand, they capture 30% of the income.
A sender pays principle
The operators’ lobbying of Brussels in favor of better load balancing seems to be paying off. According to Bloomberg, the European Commission is considering a bill to force “tech companies that use the most bandwidth” to contribute to the deployment of the next generation of Internet infrastructure.
Last September, the main European operators, including Orange and Bouygues Telecom, expressed in a joint document the wish that “the largest traffic generators contribute equitably to the significant costs that they currently impose on European networks”. A “fair contribution” would allow a “faster and more inclusive” deployment of fiber and 5G.
The document consulted by Bloomberg questions the threshold above which a company can be qualified as a “large traffic generator”. This issuer-payer proposal could also be vetoed by the Body of European Regulators of Electronic Communications (BEREC).
What about net neutrality?
According to the Euractiv site, this BEREC believes that it risks harming the current digital ecosystem by changing the rules of the game. It could also call into question the principle of net neutrality. From the moment an actor like Netflix or YouTube contributes to the financing of telecom infrastructures, is it not entitled to demand the allocation of dedicated bandwidth?
Failing to charge the GAFAM, Digiworld Institute evokes several scenarios allowing operators to increase their income and their profitability. They can monetize their infrastructure by selling their towers – pylons, 4G/5G antennas – to infrastructure operators called TowerCo.
Operators can also surf on new uses that have taken off with the health crisis, such as videoconferencing or cloud gaming. Unified communications, the Internet of Things (IoT), cybersecurity, the cloud, edge computing or quantum communications networks are also seen as growth drivers.