A new post from Facebook owner Meta makes a pretty noteworthy claim: "5G infrastructure will allow the metaverse, in time, to deliver AR [augmented reality] mobile experiences of real value to society and there is no evidence that additional investment is required to make this happen."
The post, authored by Meta's Kevin Salvadori and Bruno Cendon Martin, represents the latest round in the European debate over "fair share." Basically, European network operators want Big Tech companies like Meta to help pay for their networks. Perhaps not surprisingly, companies like Meta aren't so keen on that idea.
"Network fee proposals are based on a false premise," the two Meta executives wrote this week.
Among their claims:
- "The development of the metaverse will not require telecom operators to grow capital expenditures for greater network investment."
- "Just as you use your mobile phone in locations with access to Wi-Fi such as your home or place of work, we expect the vast majority of AR usage to be over Wi-Fi through fixed networks."
- "Evidence does not suggest that there will be mobile network capacity constraints resulting from AR. This is principally because of 5G."
Those are pretty impressive assertions considering another Meta executive argued almost exactly the opposite just over a year ago.
In February of 2022, Meta's Dan Rabinovitsj wrote that "making the metaverse a reality will require significant advancements in network latency, symmetrical bandwidth and overall speed of networks." He added that immersive metaverse video would require "revolutionary improvements in network throughput."
Of course, much has happened at Meta during the intervening year. Investors have sent Meta shares plummeting, and the company has eliminated roughly 21,000 jobs.
Getting the other side to pay
Whether it's called a "fair contribution" or a "network fee," it's the idea that a sender ought to pay in telecom. And it's taken on a new life amid a tightening economy, looming recession and widespread fears that things are only going to get worse.
On one side are Big Tech companies like Google, Meta and Amazon. During the COVID-19 pandemic, such companies enjoyed incredible profits – until recent economic uncertainties sparked a historic round of layoffs.
On the other side are network operators like Vodafone, Orange and SK Telecom, all struggling with sluggish revenues of their own. They believe content providers ought to help pay for the networks that transmit their digital goodies. You know, like how carmakers like Ford pay for roads, or how TV makers like Samsung pay for electricity.
Regulators in the US, Europe and elsewhere have been debating the topic for several years now, with mixed results. Perhaps the most interesting developments have occurred in South Korea, where Netflix and SK Broadband engaged in a legal squabble over who should pay for the video traffic generated by the hit series "Squid Game." That in turn led Korean regulators to introduce the Network Free Ride Prevention Act, as detailed by research and consulting firm Strand Consult.
To be clear, there are good arguments on both sides.
Points and counterpoints
Meta's executives rightly point out that the company built its own content delivery network (CDN), which includes an extensive fiber operation in Europe. "We don't charge telecom operators for this," the executives noted.
Netflix offers a similar argument: "We've invested more than $1 billion in our content delivery network called Open Connect, which we offer free to ISPs. We have 18,000 servers containing our content in 6,000 locations (and growing) across 175 countries. So when consumers press play, the film or TV show is streamed from around the corner – reducing traffic and costs for operators around the world," wrote Netflix's Greg Peters last year.
But others, like Strand Consult, argue that the global Internet market has now matured to a point where connections are necessary for modern life, and big Internet players ought to ensure that such connections remain available to all. "Google has grown large and dominant in part because they have forced a free ride on other's networks. The US and Japan now propose that Google pay into the Universal Service Fund or be subject to an ad tax to recover the money needed to build and maintain networks," according to the firm, citing ongoing debate over funding the USF program in the US. The program helps to fund networks in rural areas.
And Disruptive Wireless analyst Dean Bubley offers yet another view: "Tech cos don't 'generate' traffic. Users *request* traffic," he wrote on LinkedIn. "Even if traffic comes from a few sources, that doesn't mean they should pay for infra upgrades."
The truth here is that every big company, whether a network operator or a content producer, will look for a competitive advantage wherever it can find one. If that competitive advantage involves a new technology or service, great. But in the absence of that, favorable regulatory rules will suffice.
Increased competition and a tightening economic situation will only exacerbate the search for this kind of competitive advantage.
Naturally, there will be solid arguments on both sides. After all, high-priced lawyers and lobbyists are working full time to convince regulators that their client is right. Principles – those that exist outside of financial concerns – are either hard to find or nonexistent.
The only real question is whether the regulators who sit at the center of the storm can remain level headed. That's unlikely. Just look at the political grandstanding in the US surrounding the banning of China's TikTok. Such a ban would undoubtedly boost the fortunes of US companies like Meta and Google.
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