30 Apr Industry Voices — Entner: A tale of two continents and the internet during COVID-19
A few weeks ago, EU Commissioner Thierry Breton made headlines when he asked Netflix, Google’s YouTube and Disney to voluntarily reduce their video quality from High Definition to Standard Definition in order to “secure Internet access for all.” Is this an EU bureaucrat detached from reality gone wild or is there something more behind it?
What most headlines did not report is that Thierry Breton is the former CEO of France Telecom, now Orange, the 10th largest telecommunications provider in the world. By moving from HD to SD the data speeds needed to support streaming video declines by 80% from roughly 5 Mbps to 1 Mbps. To quote the eternal wisdom of Depeche Mode: Everything counts in large amounts. Especially when you multiply the reduction by 200 million households. If at the peak hour, half of the EU, roughly 100 million households, are watching streaming video and all of them are using SD instead of HD, then peak edge network load goes down by 400 million Mbps or 400 Tbps.
Europe’s largest internet exchange, DE-CIX is publishing its usage and performance data in real time for all its internet exchange points. Below is the 5-year traffic graph for Frankfurt from April 21, 2020s, the world’s largest internet exchange point:
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On one hand, the impact of the COVID-19 quarantine is quite visible at the right. Peak usage went up by 50% from around 5.8 Tbps to 9.1 Tbps, which is quite an increase that could cause alarm until you know that peak capacity is 58.4 Tbps. The concerns of Commissioner Breton cannot be in regard to the core internet backbone being in danger of potential breakdown. It has to be the edge network, since the core network is holding up well.
We know from the experience in the United States that the fiber and cable networks providing from tens up to 1,000 Mbps speeds are holding up well as traffic has increased. The problem arises at DSL, a technology that allows several Mbps data connections over copper wires, often can only support 15 Mbps or less over short distances from a central office. Next generation VDSL can provide up to 200 Mbps over distances of less than 200 yards from a central office. The problem is that central offices are generally further apart than 200 yards and speeds fall off dramatically.
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American telecommunications providers have invested heavily in moving beyond DSL and continue to invest heavily to expand their broadband offers. Congress and the Federal Communications Commission have dedicated billions more to improve access for every American at every point in the network, from last mile to the radio access network. This has not been the case in Europe.
A good proxy for the quality of a country’s broadband infrastructure is how much money the carriers have invested in the technologies and networks on a cumulative basis.
The Organization for Economic Co-operation and Development (OECD) identified $944 billion was invested in the EU telecommunications networks from 2002 to 2018 improving the connectivity of the EU’s 527 million citizens. Over the same time period, the OECD reports that the U.S. invested $1.323 trillion in U.S. telecom networks, covering 320 million Americans. Of these 320 million, 90% have access to fixed broadband internet service. From 2002 to 2018, the U.S. accounted for 42% of global telecom investment among all 37 OECD states.
When looking at the telecom investment per person in the U.S. and Europe, the difference between the investment per person is stark.
Consistently, more than $200 per person is invested to connect people in the United States. In 2017 and 2018, the two most recent years available, U.S. telecom companies have invested $291 and $290 per person, respectively. The average for the EU4 (Germany, France, Italy and Spain) was $150, about half of what is spent in the U.S. The spend in countries other than the big four has been even less.
In the Czech Republic, only $69 per person is invested in telecommunication infrastructure; in Estonia $70; and in Portugal $73. Thus, Commissioner Breton called Netflix, Google, and Disney to ask them to throttle their traffic to ensure the maximum number of EU citizens could have access to the internet. However, due to the U.S.’s spectrum policy, efforts to speed deployment of mobile and fixed infrastructure and a more evolved, and light touch regulatory framework has produced a far superior broadband infrastructure in the U.S. than compared to EU.
Roger Entner is the founder and analyst at Recon Analytics. He received an honorary doctor of science degree from Heriot-Watt University. Recon Analytics specializes in fact-based research and the analysis of disparate data sources to provide unprecedented insights into the world of telecommunications. Follow Roger on Twitter @rogerentner.
“Industry Voices” are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by Fierce staff. They do not represent the opinions of Fierce.