Orange makes Google pay

Industry watchers are abuzz pondering the implications of the news that France Telecom-Orange has convinced Google to pay to send traffic over its networks.
Orange CEO Stephane Richard slipped in the information that Google is paying it for transit during a recent French TV interview.
While Richard did not elaborate on the financial terms of the arrangement, a company spokesperson told the Register that a deal has been in place for at least a year.
The company's disclosure has sparked a flurry of speculation over what the arrangement means for Google's espoused net neutrality principles, and whether it may set a precedent for other markets and content providers.
An oft-quoted statistic in the discussions is that Google now accounts for more than half of the traffic on Orange's network.
As Forbes points out, Orange believes its strong market position in the emerging smartphone markets of Africa gave it the leverage needed to convince Google to play ball, as it appears to have decided that building Android market share is more important than holding out.
GigaOM senior writer David Meyer suggests that Google's decision betrays its own net neutrality principles. He cites a 2006 quote from chairman Eric Schmidt complaining that “phone and cable monopolies...want to build a two-tiered system and block the on-ramps for those who can’t pay.”
The agreement also sets a dangerous precedent for other internet content providers, Meyer said. Orange now has the incentive to demand similar agreements from other content companies, particularly “if Google is paying a carrier such as Orange to handle its traffic better than it might otherwise be handled.”
TelecomAsia contributor Rob Powell has meanwhile engaged in some informed speculation about the possible nature of the agreement. As Powell wrote on his blog Telecom Ramblings
My understanding is that Google has been reaching most French customers through IP transit, at least part of which is purchased via Cogent (and delivered through Cogent’s peering connections with French service providers). If they haven’t come up with a brand new business arrangement in which traffic that arrives through a peer actually gets charged *again* by the receiving party depending on the origin of the bits, then what I suspect is that Google may simply have agreed to buy transit or paid peering from FT/Orange to replace at least part of it. After all, isn’t that the easiest way for Google to put out this fire? FT/Orange can’t very well complain that Google isn’t paying for using its network if they are actually paying IP transit or paid peering for it.
The precedent that could be set in France could therefore be the ability of operators to force large content providers from buying French connectivity from French providers rather than an international backbone, Powell said.
While this could mean Google's bandwidth costs go up a little, the greater impact could be on the backbone providers. “That could simply shred the current economics of the internet backbone business, and fundamentally reshape the industry in unintended ways,” Powell said.
Finally, the timing of Richard's disclosure is unlikely to be a coincidence. It comes in the wake of rumblings by the French government that it is considering requiring Google to pay local content providers for search engine traffic generated by their content.
The government also recently proposed an internet tax on the collection of user data, as a method to force Google and other multinational internet companies to pay more taxes on their French earnings.
But the government this month also ordered Iliad's Free to stop blocking ads by default via its new Freebox modem. The ad blocking move had been widely considered to be an attack on Google, in a possible attempt to coerce it into a similar arrangement to the Orange deal.