Telcos vs the web giants: Is the playing field a fair one, and does it matter?

Spanish operators are calling for EU lighter-touched regulation against their over-the-top rivals.
Written by Anna Solana on
Casa Consistorial in the center of Santander, Spain, the city which hosted a heated discussion about Europe's digital future earlier this month.
Image: iStock
Telcos versus over-the-top services is a battle that's been waging for years and shows no signs of ending soon.

The telcos say the playing field between them and providers of free over-the-top services like WhatsApp or Skype is not a level one, and they're calling for the same regulatory regime to traditional and newer-school comms companies.

Spanish telcos butted heads with internet giants at a conference earlier this month in the city of Santander.

See also

Speakers at the conference on 'Strategies for the single market', organized by Spanish IT trade body AMETIC, circled around the topic of European regulation and how to foster a true digital single market across the continent. The telcos demanded a lighter regulatory touch to drive investment and balance out loopholes that favour the OTT companies, not for the first time.

Back in 2013, the European Telecommunications Network Operators Association (ETNO) published a study that said network operators were being held back from gaining "the fair returns needed to fund investments, primarily because of over and inconsistent regulation of competitive markets", and which proposed a five-pronged program to tackle the causes of declining investment.

The report claimed that this program, which included leveling the playing field between network operators and over-the-top service providers, would pave the way for EU citizens to get "world-leading communication networks and generate up to €110bn in additional investments by 2020".

Asymmetric treatment

Yet, things have not really changed since then. In June, policy executives from Orange, Deutsche Telekom, and BT urged the winding back of telecoms regulations, arguing they discourage investment. In Santander earlier this month, AMETIC's president José Manuel de la Riva said that revenues from both fixed and mobile communications dropped (6.9 percent and 10.3 percent respectively) in 2014. He also highlighted what he called the "slow digital development" in Europe.

Gervais Pellissier, CEO designate and senior executive vice president for Europe at Orange, said that regulation should be based on the services a company provides, not the technologies that make such services possible.

"The need is to focus telecom-specific regulation on networks and internet access," Pellissier told ZDNet. "This includes putting services provided by telecom operators as well as services by OTT internet platform providers in the same regulatory categories, and subject to the same rules," he said. "In addition, network regulation should also focus on rules about sharing the costs of physical fixed access infrastructure, especially where it represents an actual bottleneck."

Vodafone agreed that there is "an asymmetric treatment for internet providers and OTT", citing Catalonia's tax on DSL connections to fund local cinema as an example. By the way, this tax to boost Catalan audiovisual industries, approved by the Catalan parliament by majority in November 2014, was temporally suspended by the Spanish Constitutional Tribunal at mid-September.

Pellissier insisted that "equal treatment between telcos and OTT would end competition distortions on digital service innovation and provision, and would enhance telcos' ability to achieve growth from services as well as connectivity". Network operators lost €13bn in revenue to OTT players in 2014, according to analyst Juniper Research.

Orange's Pellissier said that a change in regulation would "let the connectivity business come back to sound market structures, with access services marketed on quality and on increasing value for money rather than only on cheap deals".

He also underlined that it would "allow telcos - like any other player in the internet today - to have the freedom to develop any form of two-sided model, charging either end users, or content and application providers, to match consumers' needs, as well as secure the freedom of telcos to develop innovative quality services in parallel with internet access".

For José María Álvarez Pallete, COO at Telefonica, a thorough review of the regulatory model would enable the establishment of a favorable investment framework and also guarantee information security and users' rights. "We have to return Europe to the place where it belongs," he said in Santander earlier this month.

Missed opportunity?

Yet, Carles Salvadó, telecommunications engineer and former dean of the School of Telecommunications in Catalonia, doubted a change in regulation would do any good. "Less regulation for what? To break the net neutrality [the principle that all internet traffic should be treated equally] rule? To continue taking advantage of an inherited position of dominance and make investments without being forced to open their networks to new competition?" he asked.

At the Santander conference, internet providers pointed out that Europe is losing the innovation battle. AMETIC's de la Riva told the conference that "the EU must understand that there will be no economic progress without a digital revolution".

ETNO's study underlines that by 2020 the shortfall in investment needed to meet EU Digital Agenda targets for broadband coverage and penetration will aggregate between €110bn and €170bn, leading to an enormous missed opportunity for the broader EU economy: up to €750bn in GDP growth.

"European authorities tend to be suspicious rather than supportive of industry innovations and initiatives," Orange's Pellissier said. "As long as European institutions believe it is 'safer' to regulate than to leave the matters to the market, Europe will continue to lose ground in the innovation battle. We have, however, reasons to be optimistic too. We have the potential to innovate, our customers have an insatiable appetite for digital services and the means to purchase them. These are important factors for Europe's attractiveness," he added.

Yet, Carles Salvadó believes there isn't "a quick solution for the problem". The one coming from the network operators is just "food for today and monopoly for tomorrow", he concluded.

Read more


Why you should really stop charging your phone overnight

Why you should really stop charging your phone overnight

Google Fiber expands for first time in five years, and is coming to five new states

Google Fiber expands for first time in five years, and is coming to five new states

Samsung phone deal: Get the Galaxy S22 Ultra for $299

Samsung phone deal: Get the Galaxy S22 Ultra for $299