The United Nations is considering a new Internet tax targeting the
largest Web content providers, including Google, Facebook, Apple, and
Netflix, that could cripple their ability to reach users in developing
nations.
The European proposal, offered for debate at a December meeting of a
U.N. agency called the International Telecommunication Union, would
amend an existing telecommunications treaty by imposing heavy costs on
popular Web sites and their network providers for the privilege of
serving non-U.S. users, according to newly leaked documents.
The documents (
No. 1
No. 2) punctuate warnings that the Obama administration and Republican members of Congress
raised last week
about how secret negotiations at the ITU over an international
communications treaty could result in a radical re-engineering of the
Internet ecosystem and allow governments to monitor or restrict their
citizens' online activities.
"It's extremely worrisome," Sally Shipman Wentworth, senior manager for public policy at the
Internet Society, says about the proposed Internet taxes. "It could create an enormous amount of legal uncertainty and commercial uncertainty."
The leaked proposal was drafted by the
European Telecommunications Network Operators Association, or ETNO, a Brussels-based lobby group representing companies in 35 nations that wants the ITU to mandate these fees.
The Internet Society's Sally Shipman Wentworth calls the proposal "extremely worrisome."
(Credit:
Declan McCullagh/CNET)
While this is the first time this proposal been advanced, European
network providers and phone companies have been bitterly complaining
about U.S. content-providing companies for some time. France Telecom,
Telecom Italia, and Vodafone Group, want to "require content providers
like Apple and Google to pay fees linked to usage," Bloomberg
reported last December.
ETNO refers to it as the "principle of sending party network pays" -- an
idea borrowed from the system set up to handle payments for
international phone calls, where the recipient's network set the per
minute price. If its proposal is adopted, it would spell an end to the
Internet's long-standing, successful design based on unmetered "peered"
traffic, and effectively tax content providers to reach non-U.S.
Internet users.
In a statement (
PDF)
sent to CNET on Friday morning, ETNO defended its proposal as
"innovative" and said it had been adopted unanimously by its executive
board. It would amend the treaties by saying, "to ensure an adequate
return on investment in high bandwidth infrastructures, operating
agencies shall negotiate commercial agreements to achieve a sustainable
system of fair compensation for telecommunications services," ETNO said.
Such sender-pays frameworks, including the one from ETNO, could prompt
U.S.-based Internet services to reject connections from users in
developing countries, who would become unaffordably expensive to
communicate with, predicts Robert Pepper, Cisco's vice president for
global technology policy.
Developing countries "could effectively be cut off from the Internet,"
says Pepper, a former policy chief at the U.S. Federal Communications
Commission. It "could have a host of very negative unintended
consequences."
It's not clear how much the taxes levied by the ETNO's plan would total
per year, but observers expect them to be in the billions of dollars.
Government data
show
that in 1996, U.S. phone companies paid their overseas counterparts a
total of $5.4 billion just for international long distance calls.
If the new taxes were levied, larger U.S. companies might be able to
reduce the amount of money they pay by moving data closer to overseas
customers, something that Netflix, for instance, already does through
Akamai and other content delivery networks. But smaller U.S. companies
unable to afford servers in other nations would still have to pay.
The leaked documents were posted by the Web site
WCITLeaks,
which was created by two policy analysts at the free-market Mercatus
Center at George Mason University in Arlington, Va, who stress their
Wikileaks-esque project is being done in their spare time. The name,
WCITLeaks, is a reference to the ITU's December summit in Dubai, the
World Conference on International Telecommunications, or WCIT.
Eli Dourado, a research fellow who founded WCITLeaks along with
Jerry Brito,
told CNET this afternoon that the documents show that Internet taxes
represent "an attractive revenue stream for many governments, but it
probably is not in the interest of their people, since it would increase
global isolation."
Dourado hopes to continue posting internal ITU documents, and is asking
for more submissions. "We hope that shedding some light on them will
help people understand what's at stake," he says.
One vote per country
ETNO's proposal arrives against the backdrop of negotiations now
beginning in earnest to rewrite the International Telecommunications
Regulations (
PDF),
a multilateral treaty that governs international communications
traffic. The ITRs, which dates back to the days of the telegraph, were
last revised in 1988, long before the rise of the commercial Internet
and the on-going migration of voice, video and data traffic to the
Internet's packet-switched network.
