Google Inc., Apple Inc. and Facebook Inc. need to pitch in to help pay for the billions of dollars of network investments needed for their bandwidth-hogging services, European phone operators say. As mobile and Web companies add videos, music and games, operators including France Telecom SA, Telecom Italia SpA and Vodafone Group PLC want a new deal that would require content providers such as Apple and Google to pay fees linked to usage.
“Service providers are flooding networks with no incentive” to cut costs, France Telecom Chief Executive Officer Stephane Richard said last month. “It’s necessary to put in place a system of payments by service providers as a function of their use.”
Richard, who addressed the issue at the Le Web conference in Paris on Wednesday, has joined Telecom Italia CEO Franco Bernabe and Telefonica SA CEO Cesar Alierta in what could turn into a cold war with Web companies. As more consumers access the Internet on mobile devices, the cost of building bigger networks may outstrip revenue growth for wireless operators, slicing their return on investment.
The mismatch between investments and revenue “is set to compromise the economic sustainability of the current business model for telecom companies,” Bernabe said.
While the number of mobile data connections in Western Europe will rise by an average of 15 percent a year to 270 million in 2014, overall end-user revenue will fall about 1 percent a year, according to International Data Corp. estimates. Operators’ annual spending on network gear in the period will surge 28 percent from last year to about $3.7 billion, according to researcher Canalys.
