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European telcos want U.S. big tech to pay for the internet — but tech giants are hitting back

Tensions between European telecommunications firms and U.S. Big Tech companies have crested, as telecom bosses mount pressure on regulators to make digital giants fork up some of the cost of building the backbone of the internet.

European telcos argue that large internet firms, mainly American, have built their businesses on the back of the multi-billion dollar investments that carriers have made in internet infrastructure.

Google, Netflix, Meta, Apple, Amazon and Microsoft generate nearly half of all internet traffic today. Telcos think these firms should pay “fair share” fees to account for their disproportionate infrastructure needs and help fund the rollout of next-generation 5G and fiber networks.

The European Commission, the EU’s executive arm, opened a consultation last month examining how to address the imbalance. Officials are seeking views on whether to require a direct contribution from internet giants to the telco operators.

Big Tech firms say this would amount to an “internet tax” that could undermine net neutrality.

What are telco giants saying?

Top telecom bosses came out swinging at the tech companies during the Mobile World Congress in Barcelona.

They bemoaned spending billions on laying cables and installing antennas to cope with rising internet demand without corresponding investments from Big Tech.

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Tim Hoettges, CEO of Deutsche Telekom, delivers a keynote at Mobile World Congress.

Angel Garcia | Bloomberg | Getty Images

Hoettges asked attendees why these companies couldn’t “at least a little bit, contribute to the efforts and the infrastructure which we are building here in Europe.”

Howard Watson, chief technology officer of BT, said he sees merit in a fee for the large tech players.

“Can we get a two-sided model to work, where the customer pays the operator, but also the content provider pays the operator?” Watson told CNBC last week. “I do think we should be looking at that.”

Watson drew an analogy to Google and Apple’s app stores, which charge developers a cut of in-app sales in return to use their services.

What have U.S. tech firms said?

Efforts to implement network fees have been strongly criticized — not least by tech companies.

Speaking on Feb. 28 at MWC, Netflix co-CEO Greg Peters labeled proposals to make tech firms pay internet service providers for network costs an internet traffic “tax,” which would have an “adverse effect” on consumers.

Greg Peters, Co-CEO of Netflix, speaks at a keynote on the future of entertainment at Mobile World Congress 2023.

Joan Cros | Nurphoto | Getty Images

Requiring the likes of Netflix — which already spends heavily on content delivery — to pay for network upgrades would make it harder to develop popular shows, Peters said.

Tech firms say that carriers already receive money to invest in infrastructure from their customers — who pay them via call, text and data fees — and that, by asking internet companies to pay for carriage, they effectively want to get paid twice.

Consumers may end up absorbing costs asked of digital content platforms, and this could ultimately “have a negative impact on consumers, especially at a time of price increases,” Matt Brittin, Google’s head of EMEA, said in September.

Tech firms also argue that they are already making large investments in European telco infrastructure, including subsea cables and server farms.

Rethinking ‘net neutrality’

The “fair share” debate has sparked some concern that the principles of net neutrality — which say the internet should be free, open, and not give priority to any one service — could be undermined. Telcos insist they’re not trying to erode net neutrality.

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Technology firms worry that those who pay more for infrastructure may get better network access.

Google’s Brittin said that fair share payments “could potentially translate into measures that effectively discriminate between different types of traffic and infringe the rights of end users.”

One suggestion is to require individual bargaining deals with the Big Tech firms, similar to Australian licensing models between news publishers and internet platforms.

“This has nothing to do with net neutrality. This has nothing to do with access to the network,” said Sigve Brekke, CEO of Telenor, told CNBC on Feb. 27. “This has to do with the burden of cost.”

Short-term solution?

Carriers gripe that their networks are congested by a huge output from tech giants. One solution is to stagger content delivery at different times to ease the burden on network traffic.

Digital content providers could time a new blockbuster movie or game releases more efficiently, or compress the data delivered to ease the pressure off networks.

“We could just start with having a clear schedule of what’s coming when, and being able to have a dialogue as to whether companies are using the most efficient way of carrying the traffic, and could certain non-time critical content be delivered at different times?” Marc Allera, CEO of BT’s consumer division, told CNBC.

“I think that’s a pretty, relatively easy debate to be had, actually, although a lot of the content is global, and what might be busy in one country and one time may or may not be busy in another. But I think at a local level is certainly a really easy discussion to have.”

