08 February 2010

César Alierta, Telefonica Spain to charge Google, Yahoo, Microsoft for access to Spain's internauts

The President of Telefónica Spain, César Alierta, says in today's El Pais that Telefonica Spain will now begin to charge search engines such as Google, Yahoo and Microsoft. He states that these search engines use the Telefonica networks without paying anything.

Now, I am all in favour of multinational corporations charging other multinational corporations, and even of multinational corporations fighting among themselves. The problem here though, seems to be the fact that César Alierta wants to have the best of both worlds, he wants to be paid twice for the same service. To give an idea, it would be like the electricity companies charging Bosch or Whirlpool because their washing machines use electricity.

Now if he were to reduce Telefonica's DSL charges to consumers at the same time, I'm sure he'd get a lot of support. This won't happen, of course, and the end result will see search engines beginning to charge for their services, meaning that in the end it's always the consumer who pays.

It appears telecommunications companies are deliberately being allowed to make excess profits.

The European Competitive Telecommunications Association (ECTA) reported last year that:

"Financial results from incumbents, such as Telefonica’s last week, show that they are primarily focused on increasing profitability at the expense of vital infrastructure investment What is particularly disingenuous is that, at the same time, they are threatening governments and European politicians that they will not invest in next generation access unless there is a relaxation of competition rules that allow rivals to offer services over these networks.”...“Despite Spanish regulator CMT granting Telefonica a regulatory moratorium for next generation fibre networks, ostensibly to support a €1bln fibre investment programme, there is little or no evidence that it will prioritise infrastructure investment in future. Instead it is committed to ‘preserving the company’s strong cash flow generation’, to the benefit of shareholders.

ECTA continues: "Telefonica Spain posted an 8.9% increase in profit (EBITDA) and cashflows up 14% to €8bln, but a reduction of 7.2% in investment (Capex) in 2008."

We have no problem with companies prioritising profitability, making healthy profits and benefiting from their own investment and innovation. However, we do have a problem with healthy companies using the recession as an excuse to blackmail policy-makers into relaxing regulation, with the aim of strengthening their own dominant position further at the expense of competitors and consumers. For companies such as Telefonica and Deutsche Telekom, investment in next generation fibre networks should be part of their normal upgrade strategy to replace decades-old copper networks, which have been fully paid for, and not a licence for stifling competition.

Telefonica's.results for the third quarter of 2009 showed a tiny drop in profits but the profits are still enormous and T. was "was able to boost the company’s dividend for the year 2010 by 22% in the last month and pledged a higher payment for 2012."

And `presumably we the consumers can go fuck ourselves again.

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