The Global Trend That Could Kill The Internet: Sender Party Network Pays – Techdirt

There is a Korean proverb that says: “There is always a way out, look for it.” South Korea’s recent revision of its Telecommunications Business Act (TBA) might, however, be the one thing South Korea is not able to get out of, unless it abandons its plans for redistributing the monopoly power back to telecommunication providers.
South Korea, just like Europe, faces similar challenges — an ageing population, and the need to compete in high-value sectors and create a digital ecosystem that is robust and facilitates economic and social growth. It is, therefore, quite ironic that both countries are considering policies that could put at risk and undermine much of the Internet and their digital futures. 
The “Sending-Party-Network-Pays”(SPNP) proposal, currently at the center of the respective countries’ legislative agendas, is premised on a simple idea: content platforms that generate and send most internet traffic over the Internet should pay a certain fee to telecommunications providers in order to have those providers deliver that traffic to users. This model may make perfect sense in the telephony environment, where traditionally telephone operators have a termination monopoly for their customers; but, when it comes to the Internet, this proposal will prove counterproductive and dangerous as  it creates bottlenecks for investment and degrades users’ internet experience. 
We often hear that the internet is a network of networks. This is not a philosophical statement; rather, it means that, through voluntary agreements, networks decide independently with whom to interoperate while identifying ways to optimize connectivity in order to meet users’ demands. This ensures resilience and, at the same time, the robustness of the system. As a decentralized network, the Internet has no central authority or a gatekeeper to determine which networks can and cannot join, meaning that any network is able to autonomously participate, decide on which other network to interconnect and at what cost and become part of the global Internet. The only requirement is that it “speaks” the IP protocol language. 
In 2013, a still relevant report by the OECD confirmed the success of the internet model in comparison to traditional telephony. “While national regulatory authorities have closely regulated circuit-switched (TDM) traffic exchange to achieve such policy goals as universal connectivity and competition, the Internet market has attained those same goals with very little regulatory intervention, while performing much better than the older markets in terms of prices, efficiency, and innovation”. 
This fundamental design choice and the benefits it has produced are now getting ignored and the results are at best unpredictable and, in the long run, possibly irreversible. 
In 2016, South Korea became the first country to enforce a “Sending-Party-Network-Pays” model, requiring ISPs to charge fees for the volume of traffic they were exchanging between them. Although enforced only among ISPs to date, it has already been detrimental to South Korea’s competitive market. With high fees being imposed, a number of South Korean and foreign content providers were left with only two options: exit the market or degrade their services. In the meantime, smaller Korean providers and a host of startups have to face insurmountable barriers to entry in the market.  
For a long time, South Korean users have enjoyed fast and reliable internet connectivity and South Korea was an example other countries looked to for addressing issues of connectivity. Not any longer. According to a recent report, in South Korea, “regulation appears to have discouraged peering and investment […], leading to higher costs for ISPs, initially lower quality for users, and need for more regulation to correct unintended consequences.”  In particular, in comparison to Europe, Internet access fee disparity skyrocketed to 8-10 times while, when it comes to the US, that figure was 5-6 times, causing many content providers to intentionally degrade their services.  
Europe may have to face a similar reality soon should it decide to move forward with its own “Sending-Party-Network-Pays” model.  Since March, when the European Commissioner for the Internal Market, Thierry Breton, announced the European Commission’s intention to move forward with such a plan, there has been widespread concern from a diverse set of actors across Europe. Civil society has condemned the proposal, specifically regarding the barriers to entry it will introduce as well as its potential impact on “freedom of expression, freedom to access knowledge, freedom to conduct business and innovation in the EU”. Similarly, the European Consumer Organisation has stated that “for consumers in particular, the risks or potential disadvantages of establishing measures such a SPNP system would range from a potential distortion of competition on the telecom market, negatively impacting the diversity of products, prices and performance, to the potential impacts on net neutrality, which could undermine the open and free access to the Internet as consumers know it today.” Similarly, Europe’s Mobile Virtual Network Operators (MVNO) group called for a “careful impact assessment”, while the European Association for Commercial Television and Video on Demand (ACT) urged European “institutions to thoroughly consider the wider implications before taking any actions that would directly or indirectly impact the stability and sustainability of the European audiovisual industry (and consumer rights) as a whole.  
What could then be driving this fundamental shift both in Europe and in South Korea, especially given that the proposal has been rejected by everyone bar a handful of telecommunication companies? 
Let’s think of this in terms of policy objectives. Telecommunication providers argue that a “fair contribution” scheme is needed for infrastructure and the need for both countries to meet their respective digital agenda targets. If this is really the case, however, then the starting point of the conversation is wrong. Throwing money to the largest telecommunication companies will not lead to infrastructure development so much as encourage monopolistic behavior and unpredictability. Considering that such deals will most definitely be confidential, it will also be hard for anyone to know the tradeoffs that will need to be agreed on every time. A pay-off will simply extend the termination monopoly telecommunication providers enjoy from telephone to content; it will not address any real infrastructure concerns. 
To this end, a real infrastructure strategy might be necessary. In its preliminary assessment of the SPNP proposal, the Body of European Regulators for Electronic Communications (BEREC) said that, although “debate about network investments, traffic volumes and cost drivers needs to be carefully analysed”, at the same time, “the internet has proven its ability to cope with increasing traffic volumes, changes in demand patterns, technology, business models, as well as the (relative) market power between market players”. The focus, therefore, should be on services that facilitate user experience and enhance the resilience and stability of the Internet, including Internet Exchange Points (IXPs), Content Delivery Networks (CDNs), caches and the like.  
