FCC looks to big tech to help fund network infrastructure

The Federal Communications Commission (FCC) has floated the idea of big tech companies helping foot the bill for broadband and mobile connectivity in the US through its universal service fund (USF). The move follows questions earlier this year by the European Commission about the role of tech giants in shouldering a share of telecom network costs.

The USF is a $9 billion a year program that supports telecoms companies in connecting regions in the US that are expensive to serve, as well as low-income customers, health providers in rural areas and eligible schools and libraries.

US telco customers today pay a roughly 30% charge on their telecoms bill to cover the cost of USF, according to a published statement by Commissioner Brendan Carr of the FCC to the US Congress. The thinking is that since big tech companies benefit from universal connectivity it would be fairer to have them foot the bill rather than US consumers.

Carr’s statement references a report that finds that such a move “would eliminate entirely the roughly 30% charge that consumers pay on their telecommunications bills today simply by assessing a far lower, 7% charge on Google’s and Facebook’s digital advertising revenues.”

It also points to findings that “the five largest streaming companies account for 75% of total network traffic in rural areas. Commenters argued that these companies that benefit significantly from our country’s USF-supported Internet infrastructure should be required to contribute to the network.”

Communications service providers (CSPs) worldwide make the point that the biggest over-the-top (OTT) companies generate much of the traffic on their networks – a recent report by ETNO puts the figure in Europe at 55%. ETNO also cites a study by Frontier for Deutsche Telekom, Orange, Telefonica, which estimates that each year OTTs generate total attributable costs for European telco networks of between €8 billion and €10 billion for fixed networks and between €28 billion and €30 billion for mobile networks. The same study estimates that even when considering only incremental costs the amount still comes to between €2 billion and €6 billion for fixed infrastructure and a range of €13 billion to €22 billion for mobile across Europe.

Regulation to address network funding models would take time to come into effect, but Dean Ramsay, principal analyst TM Forum, believes it is becoming inevitable.

"Getting the tech giants to foot some of the bill for connectivity has been mooted for a while now and I'm sure it will happen," says Ramsay. "We've all seen that chart where the data demand and revenue-per-megabyte have become decoupled as capacity demand soars but ARPUs dwindle. That demand for capacity is driven by a small number of OTT giants who contribute very little to the cost of connecting to their customers and there has to be a tipping point at which it no longer makes sense for CSPs to provide better quality services for the same money - I think we're there. As we move towards the next phase of data-hungry OTT scenarios like metaverse, the connectivity funding model has to change."