Belgian Content Companies Want 3.4% of ISP Revenue

Every new ecosystem of sufficient size, especially when that new ecosystem upsets legacy revenue models, faces challenge from legacy stakeholders. Telco executives complain about app providers "using our pipes for free." Physical retailers joust with Internet retailers. Google Drive competes with Microsoft Office. Newspapers want revenue sharing from Google. 

Now copyright owners in Belgium want Internet service providers to pay them 3.4 percent of access revenue. The thinking is that the Internet enables some amount of piracy, so copyright owners need to be compensated for such piracy by the ISPs that enable some users to steal content. 

The lawsuit has been brought by the Belgian Society of Authors, Composers, and Publishers, known as Sabam. 

It isn't the first, nor will it be the last effort to shift revenue flows within the Internet ecosystem. 

“Disruption” is a huge concept in the Internet and communications ecosystems precisely because, from time to time, a contestant tries to disrupt the structure of the business, and sometimes succeeds.

Nor, contrary to conventional wisdom, is it always young upstarts and start-ups that make the attempts. Apple was no small firm when it recreated the mobile phone business. Softbank was not an unknown little company when it reshaped the Japanese mobile service provider business.

Nor does disruption happen “overnight.” Huawei has disrupted the global telecom equipment business, but over a decade.

Fon has been trying, with some success of late, to create a new way for people and now even service providers to provide “access” to the Internet. Republic Wireless and FreedomPop are other entities attempting to disrupt the mobile or Internet access businesses.

For incumbents who are the target of the attempted disruptive attacks, the major issues include shrinking gross revenue, declining profit margins, fixed costs and the need to create new business models and revenue streams.

Mobile executives said they want “a more equitable share of the spoils” from mobile ecosystem value, says Emeka Obiodu, Ovum telco strategy analyst, Ovum. That isn’t a new refrain, nor unusual in a business where value and revenue are being created in new ways.

As usual, the separation of access and apps lies at the heart of the concern. The “problem” is that networks are seen as providing foundation for application businesses that service providers do not own or control. To put the matter in other terms, over the top app providers and businesses are viewed by telco executives as “riding the pipes for free.”

“This challenge needs to be overcome,” AT&T CEO Randall Stephenson noted.  Other executives tended to agree.

To be sure, precisely how modern networks can be built and upgraded is an issue.  There is universal agreement that most of the legacy revenue that historically has funded such networks is at risk of disappearing, in large part from competitive apps that displace communication services, or because consumers simply have changing preferences.

But some might note that a large part of the problem is simply that telco cost structures are out of line with current or future revenues. Other competitors offer similar services using networks and business models with different cost structures.