Here’s a sobering fact about internet use: about 56% of all global internet traffic is generated by six companies – Google, Meta, Netflix, Apple, Amazon and Microsoft.
That’s how concentrated the internet has become, dominated by a handful of companies that deliver digital services to billions of people. According to telecoms consulting firm TeleGeography, global bandwidth usage grew at a rate of 30% between 2018 and 2022. Bandwidth capacity itself increased 28% this year alone, to a total of 997 terabits per second.
Very soon, we will need to measure bandwidth capacity in petabits – equivalent to one million gigabits. The upward march in data usage has required a flurry of investment in broadband networks and undersea cables to cater for the increased demand driven by data-rich applications like high-resolution video streaming, online gaming and “internet of things” (IoT) connectivity.
The growth rate is easing following the massive shift online during the pandemic. But if Mark Zuckerberg’s vision for the metaverse becomes a reality, we will need a lot more bandwidth to be able to run Teams meetings in virtual reality and Meta’s augmented-reality version of Facebook, as nightmarish as both scenarios might sound.
My column last week detailed how a key part of the rationale for 5G mobile networks is simply boosting network capacity so more devices can connect and transfer higher rates of data at the same time.
Taxing the data-guzzlers
Telecoms providers bear the cost of upgrading their networks, with governments often chipping in funding, as our own government did over a decade ago to get the ultrafast broadband network going. But a proposal gaining momentum in the European Union and the US could see the Big Tech data-guzzlers forced to subsidise the cost of the networks they use to access their customers.
Competition regulators on both sides of the Atlantic are campaigning to make Big Tech companies pay a “fair contribution” to the cost of networks, which they benefit enormously from using. It’s a populist argument at a time when Big Tech is under assault for anti-competitive activity and facing a backlash over data privacy and security.
The telcos used to be the villains, hated by customers for their inflated prices and shoddy service. Now the vastly wealthy tech companies have the power, while telcos are solid if unspectacular performers selling “speeds and feeds” and making modest returns to shareholders.
Europe and the US face the need for significant telecoms infrastructure upgrades and their governments, seeing broadband as critical infrastructure, are worried about how they will fund it.
A network tax could, say Barclays analysts, net €3 billion ($5.2b) to €4b annually for Europe’s telecoms operators, if Big Tech companies were required to pay for half of network capacity costs.
But applying a tax could also result in some perverse outcomes.
It would encourage the likes of Meta and Google to become even more vertically integrated, investing in or buying their own broadband infrastructure. They’ve already invested tens of billions in international cables, as well as data centres and content delivery networks. They could go a step further, setting up in competition to telcos.
Fibre failure?
Over a decade ago, Google Fiber launched in the US as a scheme to deliver gigabit fibre broadband directly to consumers. If the aim was to build out national broadband infrastructure, it failed. Google Fiber never extended beyond a handful of pilot networks.
But as the Harvard Business Review argued, getting into the telco business was never Google’s real aim.
“It stimulated the incumbents to accelerate their own infrastructure investments by several years. New applications and new industries emerged, including virtual reality and the internet of things, proving the viability of an “if you build it, they will come” strategy for gigabit services. And in the process, local governments were mobilised to rethink restrictive and inefficient approaches to overseeing network installations,” the Harvard Business Review said.
That was the impetus for our own ultrafast broadband network: build capacity for high-speed internet and it will encourage all sorts of useful, entertaining and productivity-boosting applications to be developed.
It proved to be a big success. Google was essentially saying to US telcos, we’ll stick to our business selling apps and services, if you do a better job at yours, selling high-speed access and bandwidth.
At the very least, a network tax will just encourage Big Tech to pass on the cost to its users, compelling them to pursue even more aggressive business practices. The better solution is to focus on seeing through the anti-trust action already under way in the US and European Union – so a fairer and more competitive digital economy can emerge, one in which Big Tech isn’t allowed to simply buy any rival that threatens their monopoly.
Our telcos are doing OK – Spark and Vodafone generate nearly $6b in revenue annually between them. But the dominance of Big Tech has seen them struggle to move up the value chain into value-added cloud and streaming services. A better competitive landscape would give them a better opportunity to innovate and to partner on content ventures.
Digital divide levy
There are no plans under way locally for a network tax, but the thought of it has local telecoms operators salivating.
“It’s an area I am keen to explore further, but I’m not aware of any formal discussions having taken place at this point,” said Paul Brislen, chief executive of the Telecommunications Forum.
Our telcos now contribute to the telecommunications development levy, which raises $10 million annually to pay for the “relay service for the deaf and hearing-impaired, broadband for rural areas, and improvements to the 111 emergency service”.
Here’s where Big Tech could contribute, helping bridge the digital divide. A $10m levy on the big six would be enough to subsidise broadband for many low-income families and get devices into their hands.
Elsewhere, the retail price of broadband should reflect the cost of the telcos delivering it. The good news is that even as we chew through ever-increasing amounts of data, the cost of delivering each extra gigabyte of data falls, thanks to the onward march of technology.
Originally published on BusinessDesk.co.nz
Photo credit: Denny Muller, Unsplash
PETER GRIFFIN 