He suggested the net neutrality concept needs a bit of a refresh.

Not a ‘binary choice’

The “fair share” debate is as old as time. For over a decade, telecom operators have complained about over-the-top messaging and media services like WhatsApp and Skype “free riding” on their networks.

At this year’s MWC, there was one notable difference — a high-ranking EU official in the room.

Thierry Breton, internal market commissioner for the European Union, delivers a keynote at Mobile World Congress in Barcelona.

Angel Garcia | Bloomberg | Getty Images

Three decades after inventing the web, Tim Berners-Lee has some ideas on how to fix it

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Alphabet jumps 3% as search, advertising units show resilient growth

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Alphabet jumps 3% as search, advertising units show resilient growth

Alphabet CEO Sundar Pichai during the Google I/O developers conference in Mountain View, California, on May 10, 2023.

David Paul Morris | Bloomberg | Getty Images

Alphabet‘s stock gained 3% Friday after signaling strong growth in its search and advertising businesses amid a competitive artificial intelligence environment and uncertain macro backdrop.

GOOGL‘s pace of GenAI product roll-out is accelerating with multiple encouraging signals,” wrote Morgan Stanley‘s Brian Nowak. “Macro uncertainty still exists but we remain [overweight] given GOOGL’s still strong relative position and improving pace of GenAI enabled product roll-out.”

The search giant posted earnings of $2.81 per share on $90.23 billion in revenues. That topped the $89.12 billion in sales and $2.01 in EPS expected by LSEG analysts. Revenues grew 12% year-over-year and ahead of the 10% anticipated by Wall Street.

Net income rose 46% to $34.54 billion, or $2.81 per share. That’s up from $23.66 billion, or $1.89 per share, in the year-ago period. Alphabet said the figure included $8 billion in unrealized gains on its nonmarketable equity securities connected to its investment in a private company.

Adjusted earnings, excluding that gain, were $2.27 per share, according to LSEG, and topped analyst expectations.

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Alphabet shares have pulled back about 16% this year as it battles volatility spurred by mounting trade war fears and worries that President Donald Trump‘s tariffs could crush the global economy. That would make it more difficult for Alphabet to potentially acquire infrastructure for data centers powering AI models as it faces off against competitors such as OpenAI and Anthropic to develop largely language models.

During Thursday’s call with investors, Alphabet suggested that it’s too soon to tally the total impact of tariffs. However, Google’s business chief Philipp Schindler said that ending the de minimis trade exemption in May, which created a loophole benefitting many Chinese e-commerce retailers, could create a “slight headwind” for the company’s ads business, specifically in the Asia-Pacific region. The loophole allows shipments under $800 to come into the U.S. duty-free.

Despite this backdrop, Alphabet showed steady growth in its advertising and search business, reporting $66.89 billion in revenues for its advertising unit. That reflected 8.5% growth from the year-ago period. The company reported $8.93 billion in advertising revenue for its YouTube business, shy of an $8.97 billion estimate from StreetAccount.

Alphabet’s “Search and other” unit rose 9.8% to $50.7 billion, up from $46.16 billion last year. The company said that its AI Overviews tool used in its Google search results page has accumulated 1.5 billion monthly users from a billion in October.

Bank of America analyst Justin Post said that Wall Street is underestimating the upside potential and “monetization ramp” from this tool and cloud demand fueled by AI.

“The strong 1Q search performance, along with constructive comments on Gemini [large language model] performance and [AI Overviews] adoption could help alleviate some investor concerns on AI competition,” Post wrote in a note.

WATCH: Gemini delivering well for Google, says Check Capital’s Chris Ballard

Gemini delivering well for Google, says Check Capital's Chris Ballard

CNBC’s Jennifer Elias contributed to this report.

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Amazon sellers raise prices after Trump’s China tariff: ‘It’s unsustainable’

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Amazon sellers raise prices after Trump's China tariff: 'It's unsustainable'

An Amazon employee works to fulfill same-day orders during Cyber Monday, one of the company’s busiest days at an Amazon fulfillment center on December 2, 2024 in Orlando, Florida. 

Miguel J. Rodriguez Carrillo | Getty Images

For 10 years, Aaron Cordovez has been selling kitchen appliances on Amazon. Now he’s in a bind, because most of his products are manufactured in China.

