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The US would never dare push ‘fair contribution’ onto big tech

Maria Lema

As the debate around ‘fair contribution’ – which asserts big tech firms like Netflix and Google should chip in for the costs of telecoms infrastructure – rolls on, we spoke to Maria Lema, co-founder of Weaver Labs, who told us why she thinks it’s a bad idea.

Maria Lema is a PhD in Telecoms and Co-Founder of Weaver Labs, a UK start-up building Cell-Stack, a software product created to facilitate telecoms infrastructure integration and automation. At Weaver Labs, Maria bridges the technical development & solutions the team makes with commercial activities. This includes all strategic activities that involve business model definition, marketing Cell-Stack (Weaver Labs’ software), looking for partners and clients, executing government funded projects and defining areas of the market where their product can grow. Before that, Maria was leading all technical operations at the 5G Tactile Internet Lab powered by Ericsson at King’s College London. She led projects and teams working on connectivity solutions to real-life business problems: from transmitting the sense of touch to doctors while teleoperating with robots, to connecting different musicians around the world to give the audience a different concert experience.

Can you sum up the argument that big tech should pay for network costs, and who is making it?

Their argument is that they are building the pipes of the data and someone else is taking a bigger cut of the pie on the service layer. And of course the pipes are very expensive, right now the pipes are a commodity, and the value is on the data that we transact with and whatever we put on the service layer. So of course they are carrying all the CapEx and grabbing very little of the benefits of that because essentially they have not concentrated on the service layer, all of the funding is going to the capital on the investment site.

That’s just the commercial reality of it, but what is being claimed is that that’s somehow unfair?

Their argument is we build the rails so that you can create services on top, so we should somehow share the burden. And yeah, in the same way that highways have a toll, they are asking for a similar type of thing to access the networks and contribute to part of the of the capital expenditure of building these networks essentially, because a large percentage of the traffic is generated by big tech. So they see a way to alleviate the capital expenditure burden that they have is to get some sort of contribution from big tech to alleviate that level of investment.

In the same way that highways have a toll, they are asking for a similar type of thing to access the networks and contribute to part of the of the capital expenditure of building these networks.

Is it just European telcos and organisations making these claims?

I believe so yes. It is mainly driven by Spain, Italy, Portugal… Telefonica is very big, and the European Commission is now making the consultation. Well, they saying they’re making it, then they back out on it. But yes, it’s mainly Europe leading on this. I haven’t heard anything about the Asian market, and I think the US market would never even dare push something like this onto big tech.

Presumably the argument would apply globally though, there’s nothing intrinsically European about what’s being described?

No, absolutely not. If we look back in time, I’m Spanish so I understand very well how they constructed the infrastructure in that country and it can be applied to all of the utility sectors, and telecoms is a utility right now. So they’re trying to behave in the same way as the energy sector, for instance, and most of that investment in telecoms infrastructure came given to them. Public sector investment – back in the day, those were national companies.

It’s mainly Europe leading on this. I haven’t heard anything about the Asian market, and I think the US market would never even dare push something like this onto big tech.

And then because of capitalism we create more private sector businesses, the public sector is not controlling this anymore ands these companies become private sector. And they’re used to being handheld governments and lobby the government [really, really strong]. And essentially I think that’s why it’s happening in Europe and it’s not happening elsewhere, because in Europe we are used to listening to the lobbyists, especially in the big utilities and the industries. They have been very nurtured by government, something that would never happen in the US, which is a very competitive market and if you cannot survive, you die, and no one cares.

What is the argument against ‘fair contribution’, and what is your position?

The argument against it is essentially based on market competition. If you give them more money, if you create a fund based on money given by others, you are still following their commercial interests to decide where infrastructure goes and how it is controlled – the way that it is right now. And we have been talking for a long time about an infrastructure investment problem, and that we need to find solutions for longevity of infrastructure. And essentially, that is going backwards, or is supporting a status quo that we are actively trying to change from the industry.

My position is completely against that, because we are a business that builds software solutions so that infrastructure can be consumed as a service and on demand. We try and mimic the big tech business model of platforms based on software so that you can build once and reuse as much as you want. And move away from ‘one use case one network’ to customization based on software and plug and play products.

They’re giving away dividends, so I just cannot understand where the problem is.

Tat’s what I deeply believe in. I also applaud the UK not jumping onto this narrative, because I think it’s diversification of the supply chain. Far from the RAN… in general infrastructure investment is what we should be encouraging, not encouraging the status quo [by saying] there you go more, money for you. They’re giving away dividends, so I just cannot understand where the problem is.

How much of this is down to the fact building towers and laying fibre yields less margin than streaming films, and that telcos decided that data was sold unmetered, so revenue just doesn’t scale with use?

They’re looking at the problem from a very controlled position. They want to control the infrastructure, they want to control the service and they want to control how much data is pushed into the pipe so that their business doesn’t fall apart. And to be honest I think we’ve pushed a big burden on them by asking them to spend billions on building networks and billions on spectrum. And then the governments point a finger at you and say, well you need to give us 99.99999% coverage and availability because we have given you spectrum and the ability to build infrastructure.

To be honest I think we’ve pushed a big burden on them by asking them to spend billions on building networks and billions on spectrum.

