NetMission Digests have made it to double-digit as we continue to transform recent tech news and policies into a byte-size reader for you. On this occasion, we will be publishing two issues regarding network usage fees, also referred to as “network/infrastructure cost-sharing,” “fair contribution,” and “fair share.”
At last year’s Mobile World Congress (MWC), “fair share” quickly dominated policy headlines alongside 5G and Artificial Intelligence (AI) due to the European Commission’s exploratory consultation. As the topic emerges on the global stage, Commissioner Thierry Breton’s MWC remarks put forth a neutral position on the “much-debated issue” as Europe works towards universal “access to fast, reliable, and data-intense Gigabit connectivity”. However, Breton’s 2024 MWC speech on February 26 dropped all references to fair network infrastructure expenses as the Commission focused on bridging the investment gap with its latest initiatives laid out in the White Paper. While Europe’s discussion stagnated, Asia presented a much more complex story, including the force that drove this debate “westward” and globally – via GSMA, the host of MWCs.
Net Neutrality Revisited
Before delving further into the topic, it is essential to grasp the context of “Network Usage Fees”. To many, it evokes a sense of déjà vu reminiscent of the Net Neutrality controversy that originated in the U.S. back in 2005.
The debate on net neutrality in the 2000s centered on whether telecommunications companies (telcos) or Internet service providers (ISPs) should be permitted to allow different fees on users and providers of online services, such as video streaming and email, based on their Internet usage. The consensus was reached that the argument of “traffic/packet shaping” for reliable and optimal Internet performance does not justify preferential treatments and differentiated fees being offered to different sites and services (in most cases). ISPs should provide the same quality, including rates, speed and coverage, of Internet access agnostic of “content, website, platform, application, type of equipment, source address, destination address, or method of communication”.
The Net Neutrality discussion in the U.S. is currently regaining traction as the Federal Communications Commission (FCC) under the Biden administration seeks to reinstate net neutrality by reclassifying broadband providers as Title II Common Carrier Services [FCC-23-83A1] after the classification of ISPs as Title I Information Services was rescinded under the Trump administration in 2017.
Network Usage Fees
In a more targeted manner, the network usage fee discussion centered on the allocation of responsibility for the maintenance costs of telcos and ISPs’ infrastructure, particularly concerning online service providers that generate substantial data traffic. Major telcos criticized large traffic generators (LTGs) for what they deemed as “free-riding” on substantial network investment required to sustain LTGs’ significant network usage. On the other hand, LTGs such as Alphabet, Netflix, Meta, Microsoft, Apple, and Amazon, emphasized their contributions to Internet infrastructure investments and their roles in enticing end-users to purchase more premium data plans provided by ISPs.
The debates have also put weight on whether such a mechanism to extract a “fair contribution” from LTGs could be discriminatory and undermine the net neutrality principle and an open Internet. Meanwhile, telcos also contended that imposing network usage fees on LTGs would safeguard the net neutrality principle by fending companies off from conditioning the contents, services and applications accessed or used by end-users through the Internet.
Amidst these two discussions, there are other similar proposals and attempts, such as advocacies on adopting the sending party network pays (SPNP) charging model on various services and an end-to-end quality-of-service delivery on “value‐added network services” (VAS) in addition to the incumbent best-effort delivery model of Internet services.
The Global Push from Asia
On the sidelines of MWC 2022, KT’s Ku Hyeon-mo stated the GSMA board greenlighted the advocacy campaign to urge major video streaming service providers to share telcos’ broadband infrastructure costs for taking up most Internet traffic. Ku, the then-CEO of South Korea’s second-largest telco and a GSMA board member, claimed global telecom carriers had reached a “consensus to hold those causing an enormous amount of Internet traffic and generating profit more accountable”, with fingers pointing at “content providers for causing Internet speed to slow down and lag for other services”, which in turn making telcos to bear extra costs in maintaining Internet service levels and speeds”.
