Meta took a stand this week against European telcos that have suggested hyperscalers should bear some of the cost for OTT traffic which traverses broadband networks, contending those parties are discounting the positive impact its investments in content and underlying infrastructure have had on their business models.
In a Thursday blog post titled “Network fee proposals are based on a false premise,” Meta’s Kevin Salvadori, VP of Network, and Bruno Cendon Martin, director and head of RL Wireless, wrote that proposals by some European telecom operators to extract fees on Content Application Providers (CAPs) such as a Meta aren’t the solution to fix the telcos' financial challenges.
“Network fee proposals are built on a false premise because they do not recognise the value that CAPs create for the digital ecosystem, nor the investments we make in the infrastructure that underpins it,” Salvadori and Martin argued.
In Meta’s view, telecom operators and CAPs “are symbiotic businesses,” playing complementary roles. Meta pointed out that it invests tens of billions of Euros in its apps and platforms each year, including Facebook, Instagram and Quest, to help host content, which is accessed by billions of people a day. From Meta’s stance, this creates demand that enables telcos to charge people for internet.
“Our investment in content literally drives the revenue and business model of telecom operators,” the Meta exes wrote.
Beyond content
Beyond content investment, Meta said it also works to build and enhance complementary infrastructure for a more reliable and efficient internet ecosystem.
According to Meta, over the last 10 years, CAPs together have collectively invested over $880 billion in global digital infrastructure – including $120 billion between 2018-2021. Meta claims these investments actually save telecom operators around $6 billion per year.
Meta said that since 2017, it alone has invested more than $100 billion in global digital infrastructure, including $30 billion globally in 2022. It pointed to investments in submarine cables with resulting increases in transatlantic capacity as helping to fuel marked growth in demand for telco data services. At the same time, Meta said the cost per bit for operators has dropped significantly, with the company estimating it “is less than a quarter of what it was five years ago.”
The company also used the opportunity to point out that Meta itself is a large customer of the telecom industry, spending more than half a billion Euros since 2018 to lease or purchase over 1 million kilometers of terrestrial fiber. It’s also partnered with the likes of Vodafone and Orange to deliver submarine cable projects to connect Europe to Africa, the Middle East and South Asia.
Vodafone and Orange, along with Deutsche Telecom and Telefonica are among major European operators that see major OTT providers and hyperscalers as contributing to their respective financial woes, arguing the amount of traffic they drive requires them to invest billions to continuously improve network performance to provide services customers want.
The so-called “fair use” argument was brought up by Orange CEO Christel Heydemann during a keynote presentation at this year’s Mobile World Congress. In addition to Meta, other companies in the crosshairs are Alphabet, Apple, Amazon, Microsoft and Netflix.
“Shouldn’t largest traffic generators fairly contribute to the cost of delivering their traffic to end customers?” asked Telefonica’s Chief Public Policy Officer Juan Montero Rodil in a February blog post. “Video streaming, social media and gaming account for over 70% of internet traffic, with just six companies accounting for over 56% of total internet traffic.”
Pulling data from Frontier Economics and Axon reports, Rodil’s blog said delivering OTT traffic over EU telecom networks resulted in EUR 36 billion to EUR 40 billion in annual costs to telecom providers.
Meta, meanwhile, on Thursday also pointed to investments it has made to create a content delivery network, including an extensive fiber network in Europe that it says allows 99% of user-requested content to be delivered more efficiently – something it doesn’t charge telecom operators for.
Metaverse won’t require more telco capex
Meta also took aim at some operators’ argument in favor of network fee proposals, which contend they’re needed to handle capacity constraints caused by future metaverse adoption – a notion Meta called “nonsense.”
“The development of the metaverse will not require telecom operators to grow capital expenditures for greater network investment.” To support this, Meta said metaverse adoption will mainly be driven through virtual reality, and almost all VR content consumed over fixed networks through Wi-Fi with European networks carrying nearly 20-times the traffic of mobile.
“Looking ahead, Europe’s fixed network capacity, with easily upgradeable FTTH/B deployments, is more than enough to supply demand for the metaverse and other internet services for decades to come.” It also pointed to growth in 5G coverage in Europe, saying the infrastructure in time will allow the metaverse to deliver AR mobile experiences with “no evidence that additional investment is required to make this happen.”
In Meta’s view, there isn’t evidence to support a metaverse capacity wall.
“We do recognise the challenges that some European telecom operators now face, but imposing an arbitrary network fee on companies that bring investment and innovation to the digital ecosystem is not a sustainable solution,” Salvadori and Martin concluded.