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Carriers versus big tech enters new phase with 5G and the edge; will carriers lose the Squid Games?

Carriers versus big tech enters new phase with 5G and the edge; will carriers lose the Squid Games?

The rise of edge and 5G is giving a new impetus to one of the longest-running disputes in IT between carriers and content owners. Telco operators are ramping up their efforts to force content providers like Facebook and YouTube to pay for the cost of delivering ever-increasing quantities of data to consumers.

This month Vodafone, Orange Telefonica, and Deutsche Telekom wrote an open letter in the Financial Times saying that video streamers, gamers and social media groups are ‘piggybacking off billions of dollars in investment’ by the group on 5G and fiber and the ‘burden must be shared in a more equitable way.”

Some industry observers see irony in the complaints.

“Deutsche Telekom last month complained about 7 Megabytes of YouTube traffic per mobile subscriber per day. Yes, the firm that will bring you 5G for self-driving cars said 5 floppy disks of video is unsustainable,” Rudolf van der Berg, Project and program manager at Stratix Consulting, wrote1 in a recent post on LinkedIn. He noted that the companies have often created their own bandwidth problems with inefficient or outdated peering and traffic management practices, not to mention underinvestment in fiber infrastructure.

Meanwhile, the three horsemen of the telepocalypse have probably been emboldened by the progress of a lawsuit in South Korea, where SK Telecom is suing Netflix to pay for a surge in traffic caused by the popularity of Netflix’s series “Squid Game.” The whole industry is watching developments with bated breath.

Netflix delivers its content to South Korea through a complex mixture of transit, peering via exchanges and CDN, and it has a number of contracts in place with local providers including SK Telecom. Generally, courts do not like to interfere with bad bargains between commercial parties, but SK Telecom’s Broadband subsidiary won the first round of litigation. Netflix has already been forced to compromise and for the second round of legislation is offering to build out one of its CDN nodes (Open Connect Appliances) in-country.

Up until now, big content providers have been successful in using their dominance to squeeze carriers, and it is no accident that they are big supporters of net neutrality. However, the costs of building fiber to the edge, and the declining profitability of the sector as a whole sit uneasily with the recent round of bumper profits from big tech. It won’t be surprising if policymakers begin to take more notice.

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