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Meta says it's the telcos' job to build and monetize network infrastructure

Familiar disagreements between Big Tech, telcos, regulators and the European Commission regarding the fairness of fair-share arguments got an airing during a Politico debate in Brussels.

Tereza Krásová

March 27, 2023

5 Min Read
Meta says it's the telcos' job to build and monetize network infrastructure

The views of telcos, Big Tech giants, regulators and the European Commission on the issue of so-called fair contributions clashed during a Politico event sponsored by the European Telecommunications Network Operators' Association (ETNO). The idea that the handful of companies that generate most data traffic should contribute more to infrastructure buildout was, perhaps unsurprisingly, firmly rejected by Meta's director of social and economic policy, Phillip Malloch.

The event, titled "Telecoms Drumbeat for the Future of Connectivity," took place in Brussels and focused mainly on the issue of fair contributions. This is a much-discussed subject in the European Union (EU) following an exploratory consultation launched in February by the European Commission.

Figure 1: The EU is currently looking into fair-share arguments raised by telcos. (Source: Andrey Kuzmin/Alamy Stock Photo) The EU is currently looking into fair-share arguments raised by telcos.
(Source: Andrey Kuzmin/Alamy Stock Photo)

Apart from Malloch, taking part in the debate were Mari-Noëlle Jégo-Laveissière, deputy CEO for Europe at Orange, Konstantinos Masselos, the 2023 chair of the Body of European Regulators for Electronic Communications (BEREC) and Roberto Viola, director-general of DG CNECT at the European Commission.

Viola was open to the idea of what he called fair contribution toward building a digital ecosystem in Europe, but maintained firmly the consultation is open and neutral. He stated no decision has been reached yet. Jégo-Laveissière, meanwhile, noted data traffic keeps growing and while telcos have invested heavily in new infrastructure they want to ensure they can keep investing and contribute to the EU's digital decade targets.

A bit is a bit

Big Tech has perhaps not commented on the issue of fair share as often as the other parties. Yet it comes as no surprise that Malloch was unequivocal in his rejection of it. He said "a bit is a bit, wherever it comes from," arguing that if a paying customer is requesting a particular service, its share of overall traffic is irrelevant.

Malloch did not directly challenge the point that it is Big Tech making the most money out of the network. He noted telcos have been making money as well, however, adding some of the services that are being asked to pay extra are the main selling points for telcos' offerings such as fiber.

His comments were further underscored by a blog post from Kevin Salvadori, Meta's vice president of networking, and Bruno Cendon Martin, the senior director of wireless technologies for Meta Reality Labs. They argue that a lot of the fiber infrastructure expected to carry most traffic from Meta's emerging services, notably the metaverse, AR and VR, is already in place.

They went as far as to say that operators' arguments that metaverse adoption may cause service constraints are "nonsense." To back this up, the post claimed the company's data suggests "over three-quarters of Meta's traffic in Europe is delivered through fixed networks."

Elsewhere, they point out that Meta has been investing globally in infrastructure such as subsea cables, including "billions of euros in Europe." They also cite an Analysys Mason report, which states investments by content and application providers that bring traffic closer to end-users save operators between $5 billion and $6.4 billion annually.

Malloch, meanwhile, maintained it's ultimately the telcos' job to invest in, build and monetize network infrastructure in Europe.

Monetization headache

Monetization, however, has proved to be a daunting task for many telcos. A boom in sales has arguably failed to materialize, while costs have increased.

And although many of Europe's telcos remain profitable, albeit less so than Big Tech, they would argue their return on investment remains low. ETNO, which is a telco lobbying group, warned in February that the EU is on track to miss its target of providing gigabit connectivity to each citizen by 2030, with the 27 member states lagging Japan and US in terms of investment.

Leaving aside the much-discussed question of how fair the fair-share idea is, there is also the matter of how it would influence Europe's Internet ecosystem. And analysis by the Body of European Regulators for Electronic Communications (BEREC) – not an obvious ally of Big Tech – does not bode well for fair share's proponents.

In its preliminary assessment of the issue, BEREC notes that a direct payment mechanism would carry several risks. For instance, telcos may exploit their ability to reduce the quality of service or terminate it altogether in case of disputes.

Further, BEREC has also pointed out that the costs of upgrading networks to accommodate growing peak demand are "very low compared to the total network costs." It adds these "are mostly coverage costs (i.e. building a new network coverage such as a fiber network to a certain area, which represents costs that are inherent to the business model of an ISP)."

Konstantinos Masselos, the organization's 2023 chair, did, however, note during the debate that the ongoing EU consultation is broader than fair share. He added other mechanisms exist that may spur investment in network infrastructure.

One of these is changing the way spectrum is allocated to make it cheaper for telcos. Some European companies have, Masselos argued, used auctions to raise money for the budget in the past.

Spreading costs between operators could also optimize investment needs, he said, although public subsidies could be needed in areas where there is no commercial interest in network deployment. Masselos also said that the demand side of the issue should be considered and that services should be competitively priced and accessible.

It is very difficult to imagine, however, that European customers – especially the more vulnerable ones – would shoulder any significant price hikes during a historic cost-of-living crisis.

For his part, Viola noted that all options are on the table when it comes to the possibility of mergers and cross-market consolidation – within the constraints of the EU's competition law.

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— Tereza Krásová, Associate Editor, Light Reading

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About the Author(s)

Tereza Krásová

Associate Editor, Light Reading

Associate Editor, Light Reading

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