Will traffic charges support the Digital Decade targets?
It's sometimes claimed that the traffic charges sought by large telcos will help support the EU Digital Decade infrastructure targets - 100% FTTP coverage of households, and 100% 5G coverage of populated areas. I've taken a look at these claims in a new paper (funded by Google).
The good news is that progress on the targets is ahead of schedule, and a wide array of telcos continue to invest (with non-incumbent telcos a very important part of this). There appears to be ample capital, with future required capex well within historic levels of capex.
That is not to say there are no issues - investment incentives are a concern, particularly in rural areas.
So one key question is whether traffic charges will make a difference to these incentives. Traffic charges would mean broadband providers receive money for their customers' traffic. However, they will get such charges whether or not they upgrade their network. So these charges can only provide an incentive for upgrade if the upgraded lines generate more traffic (and hence higher charges).
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This brings us to the chart at the top of this post. Based on Ofcom data, it shows the average traffic of UK parliamentary constituencies, grouped by the average line speeds of those constituencies. As you can see, the linkage between faster speed and higher traffic is very weak indeed. In other words, an operator upgrading their fixed infrastructure shouldn't expect more traffic as a result, and by extension shouldn't expect higher traffic charges. Thus such charges don't help with the incentive problem.
Indeed, traffic charges could actually make matters worse. Charges of the levels proposed by ETNO are likely to make certain major applications commercially unviable on mobile networks. If these applications ceased provision (as Twitch has done in Korea in the face of traffic there), this would greatly reduce mobile traffic, and thereby worsen the investment case for 5G.
Thus traffic charges don't help achievement of the Digital Decade targets - on the contrary, they are likely to make them harder to reach.
Honorary Prof at Bristol Univ; Visiting Professor at King's College London; Trustee at Music for All charity; Fellow of Royal Academy of Engineering
1 年Fascinating and timely paper, thanks Robert. (FYI the link to the Ofcom constituency data is broken)
CEO at Telzed
1 年This fits with expectations. Also with Ofcom market data of a few years ago. This showed very little increase in traffic with speed except for very slow lines.- expected as few like to wait for a large files or to stream video if it freezes. That data showed a data volume peak on lines of c 20 Mbit/s. This related to the first typical high speed tariff at the time. But the few customers on c 100+ M bit/s did NOT use much more traffic. Very small increases on up to 1 Gbit/s. So the essential truths in the Robert Kenny paper were seen in past Ofcom data. Please check that Ofcom paper. No surprise. Once line speed is say 50+Mbit/s it is “good enough” and little need for 1Gbit/ s except in premises with heavy users, esp of video and some SOHO who do need more traffic. Another knife in the dubious traffic tax idea. I despair as the facts from Robert should be obvious from good old ratiocination. Facts and logic align. Readers can make their deductions on why the traffic tax is now demanded. Remember traffic is GOOD for a telco. Noted over ten years ago. By guess who?
Director General, Connect Europe | Board Member, GeSI
1 年Thanks for the opinions expressed in this post and for being transparent on the fact that the report is funded by Google (not everybody is as transparent). A small fact-check on my side: unlike mentioned, ETNO has *not* proposed a specific “level” for the contributions, but referred to the need for balanced and fair commercial negotiations. Among the numbers we published last year, there were also estimates of network costs. Which is of course different from indicating a price in a commercial negotiation and hence indicating a specific level for the contributions. For more info on what ETNO’s position is, here is our Q&A https://www.etno.eu/news/all-news/8-news/760-q-a-23.html