European operators are swamped by data-hungry customers and want Internet companies to help pay for network upgrades to handle this demand. The operators are targeting Google, Apple, and Facebook with their threats for additional compensation. The idea has been bounced around by France Telecom, Telecom Italia, and Vodafone. All three carriers are considering usage-based fees to covers their customer’s usage of online videos, streaming music, games, social networks, applications, and more. France Telecom Chief Executive Officer Stephane Richard summarized his view by saying,
“Service providers are flooding networks with no incentive” to cut costs. “It’s necessary to put in place a system of payments by service providers as a function of their use.”
This push by European operators comes down to money. Operators are dumping tons of cash into their cellular networks and the cost of this network buildup is outpacing revenue. Rather than look at reasonable ways of improving revenue or decreasing costs, the operators are crying chicken little with Telecom Italia CEO Franco Bernabe claiming this disparity between network investments and revenues “is set to compromise the economic sustainability of the current business model for telecom companies.”
This idea of service provider usage fees has been brewing since early this year. In February, Telefonica Italia CEO Cesar Alierta echoed this sentiment when he said that Google and Yahoo “use Telefonica’s networks for free, which is good news for them and a tragedy for us. That can’t continue.” As expected, these usage fees are not looked upon favorably by service providers. Dailymotion, a French online video provider, had an excellent idea for the telecoms. Dailymotion offered to share expenses with the telecoms as long as they agree to share some of their tariff revenues.
This battle will continue rage as long as data usage soars and operators continue to see their bottom line shrink. That being said, I highly doubt that these usage-fees will be implemented. Service providers will most likely refuse to pay and the operators will be stuck with customers unhappy that they can no longer post to Facebook or watch YouTube on their smartphone. A more likely outcome is the adoption of tiered data plans that offer discounts to those who consume less data and tax those who use more.