Telcos Want Payment From Streaming, Gaming, Social Media Giants

Telcos Want Payment From Streaming, Gaming, Social Media Giants

Australian telcos have asked the government to require streaming, gaming, and social media giants to pay for increased traffic caused by their users. Telcos have complained about the strain on infrastructure, blaming companies whose entire profit model is based on heavy streamers and gamers.

The latest complaints come from Optus, Australia’s second largest telco, which recently put its request in writing. The telco has asked the Australian Competition and Consumer Commission to come up with a model that requires large streaming, gaming, and social media companies pay for the high data usage their customers require.

Optus is not alone – both Telstra and Vodafone (TPG Telecom) have complained in the past, and research from Competition Economists Group supports the idea. 

But while heavy streamers and gamers do, in fact, place an abnormally heavy toll on the Internet highway, is it fair to bill the platforms they subscribe to while telcos already bill such heavy users for their usage? We’ll address this an more – read on to find out.

Internet usage has increased since the coronavirus pandemic 

Ever since the coronavirus sent Australians to their homes indefinitely, Internet usage has skyrocketed. In fact, this isn’t just an Australian trend – it’s global. In a Statista survey taken during the height of the pandemic, 70 percent of respondents around the world claimed that their mobile phone usage had increased as a result of the COVID-19 outbreak. The survey also recorded significant usage increases for streaming devices, laptops, and desktops, tablets, and more.

Another survey, the Next Web’s Digital 2020 report, cited a 7 percent increase in global Internet usage within the times of the coronavirus pandemic.

During the height of the pandemic, we also saw the major telcos struggle with increased traffic as network outages became quite frequent. Back then, we reported that telcos saw a huge spike in voice calls to government phone numbers – a twenty-fold increase, according to Telstra. Telstra’s Nikos Katinakis also cited a 70 percent increase in daytime data traffic.

Telcos’ take on streaming and gaming companies

These coronavirus traffic spikes have become a new rallying cry got telcos who feel cheated by straming and gaming giants. Their position is that, without their expensive network infrastructure, streaming and gaming platforms won’t be able to improve their platforms.

Outgoing Telstra CEO Andrew Penn cited the lack of regulation surrounding streaming would eventually hurt customers. TPG Telecom (Vodafone) also chimed in, with CEO Inaki Barroeta stating that such companies have “relied, thrived and enjoyed a free ride”.

Now, Optus has increased pressure on regulators with a written complaint, asking that regulators shold implement a model that ensures streaming, gaming, and social media platforms pay telcos for their customers’ heavy data usage, similar to the News Media Bargaining Code (NMBC).

The NMBC was enacted last year, requiring technology firms like Google to pay local news publishers for the content that appears or are linked on Google. Many news outlets have since benefited from the NMBC, and telcos want the same treatment.

According to Optus, the lack of regulation and compensation has created an imbalance where streaming and gaming platforms get to use their network infrastructure without contributing.

Some streaming giants have done what they can to ease traffic, but are they required to?

Streaming giants are aware of the strain that their platforms cause telco infrastructure. In fact, during the height of the pandemic, both Netflic and YouTube reduced their content’s bitrate to ease network congestion. Telstra praised the move when Mr. Katinakis stated that those bandwidth reductions “…did have an impact on the network but it was the day time traffic that was really incredible, usually the 9am to 5pm traffic is relatively flat but that pushed up by almost 70 per cent.”

However, the Netflix-YouTube bandwidth reduction was short-lived. Both companies eventually increased their video streaming quality back to normal, boosting the strain on network infrastructure all over again.

While telcos have a good argument for billing these companies, streaming and gaming giants have a credible argument of their own. These Internet giants claim ‘net neutrality’, the principle that suggests all Internet traffic should be treated equally, and that Internet Service Providers (ISP) shouldn’t discriminate amongst content and service providers unfairly.

These companies also claim to invest heavily in infrastructure to improve efficiency. In other words, streaming and online gaming could easily consume a lot more than they do today, if not for those investments for data usage efficiency.

Who will eventually settle the bill if telcos get what they want?

While we watch and wait for the outcome of this squabble between ISPs and streaming/gaming giants, we can only assume that the consumers will eventually foot the bill.

Sure, telcos invest heavily on network infrastructure in order to handle the high data demands of streaming, gaming, and social media platforms. Those platforms also invest heavily to improve their products and ensure that the current network infrastructure can handle that content seamlessly.

Somewhere in-between is the consumer – the heavy streamer or gamer who uses both the streaming service and the telco service. The consumer pays both parties, but the telcos are still not satisfied with that.

Telcos charge for SIM plans based on average data usage per plan, so in reality, they already compensated for that data usage. While a heavy gamer or streamer may use a lot of data, another user hardy uses any data at all. This balances out the traffic on network infrastructure and ensures the telcos are paid by all users, for all users regardless of usage statistics.

Streaming, gaming and social media platforms are not free either. They are either purchased outright, paid for with monthly subscriptions, or supported by ad revenue, and all three of these scenarios depend on the consumer for revenue. 

If the ACCC eventually enforces payments from content providers to ISPs, you can be sure those content platforms will pass the bill down to their consumers one way or another. And if the ACCC denies telcos their request, well, perhaps an increase on your plan will be the case. Either way, the customer will likely pay the bill.

Final words

Optus’ approach to this situation says more about the state of its Balance Sheet than its feelings on the amount of data used by Netflix, Facebook et al. Margins in telco are falling quickly, halving in just the last couple of years according to some reports. Should the regulator decide to step in, any monies paid by Big Tech would go straight to Optus’ bottom line.

It would appear, however, that Optus is ultimately asking for two bites of the cherry here. Their customers pay them for mobile data so they can use their phones in the way they want to in Australia. It’s a clear transaction, willingly stepped into by both sides; the consumer and Optus. To ask Facebook to also pay seems like a clear case of Double Dipping.

Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.