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France Telecom claims Google's scalp in content payment deal

According to reports last week Orange CEO Stephane Richard has managed to brow-beat Google into paying something for traffic delivery in Africa, where France Telecom has a big colonial legacy presence.

If this is true, readers will no doubt be aware, it comes as the equivalent of a late first half goal in a long and increasingly bitter match between two 'sides' in the global IT and networking stakes. Big Internet content and service providers (Google, Facebook, Skype etc etc) mostly US-based v. big telcos/ISPs, often European.

There is a very good run-through of the issues from the French perspective in the wake of the Free ad blocking controversy (see Benoit Felten's Diffraction Analysis blog).

The dust-up at the recent ITU World Conference on International Telecommunications at Dubai was at least partly about this division (although the emerging v. developed economies split dominated there).

It is difficult to know what has actually happened between Google and France Telecom as neither side is coming up with a lot of information, but according to Richard, France Telecom used its gatekeeper position (where Google can't get around it) to come to some sort of deal on traffic whereby Google pays above and beyond the usual costs of peering.

That Google should 'pay up' is a relatively easy case to make in Europe at the moment because the company has managed to make itself unpopular by minimizing its corporation tax through the simple expedient of channeling money through Bermuda and charged itself out of a net profit in countries like the UK.

The attitude of its globe-trotting elder statesman, Eric Schmidt, when quizzed about its tax affairs hasn't helped. Instead of being either cravenly apologetic or aggressively defensive, Schmidt blandly says the company pays as little taxes as its can while obeying the law. This goes down badly.

So when France Telecom's Stephane Richard more or less implies that Google is up to a similar set of tricks in its business dealings with FT by not paying up when it 'should', it seems to fit a pattern.

In these circumstances, the old canards - that Google doesn't pay for infrastructure (it does) and that it somehow 'sends' traffic and therefore floods little old FT's network (it doesn't, all 'traffic' is requested by FT's users) and that mobile broadband players in particular can't make a profit (they can and they do - far too much profit due to there being no meaningful competition in many markets) - are simply repeated so often they start to take on the nature of a conventional wisdom.

Disturbingly the "Google's not paying what it should" line appears to have been swallowed by many of Europe's politicians too.

The thing which makes least sense about the whole affiar is why Google would agree to such a thing at all, given the precedent it would set. Under the terms Richard implies, it appears to be paying for the 'value' of the data transported (rather than just paying for peering - which is a different thing entirely).

One possibility (and it's only a guess) is that Google has decided to play ball on some sort of carrier-owned (or France Telecom-owned) content distribution network (CDN) deal. That would enable Richard to bag a result and claim it as a precedent that could be followed more broadly.

Observers have long been uncomfortable about telcos getting into this CDN business because it potentially hands them a means of discriminating between providers and extracting a rent under the guise of improving network performance.

You pay for Telco X's CDN and your customers get brilliant performance; rely on old-fashioned peering connections instead and your videos struggle over the telco's congested wires.

A content distribution deal can, in other words, obfuscate the line between legitimate peering and content charging. And, in a territory where there are few or no alternatives to the carrier's CDN, offering such a service might become an effective way of taxing the content providers while whistling cheerily and looking the other way.

The alternative is that Google has just cravenly decided to give in to France Telecom because in this part of Africa it felt it had no choice since (as many observers have pointed out) it wants to populate the markets there with low-cost Android phones. The carriers hold the key.

If so, it would be yet another inexcusable turn-around. After all, Google gave in over Net Neutrality in the US two years ago (by lining up with Verizon) and it appears to have compromised on censorship in China.

The threat of damage is not to Google which has become the global dominant player in video (the incumbent in fact) and can afford to pay for better performance - especially as the cost of doing so acts as a barrier to entry for its competitors.

The damage is to new player entry and innovation.

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