Euro 'Google Tax' battle looms

The telecoms industry as we know it is about to go through some massive changes, and some of them are going to be ugly, very ugly. A ‘colliding worlds’ scenario is taking shape in Europe that will have ramifications worldwide because it includes network operators, regulators, online content providers and a hapless public.

The abridged story goes something like this. Ms Neelie Kroes, the European commissioner responsible for the European Union’s digital agenda, raised concerns that telecoms networks are not investing enough to meet EU targets on improving broadband speeds. The network operators, in turn, claim that they cannot justify the investment because they are unable to generate extra revenues in an ultra-competitive market from customers that have come to expect low-priced access to the internet. Add to this an explosion of data traffic, especially from online and over-the-top content providers, especially video traffic, and we find ourselves in a potentially disastrous scenario.

If fragmented news reports from the European press are correct some of the big boys (Deutsche Telekom, France Telecom, Telecom Italia, Telefónica and Vodafone) are wanting to levy wholesale charges based on the volume of data traffic passing through their networks, which could result in online content providers making substantial payments to get their video material to consumers.

This would be similar to existing voice traffic interconnect charges but would fly in the face of the existing peering system that has existed as a sort of gentlemen’s agreement, because each pushed as much traffic towards other networks as they took on to their own infrastructure. However, it does not account for the traffic generated by third-party, non-network players like Google’s YouTube, Facebook and streaming video services such as BBC’s iPlayer. This has been dubbed as the 'Google Tax' in some quarters.

Even assuming the European operators get their way in reforming the peering agreements to a more equitable model their actions, if carried out in unison, could be deemed to be cartel-like in nature and attract the wroth of the regulators. If they choose to shape traffic across their networks and charge a premium at wholesale or retail level for priority traffic then they would fly in the face of all the net neutrality mumbo-jumbo being emanating from the USA.

It’s fast becoming a case of ‘damned if you do and damned if you don’t.’ It doesn’t appear to have stopped France Telecom and Telefónica who are reportedly seeking new peering agreements between themselves and the online content providers that would enable them to levy charges based on how much data traffic travels over their infrastructure. However, what would stop the likes of Google, the most vocal of net neutrality supporters, from avoiding those networks altogether and routing their content via less expensive or free routes, maybe even developing their own.

Is anybody willing to guess the outcome of this oncoming battle?