---

Internet Architecture and the Fair Share Policy: Insights from Stanford’s Barbara van Schewick

Can the fair share policy influence internet architecture? Amidst Anatel’s Public Consultation on cost-sharing (Public Call No. 13/2023, which we analyzed here), Barbara van Schewick, a Professor at Stanford and the author of Internet Architecture and Innovation, sheds light on the significance of the principle of net neutrality. We aim to distill some key points from her contribution to the Brazilian debate.

Here is an overview of the primary insights presented: 

• Net neutrality and the socio-economic evolution of the Internet

The proposition to establish a “cost share” system for the Internet contradicts the trajectory of the past 30 years, during which the Internet has continuously flourished. This proposal sets a perilous precedent globally. Van Schewick contends that the existing model has facilitated a decline in distribution costs and a surge in information flow over the years. Today’s Internet stands as the most potent communication, educational, and financial tool ever witnessed by the world. The fair share policy has the potential to undo three decades of such triumphant development. According to her perspective, it is not that both mobile and fixed traffic in Brazil are lagging; instead, there is a perception that the cost of devices is impeding the expansion of the user base. She concludes her analysis by asserting that the current model empowers users with the freedom to make choices without undue interference from companies in their consumption habits.

• End consumers are the parties who choose content and generate traffic

It is evident that content providers globally transmit data traffic to Brazilian users, and this consumption directly aligns with user demand. Consequently, discriminating against application providers for “special treatment” not only lacks rationale but also contravenes the principle of cost causation. Content providers wield no influence over user choices, and favoring less popular content over more popular offerings is inherently unreasonable in this context.

• The absence of a direct link between cost-sharing revenue and improvements to network infrastructure

The proposition from major telecom operators to compel content providers to contribute more for the content they convey lacks a mechanism ensuring that the additional revenue directly finances infrastructure development and subsequent expansion. Consequently, it is improbable that the cost-sharing proposal will lead to increased broadband coverage.

• Double payment

For an extended period, big telcos have sought remuneration from content providers for the content delivered to end consumers. This concept has been consistently rebuffed. Furthermore, the author underscores that connection providers’ customers already pay for data transmission on the Internet. Hence, the telecom operators are essentially advocating for a duplicate payment for the same service.

• Distortion of competition

Rather than addressing a competition issue, the fair share initiative functions as a “fee” on online businesses, integrated into numerous existing markets. This creates a distortion of competition across highly competitive markets, irrespective of user preferences for specific online services. Objectively, those exempted from the “fee” enjoy a substantial competitive advantage over their counterparts.

The distortion of competitiveness extends beyond impacting the telecoms market itself. Implementing the “cost-sharing” policy championed by big telcos could skew competition among internet connection providers. This distortion would grant larger companies a more privileged negotiating position, enabling them to garner increased revenue solely due to their larger subscriber base. Consequently, diminished competitiveness in the sector would likely lead to rising costs and a decline in internet access in Brazil.

• Damage to consumers

The implementation of cost-sharing will result in heightened expenses for popular content providers, impacting applications such as gaming and streaming. Consequently, the author contends that the rise in costs will inevitably be transferred to consumers, compelling them to bear the burden of more expensive internet services. 

• Losses to content creators and non-profit organizations

Irrespective of their size, most organizations and individual content creators rely on services provided by major companies, including cloud storage, CDNs, productivity tools, and social media platforms. While these entities ultimately benefit from cost sharing, the author cautions that the price hike for these platforms will affect Brazilian businesses or necessitate a shift to more affordable but potentially lower-quality alternative services.

• Violation of net neutrality

The principle of net neutrality seeks to ensure that users remain central in decisions concerning online content rather than being dictated by companies. This is achieved through unhindered access to different types of content. By asserting that users, in selecting content, determine the popularity of applications, the author emphasizes that net neutrality demands equal bandwidth coverage for consumers, irrespective of the application or website. Any preference for one over another in terms of speed or accessibility distorts this equilibrium. Consequently, cost-sharing violates the principle of net neutrality by potentially influencing the flow of data traffic toward specific applications. 

• Investments by content providers

The success of internet revenues hinges on a simple logic, which is the active participation of content providers. It is worth emphasizing that contrary to assertions by big telcos, content providers not only contribute to the market by offering compelling content that attracts users but also invest in critical infrastructure. An example is Content Delivery Networks (CDNs), an interconnected server network optimizing data traffic and enhancing infrastructure efficiency. 

Without the proactive involvement of content producers, consumer interest in telecom-provided plans would wane. Consequently, content providers face risks from which telecoms are exempt, enjoying stability within their established market. Moreover, content providers singularly shoulder substantial resource spending. In 2022 alone, the five largest big tech companies funded $400 billion in Research and Development (R&D) within the internet sector.