Having spent most of the last 15 years in the telco/cableco space, all I can say about this article is that it is really sad that telcos (and cablecos...and most large businesses) have drank the kool-aid that the auther describes and are trying everything they can to show financial growth without actually having to innovate.
How content providers should respond to ETNO's campaign to take money for bandwidth.
By John Linkous on Tue, 06/26/12 - 2:34pm.
Recently, the European Union’s telecommunications lobbying group, ETNO, started a campaign to influence the upcoming International Telecommunications Union (ITU) meeting this December in Dubai. At the heart of their campaign is an extension of the so-called “sending party network pays” principle, in which they want content providers outside of the European Union – think Google, Apple, Facebook and others – to pay ETNO members for the substantial amount of bandwidth that ETNO members’ customers are incurring.
On paper, this proposal (which, to be fair, has not yet been formally proposed to the ITU) is designed to ensure a level playing field between network carriers who provide bandwidth, and content providers who are overloading carriers’ networks with (often free) data. In reality, however, it’s a revenue-grab scenario by a collection of large, archaic telecommunications vendors who want successful American content providers to foot the bill for the increased traffic that has been incurred on their networks due to the content providers’ popularity.
So, why is there a sudden desire by European telcos to ensnare foreign content providers in a new tax scheme? The answer is really quite simple: it’s the product of the telcos’ own declining revenue streams. Back when telecommunication circuits provided more than simply digital pipe, the telcos could get away with charging $5 a month for call waiting or $10 for caller ID because – despite the fact that the actual cost of these services to the telcos was only pennies – they could get away with it. When they controlled the phone switch and all its ancillary services, they could make tremendous revenue. Now, telecommunication circuits are simply bandwidth, and higher-level services are provided by end points and content providers … both of which happen to not be telcos.
Now, decades after their myopic failure to monetize their own content and despite having been in a perfect position to do so, ETNO members are demanding that companies like Google and Apple share their revenue with them because they lacked the vision to build viable content networks of their own over the past twenty years. As is so often the case – telecommunication carriers, the music industry, and the motion picture industry come to mind immediately – monopolistic or duopolistic incumbents in a market would much rather milk a revenue stream to death and then use a last bastion of overzealous legislation and (eventually) litigation to suck the last bit of marrow out of a failing business model, rather than actually innovate.
Even if such a proposal were legitimate, there are the practicalities of implementing such a system. While content providers might be located geographically outside of Europe, most utilize delivery networks (think Akamai) to deliver their content; so first, you would have to define what counts as “non-European content” and then police it. In order to do this, ETNO members would need to monitor users’ traffic in order to measure how much “tax” each content provider needed to pay – and that kind of monitoring seems in direct contradiction to the E.U.’s Data Privacy Directive (DPD).
As you can imagine, ETNO’s proposal has not been warmly received in America anywhere across the political spectrum. The idea has been met with bipartisan condemnation, with both the Obama administration and Republican Congress members warning the ITU that secret negotiations could result in a re-engineering of the Internet, and an introduction of Internet surveillance for taxation purposes – quite the concern for rank-and-file Europeans, given their general (and justifiable) outrage at the idea of laws such as SOPA and CISPA.
Of course, here in the United States, our own house isn’t entirely in order when it comes to carriers fighting net neutrality tooth-and-nail, using content providers as a political football in the process. Back in 2005, AT&T’s then-CEO, Ed Whitacre, decried content providers – who, by the way, already spend tens of millions of dollars on bandwidth to support their content distribution – for the mythical “free ride” they were getting on AT&T’s network.
But ultimately, this particular issue – this time – is specific to European telcos. And the message that both industry and our government needs to send them is simple: don’t tread on me!