Analyst Insight: The New Telco Name for OTTs: Over the Tax

BOSTON, Nov. 20, 2013 /PRNewswire/ -- Pressure is mounting on European governments and the EU to introduce measures to tax over-the-top (OTT) providers. Telcos and pay-TV providers are lobbying for a so-called Google Tax, arguing that U.S.-based OTT companies that maintain legal headquarters outside their markets yet make sales and profits there are stifling innovation in Europe.

The dilemma for the EU and for the national governments is between providing reciprocal tax treatment and risking a less vibrant online market for goods and services. Although the case for a level playing field appears strong in principle, the benefits that OTTs have brought to the EU digital market in terms of choice, price and innovation, must also be taken into account, according to a new complimentary Analyst Insight: The New Telco Name for OTTs: Over The Tax.

Download the full Analyst Insight here.

In mid-October, Pyramid Research attended the annual conference organized by ARCEP, the French regulator, in Paris. The central theme for this year's event was the creation and distribution of new revenue streams in the digital ecosystem and was inevitably focused on OTTs taking the lion's share of this new revenue.

"As the growth prospects of European telcos remain grim, delegates agreed that national governments and regulators, as well as the EU, must do more to create a level playing field for all providers," says Daniele Tricarico, analyst for Pyramid Research and author of the Analyst Insight. The telcos argued that, partly because they are in such a favorable competitive position, OTTs are not interested in establishing a reciprocal co-funding and revenue-sharing model for new services, despite the fact that their services require a lot of bandwidth and investment from operators.

The OTTs have on several occasions reminded telcos and pay-TV providers that they have indeed contributed to the economy in many other fundamental ways: by boosting economic growth, employment and innovation in times of recession. "All in all, from the providers' standpoint, it will ultimately be relevant content and services that will make the difference between winners and losers in the creation and distribution of new revenue streams," Tricarico explains. "Protectionism, even when justified on tax fairness grounds, still stifles a market in the long run, and competition and openness needs to be encouraged in the interest of a healthy marketplace."

To read more, download the full Analyst Insight.

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SOURCE Pyramid Research