Bloomberg News

YouTube in Network Deal Talks With Operators, Manufacturers

June 08, 2011

(Updates with executive comment in second paragraph.)

June 8 (Bloomberg) -- Google Inc.’s YouTube division said it is in talks with all major mobile operators on an agreement to pool efforts to reduce the impact of video content on telecommunications networks.

YouTube, the world’s most popular video-streaming site, is also in discussions with handset manufacturers, whose devices can help optimize the flow of data over increasingly clogged data networks, Andrey Doronichev, an executive responsible for the company’s mobile offering, said in an interview in London today. “We’re in the middle of the process.” He declined to name any operators or manufacturers.

Telecom operators including France Telecom SA and Telefonica SA are seeking a new deal with Internet companies including Google and Apple Inc., who they say are overloading networks without contributing enough to their upkeep. France Telecom is in talks with Google that will likely lead to a pact to jointly develop network technology, two people familiar with the situation said yesterday.

“You hear the content industry say they struggle to make money with piracy and so on, while we have challenges with the investment requirements versus the revenues,” Richard Feasey, public policy director of Vodafone Group Plc, the world’s biggest mobile-phone operator, said in an interview in Athens last week. “Everybody faces a challenge in the long run.”

Storing Content

Even though telecom operators’ first choice is direct payments by content providers, network congestion can be reduced with new technologies. Such stopgaps include storing more content on mobile devices, rather than sending it over wireless networks, and finding segments of radio spectrum that are underused by current equipment.

The number of mobile data connections in western Europe will rise by an average of 15 percent a year to 270 million in 2014, as overall end-user revenue falls by about 1 percent annually, research firm IDC estimated last year.

Former state monopolies including France Telecom, Telecom Italia SpA, Telefonica and Deutsche Telekom AG are also trying to convince investors that they are more than conduits for other companies’ electronic commerce.

Deutsche Telekom plans to introduce various levels of connection quality to manage the surge in data traffic and enable high-bandwidth services such as video conferences and tele-medicine, spokesman Philipp Blank said today. The Bonn- based company is also tripling the capacity of ports that connect its network with that of Google over the coming weeks to eliminate a bottleneck that slows down service.

Quality Levels

“One could imagine services that would allow people not only to get their content closer to the customer but also then to have it delivered faster or with higher quality to the actual device,” Vodafone’s Feasey said.

A spokesman for Telefonica declined to comment.

Foot-dragging on finding a solution to the network traffic issue may create a situation where governments feel compelled to step in. French officials including President Nicolas Sarkozy and Industry Minister Eric Besson have told Web companies to remember the value of network investments.

While technology co-operation “is a step in the right direction of the telecom world working with the Web world,” imbalances between revenues and investment remain that may only be addressed with new regulation, said Paolo Pescatore, an analyst at CCS Insight in London.

--With assistance from Cornelius Rahn in Frankfurt and Brian Womack in San Francisco. Editors: Simon Thiel, Kenneth Wong.

To contact the reporters on this story: Matthew Campbell in Paris at mcampbell39@bloomberg.net; Jonathan Browning in London jbrowning9@bloomberg.net.

To contact the editors responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.netvroot@bloomberg.net;


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