Online services providers such as Google, Facebook (Meta), and Netflix, among others, are deriving more money from the internet at the expense of telecoms operators who are investing in the infrastructure to enable access, according to the GSM Association (GSMA).
According to the GSMA’s 2022 Internet Value Chain Report, the scenario has generated imbalances between network operators and online service providers, which, if not resolved, might jeopardize global growth prospects across numerous sectors of the internet-based economy.
According to the telecoms body’s recent study, while the internet value chain is growing rapidly, the benefits and returns are primarily flowing to players in the online services segment, while telecom operators who build and operate the connectivity infrastructure that underpins these services are not benefiting as much as they should be.
Commenting on the report, GSMA’s Chairman José María Álvarez-Pallete said: “The internet connects 4.6 billion people and drives the global economy. It is transforming business models, unlocking new opportunities, and uplifting communities across the world.
“But as some sectors in the internet value chain thrive, the demands of investing in the infrastructure those sectors rely on for growth are squeezing network operators. We welcome the growing recognition of this issue by policymakers, and as the internet-based economy expands across all sectors over the next decade,” the Chairman added.
GSMA in the report urges business leaders and policymakers to fully appreciate the critical role of the internet infrastructure and work to ensure that market distortions, regulatory requirements, or other factors are not limiting the ability of participants to make sufficient returns in all segments of the ecosystem and that all segments can make a fair return.
“This would sustain long-term investment and not just those businesses with the biggest platforms and scale. The telecom operators have an important role to play and need the right incentives to keep investing in networks, both in core network capacity and increase in edge functionality,” the body stated.
- GSMA says the study also finds that revenues across the internet value chain nearly doubled in five years, from $3.3 trillion in 2015 to $6.7 trillion in 2020. Much of this growth comes from online services; they saw a 19% increase in revenue per annum in 2020.
- Paid-for online services will soon exceed $1trillion in revenues, driving huge capacity demand on global networks. With an annual growth rate of 7.5%, the number of users being connected to the internet globally shows no sign of slowing.
- Traffic per user grew at 27% per year, with almost 80% of that being driven by video traffic.