Fair Share at the heart of the U.S. Broadband Consumer Cost Reduction Act
Last November 16th, three U.S. senators, Markwayne Mullin (Republican), Mark Kelly (Democrat) and Mike Crapo (Republican), introduced a bipartisan proposal for the Broadband Cost Reduction for Consumers Act 2023 in the U.S. Senate. The purpose of this bill is to direct the American telecoms regulator, the Federal Communications Commission (FCC), to require content and service providers and broadband providers to make a fair and adequate contribution to the Universal Service Fund (USF). The senators sponsoring the bill represent both the Democratic and Republican parties, a sign of the cross-cutting nature of the initiative.
This requirement addresses a long-standing request from the U.S. telecoms industry, which in a recent filing to the FCC insisted that Congress should enact legislation that would provide the U.S. regulator with clear authority to substantially broaden the base of contributions to the USF. This broadening should achieve universal service goals by assessing the revenues of any service whose business model relies heavily on consumer or business access to broadband and ensuring that those business models help support those goals. Such services would include traditional Internet services such as digital advertising, streaming video services, or app stores.
The purpose of the bill introduced by the U.S. Senators is to direct the FCC to draft legislation to reform the Universal Service Fund, broadening the basis for broadband providers and content and service providers to contribute in an equitable and non-discriminatory manner to preserve and promote universal service, no later than 18 months after enactment of the bill. In its current form, the proposal would limit the assessment of content or service providers to those that generate more than 3% of the estimated amount of broadband data transmitted over U.S. networks and earn more than $5 billion annually.
With this proposal, the U.S. is taking the first step toward putting its vision of the fair share debate into law, based on a contribution to the USF by the companies that benefit most from broadband connectivity.
Large Internet companies that profit from that expanded Internet access don’t contribute their fair share
U.S. joins growing number of countries looking into Fair Share
The United States thus joins the growing number of countries that consider the contribution of large traffic generators to the maintenance and financing of broadband infrastructures to be clearly insufficient. South Korea was the pioneer, followed by the European Union, Brazil, India, and Australia. Driven by shared concerns about the status quo, they are all evaluating the introduction of some mechanism to ensure a fair contribution from large traffic generators. By taking the first step with this new bill the U.S. is clearly signaling its ambitions to lead the debate globally on the fair contribution of large traffic generators.
The diagnosis that drives all these initiatives is similar. They all start from observations on the evolution of the Internet in the Web 2.0 stage, which has led to a very small number of companies generating most of the traffic circulating on the Internet. They accounting for most of the revenue generated in the Internet ecosystem, and benefiting extraordinarily from network infrastructures while making a very small contribution to the maintenance and financing of these infrastructures. Their extraordinary market power also introduces distortions to the broader ecosystem, as shown by the difficulty of all other agents in negotiating fair agreements with these companies.
All these countries believe that the model needs to be revised to achieve a more balanced and fairer environment. Different countries are adopting different solutions to the challenge posed by the extraordinary increase in traffic and the need to expand, upgrade, and modernize the broadband infrastructure to accommodate it.
A new financing model is needed for broadband infrastructure investments
Reports such as PwC’s recent “Perspectives from the Global Telecom Outlook 2023-2027” clearly show the magnitude of the problem. The telecommunications sector faces an enormous challenge in meeting the large investments required to deploy the telecommunications infrastructure that will, in turn, sustain broader economic growth in the coming years.
The PwC report estimates that the volume of data will triple by 2027, reaching 9.7 million petabytes. This extraordinary projected growth in data usage is mainly due to an increase in video consumption. At the same time, revenues from Internet access services will only increase by 4%. Revenues matter, as the capacity to invest of the industry, depends on them.
One clear conclusion from this report is that the telecommunications sector faces an enormous challenge in meeting the large investment required to deploy the telecommunications infrastructure that will, in turn, sustain broader economic growth in the coming years. Meeting this challenge requires a fair contribution for the use of the networks from the players who stand to benefit most from the use of these infrastructures.
The debate is still open. Different countries are exploring different options, but the diagnosis is widely shared, as is the recognition that something must change. It is necessary to adopt solutions that correct the current situation and make it possible to face the extraordinary challenge of traffic growth and the deployment of broadband infrastructures. The solutions proposed, through different implementation formulas, still maintain a common basis: that the digital companies that make the greatest use of the networks, contribute to the financing or economic sustainability of the networks.