Double-digit growth in the internet value chain is at risk if infrastructure investors cannot make meaningful returns
LONDON, May 15, 2022 /PRNewswire/ — A new GSMA report warns that market imbalances between network operators and online service providers could jeopardize global growth prospects in multiple sectors of the Internet-based economy. Policymakers, the report insists, need to take into account the interdependence of online services and other growth sectors on underlying investments in infrastructure.
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the GSMA 2022 Internet Value Chain Report reveals factors such as asymmetric regulation and restrictions, industry-specific taxes, and spectrum costs that compress the business models of infrastructure providers while allowing Big Tech to thrive.
The study reveals that Internet value chain revenues have nearly doubled in five years, from 3.17 trillion euros ($3.3 trillion) in 2015 to 6.435 trillion euros ($6.7 trillion ) in 2020. Much of this growth comes from online services; they saw their income increase by 19% per year in 2020.
- Paid online services will soon surpass 960 billion euros ($1 trillion) in revenue, driving huge demand for capacity on global networks.
- With an annual growth rate of 7.5%, the number of Internet-connected users worldwide shows no signs of slowing down.
- Traffic per user has increased by 27% per year, nearly 80% of which is generated by video traffic.
Yet the return on investment in infrastructure for network operators was much lower, between 6% and 11%. The report highlighted sub-10% average returns on capital as a concern due to pressure on telecom operators to continue investing in capital expenditure at rates of up to 20% of revenue .
GSMA Chairman José María Álvarez-Pallete said, “The Internet connects 4.6 billion people and is the engine of the global economy. It transforms business models, unlocks new opportunities and uplifts communities around the world. But while certain sectors of the Internet value chain thrive, the demands for investment in the infrastructure that these sectors depend on for their growth weigh on network operators. We welcome the growing recognition of this problem by policy makers and the expansion of the Internet-based economy in all sectors over the next decade. »
The report notes that counterproductive taxation on infrastructure, onerous regulatory requirements and other value-eroding factors can reduce incentives to invest in infrastructure. It encourages policy makers to consider the whole tax and regulatory landscape, ensuring that companies investing in infrastructure have an incentive to build and upgrade the networks that underpin online services.
Download the 2022 Internet Value Chain Report.
The GSMA is a global organization uniting the mobile ecosystem to discover, develop and deliver fundamental innovations for positive business environments and societal change. Our vision is to unleash the full power of connectivity so that people, industry and society thrive. Representing mobile operators and organizations in the mobile ecosystem and adjacent industries, the GSMA offers its members three main pillars: Connectivity for Good, Services and Solutions for Industry, and Outreach. This business includes advancing policy, solving today’s greatest societal challenges, supporting the technology and interoperability that powers mobile, and delivering the world’s largest platform. to bring the mobile ecosystem together during the MWC and M360 series of events.
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GSMA WARNS INTERNET VALUE CHAIN GROWTH WILL STALL UNLESS MARKET IMBALANCES ARE CORRECTED
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