Net neutrality doesn't work for mobile operators

Telefónica and France Telecom have publicly registered their growing concern with the European Union that content providers are unfairly benefitting by not paying to use broadband networks.

While the increase in broadband traffic--mainly driven by video download--is impacting fixed networks, the consequences for mobile operators is severe, if not dire.

A recent study by the global managment consultancy AT Kearney, commissioned by Deutsche Telekom, France Telecom Orange, Telecom Italia and Telefónica, claimed that, if the growth in mobile data traffics continues as it is forecast to do, then there must be a realignment as to who captures the value and who funds the investment.

In other words, the telcos want the content providers--Google and the like--to cough up money, and in large amounts.

In an effort to justify this "realignment", AT Kearney decided to model the capital expenditure requirements for mobile operators based upon existing forecasts covering the 2009-2014 period. However, it found mobile data estimates for this period to be so high that it adopted a 'constrained' scenario, believing that data offload would have a greater impact than had been anticipated, or that growing congestion would drive users away from mobile data networks.

But, regardless of how you massage the numbers, the research firm claimed mobile data traffic would increase 16-fold over the five year period, an effective CAGR of 74 per cent.

Using data from this constrained model, AT Kearney believes that the investment required to meet this growth over the five years would be €95 billion. Comparing this with the current growth in Capex levels, the firm estimates a shortfall of around €30 billion over the period.

However, LTE could, if deployed swiftly, help to reduce this gap. AT Kearney claims that the greater efficiencies of this technology could bring the deficit down to €21 billion - which sounds better, but it is still a sizeable hole that someone will need to fill.

While the report makes many recommendations as to how this growing issue could be resolved, one telling observation is that current pricing models do not prompt content providers into making any attempt at efficiently using mobile networks.

This, at the very least, would appear to be extravagant and arrogant. Perhaps a backlash is appropriate.--Paul