Amazon, Netflix, Meta And Other Big Tech Could Soon Have To Compensate Telcos For Bandwidth In Europe

Telecom groups pushed European regulators to consider a price for the companies that send traffic along their networks to help fund mammoth upgrades to their infrastructure, something known as the “sender pays” principle, CNBC reports.

European telecom providers made their most vigorous push for Big Tech to share network costs, citing the energy crisis and EU climate change goals.

Telecom groups found specific platforms, like Amazon.com Inc AMZN Prime and Netflix Inc NFLX, chew through enormous amounts of data and should therefore foot part of the bill for adding new capacity to cope with the increased strain.

The idea won political support, with France, Italy, and Spain among the countries coming out in favor. The European Commission prepared a consultation examining the issue, likely to launch early next year.

For at least a decade, telecom firms struggled to get digital juggernauts to fork out to support upgrades to network infrastructure. 

Carriers have long been wary of losing income to online voice calling applications like Meta Platforms Inc META WhatsApp, and Skype, for example, accusing such services of “free riding.”

The pandemic outbreak genuinely worried EU officials that networks might crumble under the strain of applications helping people work from home and binge films and TV shows.

Netflix and Walt Disney Co DIS Plus took steps to optimize their network usage by cutting video quality, reviving the debate in Europe.

Meta, Alphabet Inc GOOG GOOGL, Apple Inc AAPL, Amazon, Microsoft Corp MSFT, and Netflix accounted for more than 56% of all global data traffic in 2021, ETNO report found.

Broadband operators invest €50 billion ($48.5 billion) annually into their infrastructure to support next-generation 5G and fiber networks.

U.S. tech giants should “make a fair contribution to the sizable costs they currently impose on European networks,” the bosses of 16 telecom operators said in September. 

Higher prices of fiber optic cables and energy have impacted operators’ costs, adding greater impetus for a network access fee.

Video services have driven an “exponential growth in data traffic,” according to Pescatore. Better picture formats like 4K and 8K — coupled with the rise of short-video apps like TikTok — mean that growth will “proliferate” over time.

“Telcos do not generate any additional revenue beyond the connection for providing access, whether that is fiber or 4G/5G,” media and telecoms analyst Paolo Pescatore said.

While a “mass market” metaverse has yet to be realized, once it does, “its traffic would dwarf anything we see now,” Dexter Thillien, lead technology and telecoms analyst, told CNBC.