The U.S. delegation to the Dubai summit, which will be headed by
Terry Kramer,
currently an entrepreneur-in-residence at the Harvard Business School,
is certain to fight proposals for new Internet taxes and others that
could curb free speech or privacy online.
But the ITU has
193 member countries, and all have one vote each.
If proposals harmful to global Internet users eventually appear in a
revision to the ITRs, it's possible that the U.S. would refuse to ratify
the new treaty. But that would create additional problems: U.S. network
operators and their customers would still be held to new rules when
dealing with foreign partners and governments. The unintended result
could be a Balkanization of the Internet.
In response to the recent criticism from from Washington, ITU
Secretary-General Hamadoun Toure convened a meeting yesterday with ITU
staff to deny charges that the WCIT summit in Dubai "is all about ITU,
or the United Nations, trying to take over the Internet." (The ITU also
has been criticized, as
CNET recently reported, for using the appearance of the Flame malware to argue it should have more cybersecurity authority over the Internet.)
"The real issue on the table here is not at all about who 'runs' the
Internet -- and there are in fact no proposals on the table concerning
this," Toure said, according to a
copy of his remarks
posted by the ITU. "The issue instead is on how best to cooperate to
ensure the free flow of information, the continued development of
broadband, continued investment, and continuing innovation."
Robert McDowell, a Republican member of the Federal Communications Commission who wrote an
article (PDF)
in the Wall Street Journal in February titled "The U.N. Threat to
Internet Freedom," appeared to reference the ETNO's proposal for
Internet taxes during last week's congressional hearing.
Proposals that foreign governments have pitched to him personally would
"use international mandates to charge certain Web destinations on a
'per-click' basis to fund the build-out of broadband infrastructure
across the globe," McDowell said. "Google, Tunes, Facebook, and Netflix
are mentioned most often as prime sources of funding."
They could also allow "governments to monitor and restrict content or
impose economic costs upon international data flows," added Ambassador
Philip Verveer, a deputy assistant secretary of state.
ITU spokesman Paul Conneally told CNET this week that:
There are proposals that could change the charging system, but nothing
about pay-per-click as such. There isn't anything we can comment about
this interpretation because, as stated before, member states are free to
interpret proposals as they like, so if McDowell chooses to interpret
as pay-per-click, that is his right and similarly it is he who should
provide pointers for you.
From the beginning, the Internet's architecture has been based on
traffic exchange between backbone providers for mutual benefit, without
metering and per-byte "settlement" charges for incoming and outgoing
traffic. ETNO's proposal would require network operators and others to
instead negotiate agreements "where appropriate" aimed at achieving "a
sustainable system of fair compensation for telecommunications services"
based on "the principle of sending party network pays."
"Not all those countries like open, transparent process"
This isn't the first time that a U.N. agency will consider the idea of Internet taxes.
In 1999, a report from the United Nations Development Program proposed
Internet e-mail taxes to help developing nations, suggesting that an
appropriate amount would be the equivalent of one penny on every 100
e-mails that an individual might send. But the agency
backed away from the idea a few days later.
And in 2010, the U.N.'s World Health Organization
contemplated, but did not agree on, a "bit tax" on Internet traffic.
Under the ITU system for international long distance, government-owned
telecommunications companies used to make billions from incoming calls,
effectively taxing the citizens of countries that placed the calls. That
meant that immigrants to developed nations paid princely sums to call
their relatives back home, as high as $1 a minute.
But technological advances have eroded the ability of the receiving
countries to collect the fees, and the historic shift to voice over
Internet Protocol services such as Skype has all but erased the transfer
payments. Some countries see the WCIT process as a long-shot
opportunity to reclaim those riches.
The ITU's process has been controversial because so much of it is
conducted in secret. That's drawn unflattering comparisons with the
Anti-Counterfeiting Trade Agreement,
or ACTA, an international intellectual property agreement that has
generated protests from Internet users across the world. (The Obama
administration
approved ACTA in 2011, before anyone outside the negotiations had a chance to review it.)
By comparison, the Internet Society, with 55,000 members and 90
worldwide chapters, hosts the engineering task forces responsible for
the development and enhancement of Internet protocols, which operate
through virtual public meetings and mailing lists.
"Not all those countries like open, transparent process," says Cisco's
Pepper, referring to the ITU's participants. "This is a problem."
Last updated at 9:30 a.m. PT on June 8
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