Subsequently, GSMA’s Internet Value Chain Report in May 2022 called for “a balanced approach to the ability to earn fair returns on investment across the Internet value chain” and not to favor “businesses that have the biggest platforms and scale” (pg 36, 40); followed by a clearer statement directed to European Infrastructure Investment in October 2022. Among other advocacies, GSMA and the European Telecommunications Network Operators (ENTO) made a joint association submission to the above exploratory consultation in May 2023.
The global push came amidst a legal battle and a legislative push in South Korea, which has quickly inspired other APAC governments to take a closer look at the issue (even though South Korea is not the first nation to explore such a topic). Eventually, a mutually agreed arrangement between content and telecommunications service providers on this issue seemed to have also emerged.
Across the Americas
While Europe’s discussion is shifting away to exploring other strategies to address the telecom infrastructure investment gap, Brazil is picking up its pace at this year’s MWC, with Communications Minister Juscelino Filho announcing the plan to table a bill to its congress that would oblige Big Tech companies to “fair share” requirements in the second quarter. The Computer & Communications Industry Association (CCIA) subsequently issued its commissioned study to counter its argument at the same Congress, warning a “fair share” mandate could be counterproductive to the country’s “digital ambition”. Brazil’s National Telecommunications Agency (Anatel) launched its first consultation in March 2023 and the ongoing second one in January 2024. Minister Filho contended that Big Tech companies needed to “contribute more effectively” and “provide the necessary compensation” for the expansion of Brazil’s connectivity. It remains to be seen how the Brazilian discussion unfolds, which could influence neighboring countries’ perspectives in Latin America and the Caribbean.
In particular, a continuous push by Caribbean telcos has been observed in meetings with Big Tech hosted by the Caribbean Telecommunications Union (CTU) in 2023 and the latest 2024 CANTO Connect. No government statements on their stances on fair share so far as working groups continue to examine the issue.
Meanwhile, the United States is in a peculiar situation as they have the duty to protect Netflix and other American (LTG) companies’ interests abroad while addressing the digital infrastructure investment gap at home. Domestically, U.S. Senators introduced the Funding Affordable Internet with Reliable (FAIR) Contributions Act and later the Lowering Broadband Costs for Consumers Act. Upon passage, its regulator FCC is required to study the feasibility of expanding the collection of Universal Service Fund (USF) contributions to include “edge providers”, i.e., Big Tech companies. Abroad, in its submission to the European Commission’s 2023 exploratory consultation, the National Telecommunications and Information Administration (NTIA) opposed mandating direct payments to telcos by LTGs and backed “publicly accountable funding mechanisms” such as its USF.
Epilogue: Investing in Connectivity Infrastructure Sustainably and Fairly
At the 2024 MWC, Commissioner Breton signaled to focus on the broader vision to “change the DNA of [Europe’s] connectivity infrastructure”. As the European Commission moves away from exploring the idea of “Fair Share” (even beyond 2025), its White Paper issued ahead of this year’s MWC calls for a more efficient use of resources and a coordinated approach for integrated connectivity and computing infrastructures. 12 possible scenarios were illustrated, encompassing proposals to streamline and synergize existing grant programs, impose lighter access regulations, and reinforce advanced Research and Innovation (R&I) activities to support new fiber and cable technologies.
Tracing the roots of the network usage fee advocacy is an urgent flag raised by telcos to address the investment gaps in light of technology advancements. Synergy Research Group unveiled that Big Tech companies are “hyper-scalers” with soaring Internet infrastructure investments globally, while telco’s market share of global IT infrastructure spending has been falling with their flat growth rates. The need for investments will only increase and become more pressing to “bridge the gap between today’s telecoms networks and tomorrow’s digital infrastructure”. Instead of shifting the burden from one stakeholder to another, a wiser approach might be relieving existing/projected burdens and uncovering untapped grounds for publicly accountable finances and partnerships. Although the debates on network usage fees are not quite the same as previous renditions of net neutrality discussions, they certainly are reminders of the fundamental principles for a sustainable and open Internet, of which all stakeholders should have a fair share.
Stay tuned for our upcoming issue to find out where in Asia were network usage fees considered and their mutually agreed arrangements.
By Kenneth Leung (Reviewed and edited by Jenna Manhau Fung)