The telecoms industry body and organiser of MWC throws its weight in on the question of who pays for the internet?

Andrew Wooden

May 16, 2022

4 Min Read
Digital transformation
Modern cityscape and communication network concept. Telecommunication. IoT (Internet of Things). ICT (Information communication Technology). 5G. Smart city. Digital transformation.

Telecoms industry body and organiser of MWC, the GSMA, has got involved in the debate around who pays for the internet.

The GSMA has released its 2022 Internet Value Chain Report, which makes the argument that ‘asymmetric regulation and restrictions’, sector-specific taxes, and spectrum costs are putting the business models of telcos under strain, whilst big tech rakes in all the cash it can get its hands on.

The argument is the telco sector, which builds out the physical infrastructure which enables internet connectivity, is having its margins squeezed because its expensive to erect 5G masts or lay fibre underground. Specifically, it puts return on investment in infrastructure for network operators at between 6% and 11%.

By way of contrast, the report says the internet value chain nearly doubled in five years, from $3.3 trillion in 2015 to $6.7 trillion in 2020, while paid-for online services will soon exceed $1 trillion in revenues.

The report reads:

Although the internet value chain is growing strongly, the benefits and returns are flowing principally to players in the online services segment, while the telecom operators building and running the connectivity infrastructure which underpins these services are not benefitting as strongly as one might expect. Although the operators continue to invest in extraordinarily complex networks that enable the entire ecosystem, the low returns raise questions about the robustness of continued investment in capacity, coverage and speed of the networks to connect internet users with services.

It points to ‘counterproductive taxation on infrastructure, cumbersome regulatory requirements, and other value-eroding factors’ which basically reduce the incentives to build out network infrastructure.

Ultimately the report “encourages policymakers to consider the full landscape of taxation and regulation, ensuring that companies investing in infrastructure are incentivised to build and upgrade the networks that underpin online services.” It also calls out to business leaders to be aware of the market distortions’ at play – which appears to be referencing how much, say, a hyperscaler can make off the back of modern fibre rollouts as opposed to a telco actually laying the pipes.

“The internet connects 4.6 billion people and drives the global economy,” said GSMA Chairman José María Álvarez-Pallete. “It is transforming business models, unlocking new opportunities, and uplifting communities across the world. But as some sectors in the internet value chain thrive, the demands of investing in the infrastructure those sectors rely on for growth are squeezing network operators. We welcome the growing recognition of this issue by policymakers, and as the internet-based economy expands across all sectors over the next decade.”

The report is in the spirit of previous pronouncements by telcos, in which the key complaint is that they are spending all the cash to keep the lights on, while other businesses report ever increasing revenues off the back of it, which is most evident right now in the financial results of AWS, Google Cloud and Microsoft Azure. This report certainly goes into to detail as to how it has come to that conclusion as well – you can peruse the 54 page doc here if you’d like the deep dive.

The European Telecommunication Network Operators Association – an alliance which includes many aggrieves telcos – put out a document earlier this month which amounted to a rephrasing of the previously made demands – that big tech should pony up for some of the cables that underpin their businesses.

The difference between this report from the GSMA and that is which solution is emphasised. As opposed to simply demand some sort of voluntary donation from Silicon Valley paid presumably directly into the coffers of telcos around the world, this report seems to be more about telling bodies like the EU to ease the pain by way of changing the tax and regulatory landscape. Though it does go into a lot of detail as to how much money big tech is making right now, which does seem to imply some sympathy with the other proposed approach.

Changing laws and regulations would at least would be in the power of the EU and other national governments – whereas as we’ve pointed out before, the idea of banging on Amazon or Netflix’s door and insisting they hand over a few billion on the basis of ‘come on guys those poor telcos are starving, do the right thing’ seems pretty unfeasible.

 

We want to know what you think about 5G. Click here to take part in our 5G survey and be in with a chance to win a top Yeti cooler.

About the Author(s)

Andrew Wooden

Andrew joins Telecoms.com on the back of an extensive career in tech journalism and content strategy.

You May Also Like