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What is the
" internet toll" ?
Can you envision a scenario where the Internet becomes pricier, slower, and offers less content? This is the potential outcome if Brazil were to adopt policies such as network fees and cost-sharing.
The cost-sharing policy is fundamentally unjust. It represents an effort by major telecom operators operating within Brazil to secure additional funding for their operations. Similar strategies are being employed by major operators in other regions, such as Asia, Europe, and Latin America. However, it portends a significant deterioration of the entire internet landscape.
Under this proposed policy, these telecom mammoths stand to benefit doubly—first, from Internet access charges imposed on us, the end users, when we subscribe to our access plans, and second, from the service and content providers who cater to what we, the users, actually wish to access and consume.
The risks posed to consumers, markets, and digital inclusivity are both numerous and imminent, especially given that this policy is currently under formal consideration by Anatel, with potentially far-reaching consequences.
Discover further insights into this ongoing discourse and learn how you can engage in this debate. We are actively engaging with Anatel to gain a deeper understanding of the cost-sharing policy. Our aim is to underscore the myriad drawbacks this measure poses to both the digital ecosystem and internet users.
INSIGHTS
Major telecommunications companies are always in pursuit of new revenue sources. Now, in 2023, a strategy that has been gaining momentum echoes proposals from the era of telephone company monopolies. ISOC has already commented that this is a global industry strategy but one that has been consistently rejected.
For instance, In Europe, during the initial stages of streaming’s widespread adoption (around 2012), telecommunications companies sought higher payments from major platforms to facilitate the delivery of video services to end-users. This proposal was rejected back in 2012, and subsequent iterations of the same policy met the same fate.
The updated guise for this policy is now labeled as “cost-sharing” or “network fees,” masquerading under the pretense of fairness, and it has been coined by major operators as a “fair share” initiative. However, in reality, it operates in precisely the opposite manner.
Both within the European Union and here in Brazil, the landscape closely mirrors one another. On one side, the major telecom operators advocate for the proposal, while on the other, all other stakeholders, including smaller telecom operators who collectively hold over half of the national market, vehemently oppose it. This alignment is not coincidental. The measure is fundamentally flawed from a technical perspective.
In truth, the concept of “cost-sharing” is inherently unjust and runs counter to the fundamental dynamics of the Internet itself. The Internet’s ecosystem comprises independent networks that voluntarily interconnect, predominantly operating through mutual agreements that foster a collective system of connectivity among all participants.
The Internet functions in this manner because it was designed to be an open and interconnected realm. The notion of introducing “tolls” where certain services must pay to deliver their content to users could potentially result in the effective fragmentation of the Internet. In such a scenario, as users, we would no longer enjoy unrestricted access to the interconnected and pervasive infrastructure we are accustomed to. Instead, we would transition to a reality in which access is contingent upon those who can afford to pay for specific services through their providers.
Decades of accumulated knowledge affirm that a “toll-free” network is not only more efficient and resilient but also provides the flexibility required to accommodate new applications. Conversely, a “toll” network operates counter to these principles, stifling online activities over time, deterring innovation, creating perverse incentives, fostering market concentration, diminishing the quality of services, and simultaneously inflating costs.
Anatel has initiated “Tomada de Subsídios No. 13/2023 (“Public Consultation No. 13/2023”)”(https://apps.anatel.gov.br/ParticipaAnatel/VisualizarTextoConsulta.aspx?TelaDeOrigem=2&ConsultaId=10120) to gather input from users and telecommunications service providers. However, it is crucial to note that the concept of Internet tolls has already found its way into the regulatory agency’s 2023-2024 Agenda Regulatória 2023-2024 (“Regulatory Agenda 2023-2024).(https://www.gov.br/anatel/pt-br/regulado/agenda-regulatoria/2023-2024#:~:text=A%20Agenda%20Regulat%C3%B3ria%202023%2D2024,Anatel%20no%20per%C3%ADodo%20de%20refer%C3%AAncia)
Major telecommunications corporations are staunchly supporting this concept. During a special event,(https://iree.org.br/os-contornos-do-debate-em-torno-do-fair-share/) Claro S.A. asserted that “investing in telecommunications in Brazil is not attractive,(https://iree.org.br/os-contornos-do-debate-em-torno-do-fair-share/)” a statement that is misleading, to say the least.
