“Mandating such fees would be a radical departure from how the internet has operated and flourished over the last 30 years. Network fees are a threat to the internet in India and, if enacted, would set a precedent that could lead to a splintering of the internet across the globe,” Barbara van Schewick in her submission to the Telecom Regulatory Authority of India’s consultation on the regulation and selective banning of OTT (over the top) communication services.
Van Schewick is a professor of law at Stanford Law School. She has testified before the Federal Communications Commission (FCC), the Body of European Regulators for Electronic Communications (BEREC) and advised policymakers on net neutrality issues. Her submission to TRAI focused on pointing out how network usage fees violate the principles of net neutrality.
The challenge of defining OTT communication services:
“While I do not propose a definition for OTT communications services, I want to stress how difficult it is to assign internet applications, content, and services to particular categories,” Van Schewick said in her submission. She gave the example of Gmail and League of Legends and said that while they are both well-known as email and gaming services respectively, they also offer voice and chat communication features as well.
“Does the fact that these applications offer the option to communicate via voice mean they should be classified as voice communication services? If yes, would that classification apply only to the voice functionality included in the app, or would the entire app be treated as a voice communication service?,” she questions.
She suggests that if the definition of OTT communication services is too broad it would discourage apps that are not traditionally thought of as “communication services” from innovating new ways to let users connect with each other. She also pointed out that if the regulatory burden for communication services is high, some players might decide to shut down communication functionalities or forgo the Indian market altogether.
Why OTTs shouldn’t be asked to meet quality of service requirements:
“Any requirement that an OTT commit to a quality of service guarantee (often part of legacy telecommunication requirements) ignores that OTTs, unlike traditional voice services, do not own the underlying network infrastructure over which their service is delivered,” Van Schewick mentioned.
Thus, to ensure good quality services, OTTs would have to enter into agreements with the internet service providers (ISPs) of their customers. “In other words, OTTs would have to buy a fast lane with performance guarantees from ISPs,” she explained, adding that this would violate India’s net neutrality rules because these kinds of paid fast lanes, “distort competition, create barriers to entry for innovators, small businesses, and start-ups, and make it harder for speakers without deep pockets to speak and be heard.”
Arguments against network fees:
OTTs already invest in the internet ecosystem: According to Van Schewick, OTTs invest huge amounts of money in developing and operating internet content, apps, and services and these investments directly benefit ISPs. “Without content providers, there would be no market for internet access. Netflix, Google, WhatsApp, and the millions of other sites and services available on the internet are the very reason that any ISP’s customers purchase access to the internet,” she said. When new content/services that require more data come to the market, customers end up upgrading to better and more expensive internet plans, thereby leading to an increase in ISP revenue.
Article continues below ⬇, you might also want to read:
- What Telcos Want: Fair Share Does Not Violate Net Neutrality Principles, Telcos Respond To TRAI’s OTT Consultation
- Here’s What Consumer Organizations Have To Say On TRAI’s Consultation On OTT Regulation
- Licensing will stifle innovation: Global Encryption Coalition Steering Committee to TRAI’s consultation on OTT regulation
- India Needs Clear Net Neutrality Rules For Network Management: Barbara Van Schewick, Stanford Law Professor
OTTs operate in a risky market: She said that ISPs operate in a stable, low-risk market with limited competition where demand for their product is created by others but in contrast, OTTs take significant risks in developing costly new content and applications that may or may not take off. She pointed out that ISPs benefit from the successes of the OTT market without taking on any of the risks.
OTTs bring data right to the ISP: Van Schewick mentioned that large OTTs build and operate large and expensive data centers to host their data, while nearly every other player rents similar facilities via cloud services and (content delivery networks) CDNs. Then, the large platforms, cloud services, and CDNs transport that data across the world by constructing or leasing undersea and terrestrial cables. In doing all this, they effectively bring data right to an ISP’s doorstep. Data centers today are located all over the world and not just in the US or Europe, this makes the internet faster for Indians by bringing the information closer, they also reduce the costs that Indian ISPs have to pay to bring data to their customers who request that data. She gave the example of how Cloudflare has 11 data centers in India and that thanks to this 25 million websites have copies of their data hosted in 11 parts of the country.
“So when an Indian opens their phone and clicks a link to a website that uses Cloudflare, the Indian’s ISP connects locally to one of those Cloudflare data centers, making the site load much faster for the user. And since Cloudflare doesn’t charge to interconnect, the ISP saves money,” Van Schewick said. She also mentioned that OTTs also contribute by investing in and deploying compression technology that reduces overall bandwidth (capacity at which a network can carry data) for ISPs.
