EU telecoms groups seek charging shake-up

European telecoms operators should be free to develop new business models, including the controversial idea of charging online content providers for delivering their material to consumers, a new report is expected to say on Wednesday.

The report, by the chief executives of Alcatel-Lucent, Deutsche Telekom and Vivendi, has been drawn up in response to the European Commission’s fears that ambitious EU targets to improve broadband speeds will be missed because of inadequate investments by telecoms operators.

The report is expected to provide thinly veiled backing to operators tapping new wholesale revenues by taking the contentious step of charging online content providers for delivering their bandwidth-hungry video material to consumers in a high-quality condition, according to people familiar with the document.

Such charging is strongly opposed by supporters of net neutrality, including Google, which has previously insisted that operators can get their revenue from consumers and businesses that need broadband connections.

European operators say they must find new revenue sources if they are to build high-speed broadband networks based on fibre optic cables, which McKinsey, the consulting firm, has estimated could cost €300bn ($421bn) across the EU.

Neelie Kroes, the European commissioner responsible for telecoms, in March called a meeting of leading executives from about 40 companies, including telecoms operators, equipment manufacturers and technology groups, amid concern her broadband targets are under threat.

The outcome of the meeting was an agreement that the chief executives of Alcatel-Lucent, Deutsche Telekom and Vivendi should prepare documents about how Europe could hit Ms Kroes’ targets for 2020, including the objective that at least half of European homes should have access to download speeds of 100 megabits per second.

A draft of the report about the work of the three chief executives, seen by the Financial Times, suggests it has been difficult to forge a consensus between the European telecoms operators and US technology companies led by Google.

One person involved in the process described the report as a “political fudge”. Google stressed it was not a signatory to the report, but said it looked forward to holding further talks with the European Commission.

The report endorses the case for preserving the basic, “best effort” internet for delivering content to end users.

However, the report and supporting documents refer to the operators’ interest in new “business models” that could enable them to tap new wholesale revenues. “There should be no ... restrictions on the development of these business models, albeit they should be on the basis of commercial agreements,” says one draft document.

Some operators, including Vodafone, are interested in charging content providers for delivering video material to end users in a high quality manner.

Other operators, including Telefónica, want to charge content providers according to how much material is pushed over their networks.