Furthermore, Vivo S.A. drew an inaccurate analogy between the Internet and the credit card market, a technically unsound comparison for a platform designed to operate within an open and efficient architecture.
Neither the prominent telecom operators nor Anatel have been able to substantiate, with concrete evidence, the existence of a market problem necessitating the approval of a misguided regulatory framework for a non-existent issue.
This underscores the urgency of taking action and putting an end to this proposal immediately.
South Korea was the initial testing ground for a prototype of the cost-sharing policy, and the outcomes were far from favorable.
This Asian nation stands as a trailblazer in the realm of digital transformation, boasting a high-quality Internet infrastructure. However, since the policy’s implementation in 2020, the overall landscape has undergone a significant transformation.
The prevalence of voluntary agreements among Internet providers has dwindled, leading to an increased reliance on international networks. Presently, the cost of network transit in Seoul is tenfold higher than that in Frankfurt or London. The Internet Society (ISOC) has conducted an exhaustive study on this matter (https://www.internetsociety.org/resources/doc/2022/internet-impact-brief-south-koreas-interconnection-rules/)offering detailed insights.
In Europe, there is unanimous opposition to cost-sharing (https://www.internetsociety.org/blog/2023/02/in-one-corner-large-telecom-operators-in-the-other-everybody-else/)(with the notable exception of major telecom operators). This opposition includes governments, regulatory bodies, scholars, Internet companies, small and medium-sized service providers, digital platforms, consumer advocacy groups, civil society organizations, and a diverse array of stakeholders.
Here in Brazil, the chorus of dissent is growing. While the issue has only recently gained momentum, we are witnessing an increasing number of voices joining the ranks of the opposition, and this emerging resistance should be duly considered in Anatel’s Subsidies.
KEY POINTS
Ten Compelling Reasons to REJECT Cost-Sharing
- 01The Internet thrives on consumer choice, with users defining what services and applications they access and when. Consumers play a pivotal role in the Internet ecosystem, propelling traffic and shaping the economic landscape. However, for them, the perils of adopting the cost-sharing policy encompass a spectrum of concerns. These include a potential reduction in the diversity of Internet services and applications, an uptick in the cost of online services, and a decline in the performance of their contracted Internet services, particularly in terms of latency (data delay), as well as factors like reliability and resilience. Take a look at the stance of the European Consumers’ Association (BEUC)(https://www.beuc.eu/sites/default/files/publications/BEUC-X-2022-096_Connectivity_Infrastructure-and-the_open_internet.pdf) on this matter.
- 02Net neutrality is the fundamental principle that all data on the Internet should be treated equally, regardless of its source, content, or destination. In essence, it ensures that Internet service providers cannot discriminate against or block access to specific content or services. The cost-sharing policy, however, undermines this crucial neutrality principle. It establishes differential treatment for specific sources or content based on commercial agreements between content providers and network service providers. Net neutrality is vital for preserving access to an unrestricted and open Internet, as it also safeguards fundamental rights such as access to information and freedom of expression. Take a look at the stance of the Body of European Regulators for Electronic Communications (BEREC) (https://www.berec.europa.eu/en/all-you-need-to-know-about-the-open-internet-rules-in-the-eu-0)on this matter.
- 03While big tech companies are at the forefront of the cost-sharing policy’s focus, the initial plan aims to levy charges on platforms that distribute streaming and high-traffic services. However, the reality is that the Internet was inherently designed to accommodate such traffic without disrupting its operational model. A broad spectrum of companies, spanning from small enterprises to large corporations, generates substantial traffic while delivering their services, and they already bear significant internet-related costs. This includes entities within the government itself. Over time, these companies would also be compelled to contribute to the cost-sharing policy, leading to increased expenditures in sectors such as healthcare, education, transportation, and more. Take a look at the stance of the Internet Society (ISOC) (https://www.internetsociety.org/blog/2023/02/in-one-corner-large-telecom-operators-in-the-other-everybody-else/)on this matter.
