European telcos say companies like Google, Apple, and Facebook should pay to help them keep up with growing demand for data on their networks, according to an article published by Bloomberg today.
France Telecom-Orange, Telecom Italia, and Vodafone Group would like to charge content providers fees linked to usage to help cover the cost of upgrading wireless broadband networks.
France Telecom-Orange Chief Executive Officer Stephane Richard discussed the issue at the "Le Web" conference in Paris Wednesday. Richard said the current mismatch between revenue and investment for Internet infrastructure providers is not sustainable.
"Service providers are flooding networks with no incentive" to cut costs, Bloomberg quoted France Telecom CEO Stephane Richard as saying said last month. "It's necessary to put in place a system of payments by service providers as a function of their use."
The problem Richard and other European telecommunication CEOs face is that as data connections and traffic grow on their networks, revenue is falling. The problem is particularly acute for wireless networks. For example, IDC estimates that the number of mobile data connections in Western Europe is expected to grow 15 percent a year to 270 million in 2014. But during this same period revenue is expected to fall 1 percent. Meanwhile, carriers are expected to increase capital spending by 28 percent to $3.7 billion, according to Canalys, Bloomberg said.
U.S. broadband and wireless carriers face similar problems. Executives on this side of the Atlantic have in the past complained of content companies getting a free ride on their networks. In 2005, Ed Whitacre, then CEO of SBC Communications which later became AT&T, said that he didn't think that Google should be given a free ride on his network. The remark ignited a firestorm of protest. Since then, consumer groups and content companies, many of which are based in the U.S., have fought back lobbying for regulations that would keep networks "open." The Federal Communications Commission is in the final stages of drafting its so-called Net neutrality rules, which are aimed at doing this. The FCC will vote on these rules later this month.
Network operators are not just asking content providers to pay more of the cost of upgrading wireless networks, but they are also asking consumers to pay for what they use. Wireless operators both in Europe and the U.S. say that the time for flat-fee unlimited data plans is drawing to an end. Instead, consumers will pay for what they use.
In the U.S. AT&T has already eliminated its unlimited data plan for its smartphones. And Verizon Wireless has been experimenting with tiered service offerings. France Telecom is also considering tiered pricing.
"We are progressively going to switch from the unlimited approach that has been the trademark of our industry to something which is more sophisticated," Bloomberg quoted the Richard, France Telecom's CEO as saying on Wednesday.