May 11, 2022 - Technology

New push to make Big Tech pay more for bandwidth

Illustration of a loading screen with a dollar on it

Illustration: Sarah Grillo/Axios

Regulators around the world are exploring forcing Big Tech companies to pay more for the internet service they rely on to make their billions.

Why it matters: A growing number of governments think tech giants should up their contributions to the basic internet service that makes their success possible. That money could prop up local economies or help close the digital divide.

Driving the news: The Senate Commerce Committee on Wednesday will vote on bipartisan legislation that would order the FCC to study the feasibility of collecting fees from companies like Google and Netflix to shore up the agency's broadband deployment subsidy fund, the Universal Service Fund.

Meanwhile, in Europe, antitrust chief and European Commission executive Vice President Margrethe Vestager said at a press conference earlier this month that "the issue of fair contribution to telecommunication networks" is something lawmakers should consider "with a lot of focus."

  • "We see that there are players who generate a lot of traffic that then enable their business, but they have not been contributing actually to enable that traffic, they have not been contributing to enable the investments in the rollout of connectivity," she said.

Flashback: The idea to tax Big Tech to underwrite the FCC's broadband fund, which supports internet service in rural areas, schools, libraries and hospitals, picked up steam among Republicans last year.

  • Currently, a fee on phone bills pays for the Universal Service Fund, but that revenue base has been decreasing.

The big picture: Companies that connect people to the internet and those that provide what people access on the internet, like videos, TV shows and music, are battling over who should foot the bill as streaming's costs and popularity grow.

  • European telecommunications companies argued earlier this month that the European Commission should require Big Tech to pay telecom companies for broadband infrastructure projects.
  • The European telecoms say social media and tech companies — including Meta, Netflix and Amazon — account for 55% of traffic on mobile and broadband networks, costing them between 15 billion and 28 billion euro per year, per the Financial Times.

The intrigue: Netflix is already engaged in this fight in South Korea.

  • Proposed legislation there would make global content providers pay local network fees, and the streaming giant is in court fighting a local ISP's efforts to collect money, per Reuters.
  • The law being debated in the Korean National Assembly would incur a "huge additional cost" for YouTube and could have a "direct impact on the domestic YouTube business," making it difficult for YouTube to invest in South Korea's creator ecosystem, wrote Gautam Anand, executive vice president for Asia Pacific at YouTube, in a company blog post in Korean last month (English version courtesy Google Translate).

Internet service providers in the U.S. have argued Big Tech should pay into the increasing cost of broadband.

  • The Senate proposal is "critical to the future of the Universal Service Fund," USTelecom CEO Jonathan Spalter said in a statement to Axios. "USF has long benefitted a wide universe of companies — streaming, videoconferencing, e-commerce, cloud computing and more — that largely do not contribute to the FCC’s critical universal service programs. It’s time they step up."

The other side: "Consumers currently pay internet access fees and companies that use extra bandwidth for everything from search to video streaming already pay extra fees to internet access providers," said Matt Schruers, president of the Computer and Communications Industry Association, which represents Big Tech companies. "These digital services help create the demand for the services internet access providers are selling."

  • “American families are struggling with high gas prices and skyrocketing grocery bills, and the last thing they need is a new tax on online services that bring them competition, choice and savings," said Angie Kronenberg, chief advocate and general counsel for INCOMPAS, a trade association representing both smaller broadband companies and large tech platforms like Google and Amazon.

In the Senate, The FAIR Contributions Act was introduced by committee ranking member Roger Wicker (R-Miss.) but now counts communications subcommittee chairman Ben Ray Luján (D-N.M.) as a sponsor.

  • “The FAIR Contributions Act would be an important step to help ensure that Americans in unserved and underserved areas are not left behind as we work to close the digital divide,“ Wicker said in a statement to Axios.
  • "The same companies that benefit from public funding for broadband connectivity should be willing to support this proposal," Luján told Axios.

What they're saying: FCC Commissioner Brendan Carr told Axios it's time for a "fundamental rethink" on who pays into the agency's broadband funds.

  • "It's sort of a universal idea that people are realizing that these are the companies that are benefiting from these expenditures and so why don't we look at them to pay in as well," Carr told Axios.
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