- 04Internet fragmentation is an inevitable outcome of cost sharing. When data discrimination comes into play, some services may end up costing more than others, or worse, become inaccessible to a significant number of users. This model fosters the pursuit of fragmented connectivity solutions. A free and open Internet fosters the connectivity of all and encourages collaborative efforts. This is the path to making the network more cost-effective for everyone. In contrast, an Internet laden with “tolls” fosters the creation of “islands” within the web. Take a look at the stance of the Internet Society (ISOC) (https://www.internetsociety.org/resources/doc/2023/submission-to-ec-future-of-the-electronic-communications-sector-and-its-infrastructure/)on this matter.
- 05Streaming services, encompassing movies, series, and more, constitute a valuable asset for Internet users. Operators often attribute the high volume of data traffic to these services, surpassing that of simple app messages or voice calls. Streaming services have sparked substantial innovation on the web, giving rise to CDNs (Content Delivery Networks) and analogous solutions. CDNs represent voluntary agreements between service providers (such as streaming platforms) and content distributors that facilitate the delivery of content to your home or office via your Internet service provider. CDNs enable these services to provide a superior user experience compared to centralized networks, with reduced latency and enhanced data quality. However, cost-sharing proposals may jeopardize these services, as evidenced by the situation in South Korea. Take a look at the stance of the German Association of Private Media (VAUNET) (https://www.politico.eu/wp-content/uploads/2022/11/02/VAUNET-positionpaper_NetworkFees.pdf)on this matter.
- 06Large corporations possess a greater capacity to absorb heightened expenses. Consequently, competition within the realm of content provision services is likely to dwindle, with smaller and newer entrants facing formidable barriers when vying for consumers’ attention. Similarly, on the connectivity front, a parallel consolidation is expected. Major operators will amass a larger share of resources and exploit this advantage to further expand their market presence, placing small and medium-sized connectivity enterprises at a distinct disadvantage. Take a look at the stance of Research ICT Solutions (https://researchictsolutions.com/home/wp-content/uploads/2022/11/RIS-Europe-FINAL.pdf)on this matter.
- 07In the European context, all stakeholders, except for the telecom operators, stand in opposition to this policy. Consequently, several countries have voiced their disapproval of the initiative. Moreover, this sentiment extends to other nations, with the United States being a noteworthy example. Take a look at the stance of Italy’s Digital State Secretary (https://www.euractiv.com/section/digital/interview/italys-digital-state-secretary-defines-senders-pay-initiative-premature/)on this matter.
- 08The Brazilian Civil Rights Framework for the Internet lays down regulations governing Internet usage and accessibility. Within this legislation, akin to others, there are stipulations ensuring that data flow remains unaltered and equitable across the web. Furthermore, the law sets net neutrality as the standard and delineates the limited, strictly technical circumstances in which data discrimination is permissible. Cost sharing contravenes both legal frameworks and the wealth of knowledge we have accrued over more than 15 years of managing the Internet in Brazil.
- 09The Internet landscape in Brazil distinctly delineates the separation of markets between telecom operators and other entities, particularly those providing services and content to end-users. However, cost-sharing undermines this separation by imposing a financial burden on one market to subsidize the other, a practice known as cross-subsidization. In economic terms, this approach is counterproductive. Enormous investments are made in the infrastructure market, often supported by substantial government subsidies. Conversely, investments in the services and applications market predominantly arise from commercial success. This stark differentiation in investment patterns is precisely why these markets are legally defined as separate entities.
- 10Anatel was established with the specific role of being the telecommunications regulatory authority, as stipulated in the General Telecommunications Law (Article 8). Consequently, its regulatory purview is limited to imposing obligations on a restricted set of stakeholders closely associated with the telecommunications sector. The same General Telecommunications Law (LGT) also outlines the concept of Value Added Service (VAS), intended to differentiate it from telecommunications services. VAS utilizes the existing telecommunications infrastructure to enhance user functionality. In the same legal article, LGT explicitly excludes VAS from the definition of telecommunications services. Hence, cost sharing represents a substantial regulatory deficiency. If implemented, this measure is almost certain to face legal challenges, intensifying the uncertainties surrounding digital transformation.
LEARN MORE
How to Get Informed and Show Your Support
Anatel Consultation on the Matter
Although Anatel’s Public Consultation No. 13/2023 has concluded, you can still express your views by reaching out to regulamentacao@anatel.gov.br
Library
Visit our extensive repository containing information on the cost-sharing policy, featuring perspectives from regulatory bodies, civil society organizations, technical entities such as the Internet Society, and relevant authorities.
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