Published in Network

European telcos claim they are too broke to build Internet

by on26 July 2022

Want EU to give them more cash end net neutrality 

Europe's telcos claim that they are so broke that they can't afford to provide internet to millions of users and are demanding that the EU give them more cash and end net netruality which stands in the way of executive's getting huge bonuses them making a living.

Apparenlty, European telecom operators claim that growth in internet traffic has created a situation in which they are unable to make a “viable” return on network investments.  Yep it is that age old problem that when lots of people buy your product, suddenly it ends up costing you money.

The solution, they argue, is to demand payment – not just from their end-users, but also from popular tech companies that send data in response to end-users’ requests.

This might seem very odd because the telcos are frantically telling their shareholders different stories. Vodafone Group CEO Nick Read said in May that they had “delivered a good financial performance in the year with growth in revenues, profits and cash flows, in line with our medium-term financial ambitions.” Vodafone reported a profit of €2.6 billion for the financial year. Telefónica reported that it “has accelerated its growth in the first quarter of 2022, reporting an increase in revenues in all the markets of the company in reported terms, and a net income of €706 million.” Meanwhile, Orange said that it continues to “reap the benefits of our European fibre and 5G network leadership with a two per cent rise in our retail sales growth in these first three months”. 

Deutsche Telekom continued its growth in the first three months of 2022. Revenue increased by 6.2 percent to €28 billion, with service revenues growing even faster at 10%, Germany’s incumbent operator boasted. Its 2021 net profit were €5.9 billion. “We are continuing to grow on an organic basis and are therefore in a position to raise our guidance for 2022,” Deutsche Telekom CFO Christian Illek said when presenting the quarterly figures.

So why then did the CEOs of Telefónica, Deutsche Telekom, Vodafone, and Orange, demand that online players should contribute financially to network upgrades if Europe still wants to reach its ambitious connectivity goals? It seems that the Telco political lobby group demands have not matched the painting being created by shareholders. 

For a start what they are saying is not exactly true. A recent study by Communications Chambers found that demand for internet traffic drives telcos’ revenues, e.g. through fixed lines, including fibre cables, and tiered mobile data tariffs. This is why telcos are trying to attract data-hungry customers by using streaming services to promote their own offerings.

When the lobby groups claim that data traffic really is that unmanageable or undesirable for them, it would seem stupid that they are frantically trying to attract those sorts of customers if they did not earn money from them.

Communications Chambers also found that data growth has actually been declining – for both fixed and mobile access – in recent years (aside from a short-lived spike during the lockdowns). If growth in data traffic is indeed driving revenues for telcos, then they might be looking for sweetners to cover the short-fall.

What is alarming is that the EU politicans seem to think that some form of legislation might be needed to save the poor phone companies.

 What is a more likely scenerio is that the European telcos just want to enforce another revenue stream, much like the US telcos. If they can get Google and Netflix to pay more for their services they can give their CEOs and board members huge bonuses without having to do anything more.

The difference is that the US telco's operate under regional monopolies which are enforced by bribing politicans with campaign funds.  The EU has not reached that stage yet and might wake up to this form of back door money grabbing. 


Last modified on 26 July 2022
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