Accurate traffic measurement is impossible: To impose network fees, traffic would need to be measured, Van Schewick explained. Any traffic measuring system would need to go through a certification process so that all parties involved can be assured that it is accurate. Further, “most traffic is encrypted and increasingly uses modern protocols (QUIC/HTTPS3) that prevent network surveillance.” she said, this means that it would be challenging to identify the source of traffic. Users are also increasingly using use privacy and security tools such as VPNs and Apple’s Private Relay that completely hide their traffic from network snooping, including attribution tools. “All that means that traffic attribution will never be accurate, so disputes will be common and difficult to resolve. Companies subject to the fees might take steps that make it harder to identify their traffic.”
On the other hand, if ISPs get paid network fees based on traffic coming into their network, they would have an incentive to inflate the traffic generated by certain online platforms. “Thus, if such a proposal was put into place, it would be necessary to have government-audited technology or a neutral third-party measurement tool,” she suggests. It is also important to consider that apps don’t consistently get the same kind of traffic. Van Schewick gave the example of how Facebook’s share of global traffic dropped from 15.1% to 6.5% between 2021 and 2022. So a platform might meet the threshold for network fees at one point in time and not at another.
Finally, traffic management may lead to privacy concerns, if an OTT’s data comes into an ISP’s network through a third-party content delivery network (CDN) analyzing the data packet (deep packet inspection) might be the only way to identify traffic.
International examples depict opposition to network fee: Van Schewick pointed out that Europe’s top telecom regulator BEREC and the majority of EU member states have rejected the proposal. She said that industry groups and civil society organizations like Mozilla, Creative Commons, Works, and European Digital Rights (EDri) have argued that network fees violate net neutrality.
The problem of using infrastructure development as grounds for network fees:
No proposed mechanism for using network fee: Van Schewick says that one of the arguments given in favor of network fees is that it will be used for infrastructure development but that no proposal for network fees includes, “any mechanism that requires ISPs to use the additional money to fund infrastructure buildout beyond their current and usual expenditures.” Creating a mechanism for this would be challenging, she says. She suggests that while there could be mandates by regulators saying that a telecom company must spend a certain percentage of revenue on network infrastructure development. “However, this misses that infrastructure spending is cyclical. A company may spend a lot for 4 years to build out 5G, then relax that spending because the next generation infrastructure is now built,” she explained.
Even if mechanisms are created, they are hard to enforce: “ISPs would be free to take this new pot of money and use it for dividends, stock buybacks, acquisitions, or even executive bonuses,” Van Schewick argues. She gave the example of how in the telephony world, countries charge termination fees for long distance calls which can cost multiple dollars per minute. “Countries justified the high fees on the grounds that the money would be used to build out infrastructure, but that’s not what happened,” she said explaining that in a similar way, network fees are also unlikely to be used for infrastructure development.
Funding may not always be used for intended purposes: Van Schewick gave the example of how in the U.S. more than 35 states instituted lottery systems (selling lottery tickets to generate funds), with many of them dedicating most or all of the proceeds to education. While this was expected to increase funding, education budgets in lottery states remained the same. She explains that the funding is fungible, meaning that once it enters the reserves, it may be used for purposes other than what it was intended for. The same could occur with funds generated through network fees as well. She also mentions that even if network fees are used for their intended purpose, it is unclear whether this would give ISPs the capacity to build infrastructure more quickly than they do today.
Flawed assumptions used to support in favor of network fee:
Assumption #1, services generate traffic: “YouTube doesn’t randomly send a World Cup match recap to an ISP’s paying customer. WhatsApp doesn’t write a user asking when their shop opens on Saturday,” Van Schewick says, instead users choose to watch content on YouTube or send a text through WhatsApp. She argues that the Indian user creates traffic on a telco’s network and pays their ISP to deliver this traffic to and from sites and services online.
She argues that punishing online services for creating demand for ISP’s network is equivalent to, “a beach resort being angry that pleasant weather, pretty sunsets, fine sand, and warm water make people rent their rooms.” Moreover, she says, singling out traffic from large OTTs violates the principle of cost causation (costs should be borne by those customers who cause the utility).
Assumption #2, increased traffic leads to higher costs for ISPs: Van Schewick says that networking equipment gets faster, cheaper, and more powerful every year. Moreover, ISPs are moving away from hardware control of network operations to software control, just as people are moving from desktop word processors to Google Docs. This process is called network virtualization, she explains adding that this makes it easier and cheaper to, “modify software, control the network, and configure new capacity.”
STAY ON TOP OF TECH POLICY: Our daily newsletter with the top story of the day from MediaNama, delivered to your inbox before 9 AM. Click here to sign up today!