Fast internet doesn’t cost EU telecom operators much at all

“The insurmountable cost of OTT traffic in Europe” is the alarming headline of a The last article By the Head of Public Policy at Telefónica. Based on reports commissioned by the European Confederation of Telecom Network Operators (ETNO), it attempts to make an argument for charging network usage fees in the EU.

The telecoms lobbyist states that “the exponential growth of Internet data traffic poses a challenge to the sustainability of investment in European networks”, arguing that content and application providers (CAPs) should be mandated by the EU to pay for telecom networks. In doing so, the question also arises: “How much does it actually cost to deliver traffic?”

Well, the answer to that is pretty simple: providing Europeans with fast internet that doesn’t actually cost telcos a penny, and this blog post makes it clear that the cost of customers ordering OTT traffic is nothing but an “insurmountable” cost. In case you are not familiar with the acronym, Over the Top (OTT) Traffic is basically everything you do on the Internet that involves third party service providers other than your Internet provider.

It seems that your online subscription is still not expensive enough

So, what the telco lobbyists are saying is that whenever you read an article like this, or watch a video on social media, or upload files to the cloud, or join an online meeting, you incur huge costs for the telecom operators and put pressure on broadband network in Europe. Apparently, your monthly fixed and mobile Internet subscriptions are still inexpensive enough to cover all costs. Telecom companies now say they need up to 36 billion euros Additional annually, or 80 euros per European, to manage daily Internet traffic.

The solution proposed by the telecom companies is not to raise prices by 80 euros per person. Instead, they want to charge them indirectly By making online services more affordable. Telecom companies are now demanding payments of up to €36 billion a year in CAPs – in addition to what you already pay for internet access.

However, telecom companies don’t actually need any extraordinary financial capacity to achieve the capacity of the European Commission Gigabit community goal Connecting all households in the European Union to a fast network of 1 gigabits per second (Gbps) by 2030. Telecom companies are profitable and do not need an “internet traffic tax” to deal with consumers’ growing appetite for streaming movies, series, conference calls, social media, cloud, games and other services over the Internet – and they don’t need to be taxed on traffic in order to keep their networks running!

What is the basis for the telecom companies’ claim of 36 billion euros?

Neither ETNO nor Frontier Economics have been very open about the numbers they used to make their calculations. what they say It basically boils down to this: “It was capital spending by telecom companies in the EU 52.5 billion euros in 2020 And internet traffic from CAPs is 60-70%, so these companies have to pay us 36 billion euros a year.” Telecom companies also argue that they need more money in the future, because consumers will use more data every year. Stunning and completely wrong.

Telecom operators are spending their capital investments on infrastructure — such as cell towers, fiber optic cables, routers, modems, and data centers — in order to connect people to broadband networks and expand 5G coverage. Moreover, 70-80% of their capital investment goes into assets that will last at least 30 years. The rest is for equipment that is upgraded every five to 10 years for better and faster services. ETNO’s demands for “fair share” payments essentially mean that they want CAPs to cover 60-70% of total network costs, while at the same time actually charging consumers for those same networks.

Maybe we should let the French telecoms do the math instead of ETNO. In fact, the operators said, the French Telecommunications Federation (FTT). You only need a third Appreciated by ETNO for dealing with consumer consumption of the Internet! According to the FFT, traffic costs for OTT services are €2 billion annually, or €27 per inhabitant in France. But even this amount is very high. ETNO and FTT grossly overestimate the amount of capital required. Traffic doesn’t cost much to handle.

Do consumers really need faster internet connections?

A good question to start with is whether consumers really need that much bandwidth, especially when the average usage is much lower. The answer is an emphatic yes! Websites, video platforms and other services need to send high bandwidth data to their users in short bursts.

This is similar to using tap water to fill a bucket. Don’t use too little water for a long time, just open the tap to get the full flow for a few seconds. It won’t help if it takes half an hour to fill a bucket. The water utility relies on the fact that not everyone uses water at the same time.

The main factor here is the “discord”, which is how many users can use the same service at the same time when sharing the bandwidth. If 10 megabytes of data—say three or four photos from a decent smartphone—were sent over a 1 megabyte per second (Mbps) connection, which is a thousand times slower than a gigabit connection, you’d have to wait more than a minute!

Much of what you do on the Internet uses short bursts to send and receive data. We ran some tests using a gigabit connection in our office. Opening a webpage will use 30-200Mbps for a short interval, often less than a second. It’s a few megabytes, but you shouldn’t wait more than a second. This is why you want a gigabit connection. Streaming, by contrast, does not require gigabit speeds, but instead uses a steady stream of data from 2 to 10 Mbps for a few hours, which amounts to several gigabytes in total.

For example, the ETNO website has a video library. All embedded videos must be loaded before the web page can be completed. Our tests show – somewhat ironically – that its Communications Lobby site produced one of the highest burst speeds we’ve encountered. Newspapers and other communication sites pull in a lot of bandwidth as you can see below.

These examples show that achieving the European Gigabit Community goal is not about the amount of data we consume each month. The catch is that we shouldn’t have to wait for that data.

As I show in the two examples below, the cost of equipment to deliver Gbps capacity to the average European is only a few euros per month. Once a one-time investment is made in laying fiber optic cable – an investment that is indeed expensive, but that can last for half a century – the costs of actual network operation and managing traffic demand from customers are relatively low.

Students can get 1Gbps for €11 per month

Here’s a great example of how discord, using the bandwidth of different users over time, can help keep the Internet accessible to everyone. In 2020, my company helped a Dutch student housing organization that needed to re-bid for broadband service for 41 dormitories across the city, which house 5,500 students in total. Fiber connections in each room were fine, but all network equipment was up for replacement.

Eight Dutch telecom companies have responded to this call for bids. Five of them said that every student could get gigabit broadband for a very reasonable €11 a month. Since communication lines can be shared efficiently, four 100Gbps lines to the outside world was more than enough to ensure each student had access to the full 1Gbps at all times.

Excessive bandwidth usage simply wasn’t an issue, and additional investments weren’t necessary to provide fast internet. In fact, this was the cheapest possible design, using off-the-shelf network equipment, and gigabit access was still provided. The most expensive items for the service provider were network switches, 24/7 support, and billing. However, all this can easily be provided to students for only 11 euros per month.

When you move from student housing to a nationwide broadband network, some numbers may change, but the basic principles remain exactly the same.

In 2013, Deutsche Telekom designed its Terastream network around 10Gbps lines shared by 250 consumers. This assumed that a transmission of 4 x 100Gbps per 5,000 clients to the regional network center was more than sufficient. This is remarkably similar to what students need, with a distinct difference: Deutsche Telekom does offer gigabit internet access for €11 per month.

French broadband users always get the fastest possible speed

Broadband providers in France already offer these types of high-bandwidth connections to consumers. Different upload and download speeds haven’t been used as a price differentiator for nearly two decades. Consumers always get the fastest speed that technology can handle. At present, this is up to 8Gbps with XGS-PON data links.

Free, the French internet provider, already has commercial offers of 1-10Gbps for 30-49€ per month, including telephone line and TV. The price differences come from added hardware and services, like a better Wi-Fi router, video-on-demand viewing, or home security—not the cost of a faster connection.

These examples go on to show that data demanded from content and application providers (CAPs) by consumers does not place an insurmountable financial burden on telecom operators. Consumers already pay monthly subscription fees to carriers to access the Internet, including services provided by CAPs. It’s easy to manipulate the bandwidth they use and actually pay for it. Obviously, networks do not need the extra cost of 80 euros per European per year.

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