Cordovez, co-founder of Zulay Kitchen, said his company is moving “as fast as we can” to move production to India, Mexico and other markets, where tariffs are increasing under President Donald Trump, but are mild compared with the levies imposed on goods from China. That process will likely take at least a year or two to complete, he said.

“We’re making our inventory last as long as we can,” Cordovez said in an email.

Zulay is also temporarily raising the price of some of its milk frothers, smores roasting sticks and other products. The company’s popular kitchen strainer now costs $12.99, up from $9.99 before Trump announced his sweeping tariff proposal earlier this month.

Amazon merchants are hiking prices for everything from diaper bags and refrigerator magnets to charm necklaces and other top-selling items as they confront higher import costs. E-commerce software company SmartScout tracked 930 products on Amazon that have seen increased prices since April 9, with an average jump of 29%.

The price hikes affect a range of categories, including clothing, jewelry, household items, office supplies, electronics and toys.

The trade war with China has threatened to upend sellers on Amazon’s third-party marketplace, which accounts for about 60% of the company’s online sales. Many merchants are based in China or rely on the world’s second-largest economy to source and assemble their products.

Sellers are now faced with the conundrum of raising prices or eating the extra costs associated with Trump’s new tariffs. It’s an existential threat for many sellers, who subsist on razor-thin margins and have, for the last several years, dealt with rising costs on Amazon tied to storage, fulfillment, shipping and advertising fees along with pricing pressure from increased competition.

CEO Andy Jassy told CNBC earlier this month that the company was “going to try and do everything we can” to keep prices low for shoppers, including renegotiating terms with some of its suppliers. But he acknowledged some third-party sellers will “need to pass that cost” of tariffs on to consumers.

Amazon’s stock price is down 15% so far this year, sliding along with the broader market. The company reports first-quarter earnings next week.

Watch CNBC's full interview with Amazon CEO Andy Jassy

Goods imported from China now face import duties of 145%, though Trump said Wednesday his administration is “actively” talking with China about a potential deal to lower tariffs. Chinese officials on Thursday denied that trade talks are taking place.

About 25% of the price increases observed by SmartScout were initiated by sellers based in China, said Scott Needham, the company’s CEO. Last week, stainless steel jewelry maker Ursteel hiked prices on four of its products by $6.50, while apparel brand Chouyatou raised the price of some of its dresses by $2. Both businesses are based in China’s Zhejiang province.

Anker, a Chinese electronics brand and one of Amazon’s largest sellers, has raised prices on one-fifth of its products sold in the U.S., including a portable power bank, which went up to $135 from $110, SmartScout data shows.

Representatives from Anker, Ursteel and Chouyatou didn’t respond to requests for comment.

Zulay, headquartered in Florida, is one of many U.S.-based sellers raising prices. The company is also cutting costs. Cordovez said he’s been forced to lay off 19% of his workforce and slash online ad spending by 85%.

Desert Cactus, based in Illinois, is also taking action. Joe Stefani, the company’s president, has been looking to move production of some of his brand’s college-themed merchandise out of China and into Mexico, India and Vietnam. About half of Desert Cactus’ goods come from China, while the rest are made in the U.S., Stefani said.

An Amazon worker moves a cart filled with packages at an Amazon delivery station in Alpharetta, Georgia, on Nov. 28, 2022.

Justin Sullivan | Getty Images

One of the company’s top products is a customizable license plate frame that’s manufactured in China. At the start of Trump’s first term in 2016, Stefani’s company paid import and shipping fees of 4% on the license plates. That rate has since skyrocketed to 170%, he said.

“The tariffs can’t stay this high,” Stefani said. “There’s so many people that just aren’t going to make it.”

Stefani said he expects Desert Cactus will end up raising prices on some products, though he’s worried shoppers might be put off by sticker shock.

“Will someone be willing to pay $50 for a hat on Amazon?” Stefani said. “You know it’s going to be expensive at the ballpark, but on Amazon we don’t know.”

Dave Dama, co-founder of health and beauty business Pure Daily Care, said the price to manufacture one of his skin-care products in China jumped to $25 from $10. Most Amazon sellers will have no choice but to raise prices, he said.

