Dec 7, 2021 - Technology

Overseas telcos: Make Big Tech pay more for bandwidth

Illustration of a loading screen with a dollar on it

Illustration: Sarah Grillo/Axios

Overseas telecom providers, increasingly frustrated with American tech firms whose apps are gobbling up bandwidth, are pushing them to pay more for it.

Why it matters: Any effort to reslice the "cost of internet bandwidth" pie could shake up the entire industry, make new winners and losers, and put new pressure on U.S. tech giants.

Driving the news: Chief executives of more than a dozen of Europe's major telecom companies, including Vodafone and Deutsche Telekom, said last week that U.S. tech firms should "bear some of the costs of developing Europe's telecoms networks because they use them so heavily," Reuters reports.

  • In October, South Korean internet firm SK Broadband sued Netflix, alleging the company should be forced to pay maintenance costs to its networks as a result of unprecedented use due to customers binging Netflix's South Korean hit "Squid Game."

Between the lines: Tech giants already have a target on their backs with foreign governments over privacy and anti-competitive practice concerns. Telecom companies calling them out adds fuel to that fire.

The big picture: Broadband usage jumped 40% over the past year, according to OpenVault data, with the pandemic driving the surge as people spend more time at home with their devices, primarily streaming video.

  • But although usage is expected to remain high, a recent report from Kagan, the media research unit of S&P Global, found that broadband subscriber growth stalled in the third quarter.

The intrigue: Some Republican lawmakers and regulators in the U.S. are pushing to force tech companies to pay into a fund used to support the deployment of broadband networks in hard-to-serve areas.

  • A recent study by Econ One managing director Hal Singer and consultant Ted Tatos, funded by Oracle, recommends assessing a fee on digital advertising to help shore up the Universal Service Fund, which is used to support broadband programs.

What they're saying: Broadband industry trade group USTelecom says tech companies have grown thanks to the investment of broadband providers, and should contribute to the fund.

  • “I don’t think it is particularly controversial to ask some of the nation’s largest technology, streaming and internet platforms, which don’t currently support our shared network infrastructure ... to contribute in some way (as our members do) to the costs of ensuring universal connectivity," USTelecom CEO Jonathan Spalter said in a statement.
  • "These companies need to be (and certainly can afford to be) part of the solution.”

The other side: The Internet Association, which represents big tech companies, has opposed efforts to make its members pay into the broadband fund.

  • “If internet providers attempt to pass costs of broadband to technology companies simply for driving users to popular content accessed through their services, providers will only harm the ability for a wide range of users to access that content, as well as the demand for broadband services," an IA spokesperson told Axios in a statement.

Flashback: Demands by internet service providers for streamers like Netflix to pay extra to prioritize their web traffic helped galvanize the debate over net neutrality, leading to rules against the practice by the Federal Communications Commission in 2015.

  • The FCC repealed the net neutrality rules during the Trump administration, but U.S. telecom companies have not publicly called for tech giants to pay for network development in the way their European counterparts have.
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