On October 4, MediaNama conducted a discussion on network usage fees, based on issues raised in response to the TRAI’s consultation on regulation of over-the-top (OTT) services. The discussion focused broadly on the implications of charging network fees, what is the sender party network system and clarifications on the framework of South Korea and Europe, and the impact of fair share contribution from OTTS on net neutrality.
Our objective was to identify:
- What are the implications of charging communication platforms a network fee?
- What are the implications of network usage fees for freemium business models?
- What is the status of the EU’s consultation on network usage fees?
- Does fair share contribution from OTTs impact net neutrality?
- How do content delivery networks (CDNs) work, how does the sending party network pays system work with CDNs and localized exchanges?
- How has South Korea’s Telecommunications Business Act, section 22-7, mandating quality of service, been implemented?
- What are the differences between sender-party network pays, paid peering, termination fees, and network usage fees?
- The rationale behind asking online services to contribute a percentage of their revenue to a broadband fund or a universal services obligation fund?
Every one of the speakers at MediaNama’s discussion on International trends in Network Usage Fees unanimously highlighted that implementing fair share agreements, or network usage fees will violate principles of net neutrality. It is imperative for us to look at the issue of network usage fees because, as pointed out by one of our speakers, it poses a high risk of internet fragmentation. The discussion delved into the regulations in Europe and South Korea, discussing their similarities and differences. One of the things we’re hearing in India is that the European Parliament has voted in favor of network usage fees. Discussants confirmed that this is false and that the network fee as a concept has been rejected over and over. They stressed upon the idea that implementing network fees is an economic as well as technical discrimination.
While talking about network regulations in South Korea, the sender-party network-pays system (hereafter SPNP) and its impacts were discussed at great length. SPNP model meddled with the existing relationship between caching and ISPs forcing online platforms and services to choose a mechanism that has higher latency and less efficiency, as a result, this model disincentivizes a more efficient method of internet delivery. The model further, upsets the natural balance for interconnection between various networks on the internet in Korea. The Indian telecom industry’s claim that it will only charge large traffic generators a network fee was also proven wrong on two fronts: consumers generate traffic and the notion that growth of traffic is unsustainable. More traffic means more demand for content which means more demand for ISPs. Competition among ISPs is driving investments and not traffic from operators.
The discussion also focused on interconnection agreements between last-mile ISPs and content providers. Further, potential consequences for smaller ISPs and content providers with exceptional cases of ISPs that are paid by both users and content providers for delivering data were also discussed. It was highlighted that only ISPs with significant market power were able to coerce companies into paying them. ISPs also used tactics such as degrading the quality of unpaid connections to force payment. A need for stronger net neutrality regulations or an explicit ban on network usage fees or sender party pay in the law is fundamental to avoid any kind of exploitation from larger ISPs. Discussion around net neutrality becomes even more important in situations like these because the essence of net neutrality is to ensure that ISPs do not leverage their control over the last mile to charge content providers for access to their customers.
While discussing if there is a provision for online platforms contributing to universal service obligation (USO) funds anywhere in the world, speakers pointed out that international telcos were urging platforms to contribute based on traffic volumes. One of the discussants pointed out that cross-subsidization for USO funds can be done amongst telecom operators because the content providers are not in the business of providing access services or infrastructure for telecom users.
The discussants also spoke about termination fees. They pointed out that access providers act as gatekeepers separating platforms and their customers, and said that this can lead to a termination monopoly wherein access providers only allow platforms that pay them a fee to access customers. This raises competition concerns in the ISP market and can distort prices.
While discussing the potential consequences of network fees, discussants also highlighted the larger benefit to big tech companies. South Korea’s experience with the sender pay model has raised concerns about its impact on competition, the termination monopoly, and costs incurred by content providers. It is crucial to note that SK Telecom and Netflix’s settlement case from Korea is not an endorsement of sender sender-party network pay system.
It was concluded that Europe’s decision on the implementation of network fees would have a significant impact on regulations around the world. Discussants agreed that it is necessary to maintain a balance between customers and ISPs ensuring fair access to the Internet while fostering innovation and competition.
Video and Coverage
About the discussion
- Carl Gahnberg, Director of Policy Development and Research at the Internet Society
- Barbara van Schewick, Stanford University
- Professor KS Park, Korea University School of Law
- Thomas Volmer, Head of Global Content Delivery Policy, Netflix
- Alissa Starzak, Vice President, Global Head of Public Policy, Cloudflare
We saw participation from companies and organizations like Amazon, Disney Star India, Netflix, Google, Microsoft, ISB, FTI Consulting, The Hindu, Cloudflare, CMS, The Quantum Hub, Saarlegal, Deloitte, EY, Koan Advisory, Esya Centre, Ikigai Law, CCG-NLU, ISOC, Truecaller, IT for Change, DeepStrat, Access Now, NASSCOM, Vodafone Idea, COAI, Ikigai Law, CCG-NLU, ISOC, CMS, The Quantum Hub, ISB, and FTI Consulting, among others.
Support and partners:
MediaNama hosted this discussion with support from ADIF, Google, Meta, and Netflix.