French regulator throws wobbly over telcos' spend on content

French regulator Arcep has voiced its concerns over the increasing amount telcos are spending on content, arguing it will have a negative impact on the network.

Speaking to the Financial Times, Sébastien Soriano, Chairman of Arcep, highlighted the race to bring in content in the on-going game of one-upmanship could see attention and investment drawn away from network infrastructure, the core reason for the existence of these companies. Currently, Arcep is not in a position to control how an organization spends its cash, but Soriano has speculated regulation might be needed to ensure the network does not suffer.

“If telecom operators are massively investing in content… there’s a high risk that this deters investment in telecom networks in France,” said Soriano. “I would prefer to hear them with a clearer message of investing in fibre, in 4G, in 5G, than this kind of permanent discussion about content.

“My main concern is that we don’t go further on this telecom media story. For the moment there are no big problems – but please could we just stay at this point.”

The French market is one which is slightly unique due to the disruptive nature of Iliad mobile service, Free, which kick-started a price war. Since that point content has been a means to differentiate the brands, focusing on value-adds to reduce the churn rate, as opposed to network performance.

While this has been prominent in the French market over the last couple of months, the same can be in other markets around the world. Verizon and AT&T are spending big in the US to get into the content game, BT is challenging Sky for premium sports content and Telstra in bagging NRL and AFL in Australia. In all of these cases, some industry commentators have stated the cost of acquiring such rights has detracted investment in the network.

In the UK, many critics of Openreach, namely BT’s competitors, have disapproved of the company’s pursuit of more cost effective copper solutions to improve network performance, as opposed to fibre alternatives. While Openreach has been restricted to copper investments, BT spent £960 million to show 42 Premier League games a year, for three years. Although there are few who have the right to criticize how BT spends its cash each year, it is after all a private company, it did make it easier for competitors to escalate the whole Openreach saga.

The impact of content on the core business of telecommunications is unlikely to be felt in the immediate future, though you can see some of ripples beginning to form. Upgrading the network to meet demand is becoming more expensive every year, as is the cost of entry into the premium content game. One has got to give before too long.

If companies like BT were winning the content game hands-down, there would be an argument it was worth it, as increased customer retention and additional revenue channels could lead to larger long-term investment. They are doing well, but they aren’t winning. The middle ground of doing well, but not exceptional in the content game, while swallowing mammoth amounts of cash could have some very serious repercussions.