Bad ideas tend to be solutions to problems no one really has. And, truly, there is no identifiable problem in the market of interconnection. The norms and rules that were set years ago continue to apply, ensuring connectivity. Europe must learn from the South Korean experience and avoid replicating mistakes that, in the end, will only harm its citizens and its digital future. As other countries, including the UK and India, are starting to flirt with similar ideas, the conversation about what sort of a digital future we want becomes increasingly pressing.
Konstantinos Komaitis, Internet policy expert and author & K.S. Park, Professor, Korea University, Director, Open Net
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I have a home network, so does that mean under the “Sending-Party-Network-Pays” doctrine, my ISP needs to pay me for all the content I receive; thereby, paying ME to USE the internet?
surely this means that when I download the latest Ubuntu DVD set that Comcast will have to pay ME?
Soot only do they want to double-dip, but when they bill their own customers to “suck” down bandwidth, that’s a contracted clause. (I won’t say “right” but it’s been agreed to by both parties.) The customer has full control of how much they use.
When the Comcasts of the world want to bill someone else for “blowing” bandwidth their way… there are two issues with that. One is that likely the bandwidth source is NOT their customer. Second, that entity does NOT control the use of the bandwidth.
Websites don’t “reach out” and “send you data”. YOU request it of them and they provide it. Websites can’t control if 3rd parties DoS them and issue millions of say HTTP requests causing the party being DoSd to have to “sender pay”.
There’s nothing right about this concept and everything wrong. In the US one can’t create a contractual relationship unilaterally. The whole “if you use our network then you owe use money” negates the entire interoperability of disparate networks, also known as the Internet (big I).
Shareholders might like it until they realize the “senders” will just up their fees, add paywalls, limit content quality or resolution or bandwidth, etc. ALL OF WHICH will hurt the content consumer… the poor schmo paying Comcast $150/mo for 200Mbps and maybe getting 40% of that.
And finally, I have servers. So do many other people. I still expect my Comcast bill to be the same every month. If “both sides pay” aka “Sender Pays” was a thing who knows what amount I’d be “on the hook for” every month.
Contract law is pretty clear on this one. Snowball, welcome to hell.
What the hell?
If this goes through, it will be a ‘hidden’ price rise, as the senders of data will charge the users directly, or via advertising income. Also, it is an expensive, for the user, way of increasing prices, as the companies paying will recoup their administrative costs, plus a profit on top of what they pay the telecos..
It IS a big-tech tax, no matter how it’s disguised by the oligarchs of yesteryear.
Gavron is correct, both sender and receiver will pay, and through the nose. This is going to take a general populace uprising on the order of storming the bastille to make it go away, because the backbone carriers smell money, and governments all over the planet smell tax money.
OTOH, the various Post Offices could be behind all of this…. planning on people leaving the internet in droves when it becomes too expensive, and returning to using snail mail. (If that conspiracy theory gains traction, I want the credit! :))
Sender pays will mean alot more administration as each telecom provider will have to record the data used by different networks this is fixing a problem that does not exist the existing networks work well and company’s like Google spend billions building network cable infrastructure
Sender pays works ok in the area of basic phone calls as customers know it LL cost X to make local calls or long distance calls
Its not needed in the area of internet IP data networks company’s already have peering agreements to allow networks to
operate effeciently
The problem in America is monopolys by company’s like Comcast in certain areas and the lack of local open fibre networks provided by local company’s
So if the likes of Netflix have to pay to send their traffic that means they don’t have to pay for the connection when they’re not doing that, right? Because last I checked they already pay for a connection and use of it, just like the ISP customers asking for the data, so if they’re going to be forced to pay to use that connection it certainly seems like the account should be absolutely free since it provides them nothing on it’s own.
The whole thing is blatant corruption and naked self-entitled greed on the parts of politicians and ISP’s respectively, and if there’s a silver lining it’s in showing which and how many politicians are out there who are either blatantly corrupt and don’t mind showing it or are so trivially easy to manipulate they have no business being in office.
Aside from how wrong this is, it also seems it would be ripe for abuse. If I had a grudge against some corp I could redownload the same thing over and over and they would have to pay for it.
Very informative
The telecom companies only sell access to the internet. The only value this service has is the value of the internet. The services on the internet have developed that value with 0 contribution of the telecom companies. So the free loaders here are the telecom companies, they are the ones who should help pay their share instead of only acting like a toll booth leechin money out of the system.
(only just slightly hyperbolic).
Telecom companies don’t sell “access to the Internet”. They sell a cable that connect to an Internet Service Provider. Sometimes that’s a different division of the same company. Comcast the cable company is a telco.
ISPs sell “access to the Internet” which includes an IP address or more, routing to the global Internet, and in the Comcast case it’s “Xfinity.”
In no case does Comcast the Cable Company care whether you suck or blow one bit a month or 600GB a month. It’s just a cable line. If they can bill you more for a larger circuit (i.e. fiber vs copper vs HFC) then they will.
Xfinity the ISP does care, because their routing infrastructure must be able to packet-switch (or WDM switch) and get the data from point A to point Z and vice versa. The more that you and your neighbors in their routing hub use the more they have to invest (but it’s not linear) so they raise prices. In the US they do so dramatically but that’s the nature of an f’d up free market. Karl’s written about this for years and he’s not wrong at all about it.
“pay their fair share”. Of what? The telcos are the ones who have already laid the fiber/copper/HFC in the ground (or on poles) or who put up retransmission towers, antennas, etc. They’ve paid. ISPs? They pay the telcos. Users? We pay the ISPs.
If for a split second I thought that my payment every month to Xfinity didn’t get me the ability to download techdirt, ars, nyt, washpo, etc. because someone was demanding that techdirt (which already pays for its connection) pay MORE each time I click on a link I’d disconnect that service.
This sounds suspiciously like a failed piece of US telecom deregulation circa 1993
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