So I think the problem here is shared. The government allowed them to take that role, and then the other issue is that now they want to still control the infrastructure. And you cannot control what goes on that pipe. If you’re in the business of building the pipes, you need to make them as big as possible so that people can communicate and businesses can thrive through the use of connectivity. And unfortunately the way that we are evolving in the world is that networks power the economy, and we are seeing how countries are measuring their global connectivity index as an input to their development indexes. So they have a very, very strong position in delivering that.

However, I think that governments should be more involved in building networks, and in terms of providing the underlying baseline infrastructure or intervening in making this market more competitive so that others can build networks where mobile network operators don’t see a commercial benefit of doing so.

Do you think governments might get behind the idea of Silicon Valley paying funding it because they don’t want to necessarily want to fund it themselves, plus as it stands they get a lot of money from the auctions?

I know the Spanish market quite well, which is a very well connected market in terms of the fibre infrastructure. I think the Spanish government has put a lot of effort into facilitating that and helping the fibre network to grow, and it’s a really good market to see how easy it was to grow the network in terms of fibre infrastructure. I just think that the lobby is too strong. And also [there is] the old way of doing politics of ‘my good friend here wants this I’m going to back it up’ instead of being completely neutral and impartial. I mean, how are we going to Silicon Valley and asking them for money? I don’t think it’s going to happen.

How are we going to Silicon Valley and asking them for money? I don’t think it’s going to happen.

And assuming Google, Facebook, or Netflix aren’t going to be convinced by arguments being made, what is being suggested be done? Are they suggesting that these firms should be legally forced to pay this money?

I was reading in the Financial Times this week about the model that it could potentially take. It was kind of like a creation of a fund, which then would basically feed into telecoms infrastructure investment, but then how do you actually divvy out the money? The problem I see with this is that the well connected areas are going to continue to be very well connected because those are the ones that are consuming all the high bandwidth services, and the unconnected areas are going to remain unconnected. Because if I am Telefonica or any broadband network provider and I need to access these funds, I would potentially do it to support the areas where I need to increase my capacity. So I believe this is just contributes to the bigger problem that we have, which is connectivity, the digital divide, and the people that are being excluded from society, essentially.

Where do you put the barriers? Where do you put the geographical limitations? Is it going to apply to all the EU members? Is it going to apply to a federation of countries that want to do this? What happening then on the rest of the planet?

From a social perspective, this is just wrong. And I really don’t know how it would work. Big tech would put money into the fund, and then in the same way as we apply to the European Commission to fund projects, the telcos would apply to get funding… and then where do you put the barriers? Where do you put the geographical limitations? Is it going to apply to all the EU members? Is it going to apply to a federation of countries that want to do this? What happening then on the rest of the planet, what’s going to happen in Asia, Australia, which is not very well connected either… [or the] US?

And since all the big tech firms are really in the US, would it mean getting US authorities involved and how feasible is that?

I think it is not, because the US is going to look elsewhere. Their liberal nature would tell them the markets are the markets and if you live you live, if you die you die. And the other thing is I think that it’s very unfair for big tech because they are investing a lot in infrastructure as well. If we can talk about Open RAN today, it is because Facebook intervened with the Telecoms Infra Project. And they created it six years ago, maybe more. But it was born in the US and it’s now a global thing which is helping the telcos reduce their capital expenditure.

There is a potential here for collaboration and I think this is just breaking it. I’ve sat in a room where the hyperscalers and the telcos were yelling at each other literally. I think both have the same problem of control.

Google has invested in transatlantic cabling, they have tonnes of data centres and they are also opening up the doors for public cloud for the operators to run some of the [software]… I think that’s quite expensive and I’m not sure if that will work, but there is a potential here for collaboration and I think this is just breaking it. I’ve sat in a room where the hyperscalers and the telcos were yelling at each other literally. I think both have the same problem of control. The Google’s, the Facebook’s, and the Amazons think that they can do everything better than the telcos, and the telcos think that they have no idea and they are never going to get the levels of availability and reliability that they have.

What I think it’s true is that big tech pushes the boundaries of innovation, and we should be looking to them at how they have built platforms and how they have made a cloud infrastructure into a hyper scalable business, and adopt that in the telco industry instead of continuing the status quo of a mediaeval type of approach.

Ultimately what do you think will be the outcome of this? Do you do you think it will be discussed  for another 10 years, do you think the companies will ever come to any agreement, or do you think it will all just go away?

I think the consultation will happen, because now it has to happen. And I think that in the same way as when the UK government launches a consultation, you can actually see the diversification of opinions that exist in the market. And I do hope that the European Commission gets enough diverse opinions from the industry not to pursue this as a geopolitical type of argument – because it will end up being one – and actually to intervene in the opposite way and facilitate to open the market.

I do also understand that the investment is it’s very high, but they should be looking at other models and welcoming the fact that other businesses are willing to invest in infrastructure.

So that’s where I hope things go – that the consultation happens but it actually opens up a voice that it’s not really heard, because we don’t have access to the lobbies… I don’t have access to the European Commission, so I cannot go and tell them this. But if they do open this consultation, then it’s a really good opportunity for everyone to contribute.

Operators have a very, very difficult task. I don’t want to undermine the task that they have… they need to provide everyone’s connectivity with 100% availability, and it has to work. And I do also understand that the investment is it’s very high, but they should be looking at other models and welcoming the fact that other businesses are willing to invest in infrastructure. And for governments I think the headline here is: diversify the supply chain. Let more people come in and bet on software because that’s what’s going to give you the savings, not a toll.

 

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