Deutsche Telekom boss Timotheus Höttges is a big fan of America with its more Wild West telecom market, pioneering technology players and absence of bureaucratic European spoilsports (not to mention its ocean of overcharged customers). Except when he isn't. Silicon Valley's Internet giants dump huge volumes of traffic on European telecom networks without paying a toll, is the charge he and fellow bosses of other European operators have repeatedly taken to Europe's bureaucrats. The region's telecom infrastructure looks as congested as a bierkeller offering free drinks at Oktoberfest.

Höttges and pals, then, have for a couple of years been calling on Europe's regulatory authorities to support them in their demand for a "fair contribution" or "fair share" from the worst offenders – the likes of Netflix and Meta. Unfortunately, the pleading has got them nowhere. BEREC, the Body of European Regulators for European Communications, broadly disagrees with the philosophy (more on that later). But the dispute between telcos or Internet service providers (ISPs) and Internet content companies has suddenly erupted in a real-world clash, pitting Deutsche Telekom against Meta on the streets of Germany.

A court in Cologne has taken the side of Deutsche Telekom, which says Meta has refused to pay it ever since the coronavirus crisis for direct connections to German subscribers. This is simply not on, insists the German telco, given that Meta "feeds a gigantic 3.5 terabytes into Deutsche Telekom's network" every second. That's the equivalent of about 100,000 high-definition films, it points out, implying networks would explode without the huge investments it has made to upgrade them. "Meta is not above the law," says the rules-loving operator.

Rather than pay up, Meta has stopped sending traffic over the most direct route. This arrangement, whereby two companies interconnect their systems, is commonly referred to as "peering" in the industry. Instead, Meta is opting for an alternative "transit" arrangement that normally involves paying third parties for a more circuitous route. If the straight road between your home and the nearest shop is peering, transit is the twisty path to it around the edge of the town. Meta evidently prefers this to backing down and setting a precedent.

Restaurants without food

Despite what Deutsche Telekom and its new law buddies in Cologne have said, peering usually involves no big exchange of money between the two parties. Meta says it has thousands of these "settlement-free" relationships with telcos around the world. Yet the natural flow of traffic is mainly in one direction – from the content company (Meta) to the telco (Deutsche Telekom) – and it's the telco, as the network owner, that bears the cost. Right?

This is certainly the rationale advanced by Europe's telcos. Unfortunately, it does not survive much scrutiny. Ideas about traffic flows and who's responsible are a hangover from the days of old telephony, when the calling party usually paid unless he was a cheapskate student in some eighties movie making a "collect call" to his dad. But Meta does not originate the transmission of most data traffic in the Internet world. The "calling party" equivalent is the customer of Deutsche Telekom prodding a touchscreen link to watch an Instagram video. "Traffic is requested and thus 'caused' by ISPs' customers," said BEREC, in October 2022.

The Deutsche Telekom customer, moreover, is already charged by Deutsche Telekom for any touchscreen prodding. Meta, incidentally, takes no cut of this, even though it could argue the customer spends money to access its applications and would presumably have as much interest in paying for a high-speed service without content as visiting a restaurant without food. It does not ask Deutsche Telekom for any "fair contribution" to the cost of its data centers, the vast and expensive repositories of all that content the telco's customers keep demanding. Such considerations largely explain why most peering is free.

There is little headline evidence, too, that data guzzling by customers has sharply driven up network costs for Deutsche Telekom. It does invest more than many other telcos do in capital expenditure, recording a capital intensity (spending as a percentage of revenues) in Germany of 18.7% last year. But that figure has dropped from 19.5% way back in 2018, when data consumption was much lower. Across the whole group, energy use – a proxy for relevant operational costs – fell from 12,843 gigawatt hours in 2020 to 12,241 last year.

Meta and Netflix are convenient scapegoats for Deutsche Telekom, which probably envies their sales success. Unlike Amazon and Google, both of which also stream lots of bandwidth-hungry video content, neither is a supplier to the telco industry of essential cloud-computing services and software tools. But few ISPs are as vociferous as the German operator, and some are in the opposite camp.

Indeed, one of the most interesting contributions to this week's debate came from Init7, a Swiss ISP, which has a scathing assessment of Deutsche Telekom's case. In a blog written in 2022, long before the latest developments, it noted that "zero-settlement peerings without billing" had become well established. "This is because it makes no difference which peering partner sends the larger amount of data, as the costs for the infrastructure do not depend on the direction in which the data flows," it said. "The traffic is therefore 'free' because each partner bears its own costs. The benefit is there for both parties because both save transit costs."

Mafioso behavior

The problem for Meta, as Init7 points out, is the "technical monopoly" Deutsche Telekom has over its customers. At some point, Meta's traffic must pass through an interconnection point the operator controls. While Meta is pursuing its transit arrangement, Deutsche Telekom could retaliate by throttling or even blocking traffic at these points.

This is probably what Meta alludes to in a published statement on its transit move. "We are hopeful that corresponding efforts have been made by Deutsche Telekom to ensure the user experience of our apps, or other third-party services like video streaming platforms, will not be reduced or disrupted in Germany as a result of our move to a third-party transit provider," it said.

Deutsche Telekom has turned the tables by implying that any disruption will be the fault of Meta. "It is now Meta's responsibility to use the sufficient capacities accordingly and to route the data traffic without interference, because Meta alone decides how Meta traffic is routed to Deutsche Telekom's network," it said. 

Meta is conceivably Machiavellian enough to deliberately upset quality and blame this on Deutsche Telekom. But the telcos, not the content companies, are the network's gatekeepers. For this reason, the onus of Europe's net neutrality legislation falls on the telcos rather than the likes of Meta. Much of its small print is nebulous or pernickety and should be scrapped. Nevertheless, if there were any signs of blocking or throttling, which the rules forbid, immediate suspicion would fall on Deutsche Telekom.

Init7, of course, is not impartial here. Back in 2012, it was functioning as a transit provider for a content provider called Zattoo. Swisscom's response to that, Init7 claims, was to restrict capacity at one of these choke points, leaving Zattoo's users with a "pixel mess." Zattoo's only option was to strike a peering arrangement with Swisscom for a fee and ditch its former transit deal, said Init7. Legal proceedings have apparently been ongoing ever since.

In its blog, Init7 likens the behavior of some network providers to that of mafia villains on the big screen. "They are basically holding a gun to the content provider's head and saying: 'Pay for paid peering or your data will be stuck in a traffic jam!'" it wrote. For someone like Meta boss Mark Zuckerberg, a pixelated video is a horse's head in bloodstained sheets.