“If you were selling something for $40 and making a $7 or $8 profit at the end of the day, with these tariffs, those days are gone,” Dama said. “You can’t do that anymore. It’s unsustainable.”

Pure Daily Care plans to stagger price increases over several weeks, and only on products “we absolutely need to,” to keep Amazon’s algorithms from ranking it lower in search results or losing the valuable buy box, he said. The buy box determines which listing pops up first when a shopper clicks on a particular product, and the one that gets purchased when they tap “Add to Cart.”

An Amazon spokesperson said the company’s pricing policies continue to apply.

“As always, sellers set their own prices, and we regularly monitor how we highlight great prices as Featured Offers to provide customers with low prices across a wide selection,” the spokesperson said in a statement.

Dama said his company has enough inventory for some products to last up to six months, which it aims to “stretch as long as possible” in the hope that China and the U.S. can reach a trade deal. The company is also forgoing some sales promotions and discounts, while pausing spend on some display and video ads.

Regarding his inventory, Dama said, “We can try to stretch that seven, eight, nine months, which buys us a lot more time for this thing to work out, hopefully.”

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Trump tariffs are raising prices on Amazon and threatening to ruin U.S. sellers who source in China

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Pony.ai teams up with Tencent for robotaxi services on WeChat, other apps

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Pony.ai teams up with Tencent for robotaxi services on WeChat, other apps

A Pony.ai autonomous car.

Pony.ai

Chinese start-up Pony.ai said Friday it will develop autonomous driving technology in partnership with Tencent Cloud and deploy robotaxi services on tech giant Tencent’s WeChat and other applications.

The Nasdaq-listed company which specializes in autonomous vehicle technology, particularly robotaxis and robotrucks, said in a press release that the deal will include cooperation in areas such as cloud services, map data, information security and intelligent cockpit ecosystems.

The arrangement will also see the two companies integrate Pony.ai’s robotaxi ride-hailing services within Tencent’s popular WeChat app as well as other applications like Tencent Maps. 

Both companies had been in talks “for quite some time,” Pony.ai CEO James Peng told CNBC on the sidelines of the Shanghai Auto Show on Friday. He cited Tencent’s huge user base and its cloud offerings as factors supporting the “win-win” collaboration as the start-up continues to scale up.

Following the partnership, Peng said that “hopefully in the near future,” users would be able to call Pony.ai robotaxi rides straight through the WeChat app.

WeChat is known as the world’s most popular ‘super app,’ housing everything from messaging to payment transactions to food delivery services, with a monthly user base of over 1 billion people.

“Pony.ai possesses industry-leading autonomous driving technology accumulations, while Tencent excels in cloud services, mapping, and cockpit ecosystem technologies,” Vice President of Tencent Group and President of Tencent Smart Mobility Zhong Xiangping was quoted as saying in the Friday release. 

“This strategic partnership between the two parties is not only about complementing each other’s technologies and resources but also marks a new starting point for collaborative innovation,” he added. 

Ordering a robotaxi ride on WeChat may soon be possible, says Pony.ai CEO

The release said that the partnership would also see both companies collaborate on the development, testing, and operation of Robotaxis, particularly in L4-level autonomous driving.

According to SAE International, L4 is a type of autonomous driving that allows drivers to take their eyes off the road in designated areas. For comparison, L3 is considered a hands-off system, but drivers must actively monitor the vehicle and be ready to take over the wheel.

The Tencent Cloud agreement comes a day after it was reported that Pony.ai unveiled its L4, seventh-generation robotaxi solution at the Shanghai Auto Show on Wednesday. The company’s shares surged about 40% in the U.S. on Thursday. 

The start-up continues to establish itself as a prominent player in China’s autonomous driving industry. The company obtained China’s first permit to charge fares for fully driverless taxis in core parts of a business district of Shenzhen, where Tencent is headquartered. 

However, the firm may be implicated in increasing trade tensions between China and the U.S. as the latter is a market Pony.ai considers “hugely important” to its expansion plans.

James Peng, co-founder and chief executive of Pony.ai this week reportedly told the Financial Times that the company is considering a secondary listing outside the U.S. amid mounting concerns that Washington will push for the delisting of Chinese companies off the New York Stock Exchange. 

If this were to happen, it would come less than six months after the company’s initial public offering in the U.S. Notwithstanding, Peng told FT that a lot of factors need to be considered.

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