What European Telcos’ Funding Woes Mean for U.S. Businesses

The “State of Digital Communications 2024” report by the European Telecom Network Operators (ETNO), a trade association with 160 members, discussed the hotly contested Fair Share plan. Based on research by Anaylsys Mason, it raises serious questions as to how to best meet regulatory goals for fiber broadband deployment and 5G.

Under the plan, content companies, which they claim together make up over half of their network data use, should pay more to fund network advancement. Google, Meta, Microsoft, Amazon, Apple, and Netflix could be the most adversely affected by the creation of usage fees.

Meta railed against the plan last year, and there was relative silence because policy makers decided against filing legislation. ETNO has not given up. It pushes Fair Share as a core means of raising funds to help telcos pay for much-needed investments.

“It’s our position that this policy would undermine most of the principles of the Internet Way of Networking that make the Internet valuable to all of us,” wrote the Internet Society. "We believe that this isn't just a policy that would also contribute – at its core -to the intentional fragmenting of the Internet, which would service nobody."

U.S. Enterprise Impact

Where does the ongoing European situation leave enterprises based in the U.S.? “Businesses looking to add new facilities or branch offices need to be aware that they won’t have the same service choices they have here in the U.S,” cautioned Jeff Heynen, Vice President of Broadband Access and Home Networking for Dell’Oro Group, a technology research and consulting firm. “For example, 5G Fixed Wireless Access barely exists in Europe.”

IT leaders need to understand other limitations when considering expansion into Europe. "Further, service tiers and service level agreements will often not be as robust as they are in the U.S. due to the fact that competition in certain markets continues to be limited," explained Heynen. "Residential ARPU is low compared to the U.S. That is one reason European telcos are looking to Fair Share."

European Commissioner Looks Beyond Fair Share

“Some have tried to reduce the issue of investment to a battle over the “fair share” between Big Telco and Big Tech. A binary choice between the vested interests of those who provide networks today and those who currently feed them with the traffic,” wrote Thierry Breton, European Commissioner for Internal Market, in a LinkedIn post.

"We should work together, industry, investors, public authorities, to uncover and remove the obstacles to much-needed investments and make them more efficient," added Breton, who wants to look at the bigger picture. "But while finding a financing model for the huge investments needed is an important issue that we will need to deal with, so much more is at stake. It is about achieving the giant leap ahead of us, not only in the telecoms sector but more broadly in digital technologies. "

All parties agree that effective and decisive action is required for European telcos, businesses, and residents to stay competitive.

"Users are expecting new networks, and Europe's competitiveness relies on innovative connectivity. This is why we must take urgent policy action to help strengthen the European telecom sector," warned Lisa Fuhr, ETNO Director General, in recent comments. "The status quo – both in terms of investment and of policy – will not deliver the levels of innovation that are so desperately needed to sustain growth and deliver on the Open Strategic Autonomy."

Synopsis of the ETNO findings

With regard to 5G Standalone Networks (5G SA), the report found that “with innovative connectivity becoming more and more crucial to competitiveness and security, telecoms investment reached a record.”

Additional findings include:

The report noted that Europe’s Connectivity Ecosystem is at a “lead or lose” moment. To that point:

According to the report, with the EU aiming to reach full 5G and full gigabit coverage by the end of this decade, our report found that significant additional investment in roll-out is still needed before the targets are achieved. In 2023, 5G in Europe reached 80% of the population, up from 73% the previous year. However, Europe still trailed all its global peers: South Korea (98% 5G coverage), the US (98%), Japan (94%), and China (89%).