Three options for Telcos as they compete with Big Tech

Julius Hafer, Partner, Networks Technology Consulting & Visual Analytics at BearingPoint

European Telco companies are under pressure from Big Tech, as both industries are rapidly converging. To continue to compete, Telcos must deliver both excellence in their connectivity services and focus on areas where they can generate new revenue streams.

Julius Hafer, Partner, Networks Technology Consulting & Visual Analytics at BearingPoint

Telcos are shouldering the task of providing connectivity, the backbone of the digital world, to end customers, but more than half of internet traffic is created by the five giants of Amazon, Apple, Alphabet, Meta and Netflix. According to estimates, Big Tech content providers are costing European communications services providers (CSPs) a massive €15 bn a year.

Moreover, the costs of building and running telecommunication networks are increasing due to rising service, hardware and energy costs. New technology rollouts will add to these costs, especially with the climax of 5G and advent of 6G rollout on the mobile side and on the fixed side the continued fibre roll out in Europe. Simultaneously, end user prices for both technologies have been pushed down while data consumption has increased.

So, what can European telecoms do to change this dynamic?

  1. Change the playing field
  2. Drive revenue growth
  3. Focus on efficiency and productivity

Change the playing field

Lobby regulators and governments to allow cross EU consolidation and adopt a differentiated cost model

First, telecom companies could persuade national governments and regulators to allow cross border telco consolidation.

This increase in telco mergers would reduce extreme competition from numerous national counterparts. If cross-border mergers and acquisitions were permitted, telcos could build economies of scale across Europe to be able to compete more effectively while improving cost efficiency.  The size would potentially prevent takeovers by Big Tech.

Secondly, they can lobby regulators and government to end ‘freeloading’ by Big Tech and adopt an “Internet Tax’’.  

The five biggest ‘hyper-scaled’ players take up more than half of European data capacity, mainly for streaming, but also for gaming, cloud services and social media. Campaigning for Internet Tax legislation and implementation will force Big Tech to pay a fair share of their revenues to the telcos. An internet tax sounds like a golden ticket for additional revenues but it may cause various adverse effects. For example, it could cause Big Tech companies to establish their own network infrastructure e.g. Amazon announced the launch of 3,000 satellites to support its broadband service or depending on its size, to an acquisition of a Euro-Telco. However as of June 2023, the EU’s proposed network fee levy is encountering resistance from most member states.

Thirdly, an amended version of net neutrality could be a worthwhile lobbying target for European telcos as a separate means of leveling the playing field.

While an internet tax may be a violation of ‘net neutrality’ rules (equal treatment of all users), allowing Telcos a modified net neutrality model that specifically enables them to charge for mobile network features such as latency or bandwidth in order to spend on innovation to enable better customer networks might be the way forward.

Revenue Growth

Launch their own paid premium network services for superior customer experience.

Telcos have built costly networks that enabled the online commercial revolution and now face an explosion in demand of around 20-30% pa until 2030. However, the way networks are deployed and used will change massively. Currently with 5G and later with 6G, we are entering the age of real-time human-machine-communication. 


This requires low latency networks with a dynamic set of features which can be commercialized. Already our research has found that up to 40% of respondents would be willing to pay a premium for dedicated 5G services. To drive monetization, Telcos need to launch those services and regulators need to give a framework to allow for these services.

However, our research also shows a vast majority of European customers are simply not aware of the benefits of modern network technologies such as 5G or fibre. Therefore, Euro-telcos must spend time and effort in ensuring their customer base fully understands the benefits 5G/6G and fibre networks bring to each consumer in each nation and across borders.

The increased volume of available services has led to end customers experiencing the paradox of choice. They have so many opportunities that they are too overwhelmed to pick the best solution.

Telcos will not be likely to beat Big Tech on their home turf but rather by finding collaborative models. As telcos are the doormen of the internet, they are ideally positioned to help customers picking the right offers, with the help of recommendations or orchestration. For example, the world of streaming has become extremely fragmented – especially when we look at sports where if you want to watch all matches of your favorite sport you need to subscribe to 3 or more platforms. Telcos can orchestrate all these contracts into a bundled service that benefits the customer while also creating a margin for themselves.

Focus on efficiency and productivity

Maximize network synergies through merger, cooperation and roaming partnerships

Telecom companies can compete by focusing on running their core connectivity business in the most productive, cost-efficient way possible. The networks need to run as efficiently and effectively as possible by rolling out zero touch AI-fueled network management. Therefore, network operators need to use the full array of options, starting with optimizing network capacity with open access and national roaming.  Parallel building of the same technology that we see partially with the fibre rollout is of course a perversion of the above stated. By divesting legacy networks and refocusing on value-centric network rollout, they will be able to target the area their customers believe is where telcos deliver the highest value. Then, delivery needs an end-to-end education program to understand how they can help their customers to increase that perceived value and willingness to pay for it.

For the European Telecom companies to continue to compete in a world where all industries are converging, they need to focus on their core business: the delivery of outstanding network services. To do this they need a level playing field in which they get a clear benefit from their investment and they need to monetarize their service to drive new revenue streams.

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