What is “sender party pays”?
Let me talk a little bit about how the current system works. The current system of peering and transiting arrangements are commercially-negotiated, voluntary agreements, of which I am told that something in the order of about 99 percent of those agreements are handshake and informal agreements. No government involvement.
Peering often refers to agreements between various carriers and others to exchange traffic often with no exchange of money, just exchange of traffic. Transiting often involves an exchange of money from the smaller to the bigger. And there are a number of technical aspects associated with that. The ETNO proposal would seek to replace this completely voluntary system of commercially negotiated agreements with one that would have certain requirements, including a requirement that certain parties engage in certain types of negotiations, including, for example, that of “sender party pays” explicitly. The concept of “sender party pays” is unclear. But in essence, it appears that what they want to do is say that, if my customer — if I’m a carrier — my customer makes a query, sends out a search for certain information, and they access a website because of that, that the party associated with a website that has the content that is responding to that search, that the content provider must pay for transmitting that content to the requester. This is a completely new economic concept to the Internet. And it could have a radical and profound impact on the economics of the Internet, especially in the developing world.
The example I use here in Thailand, of course: If you are a poor, Thai student in rural Thailand, and you seek to download some content on the Internet, currently you pay nothing other than your connection here in Thailand. Google — and I’m just using [Google] as an example — delivers whatever information to that person in Thailand. But if Google had to pay someone for the right to send that information to that person in rural Thailand, a rational company may not be willing to pay anything for that because there would be no economic value of doing that. The eyeballs of a rural person in Thailand to an advertiser is probably not that valuable. So as a result, what it imperils, among other things, is the ability of poor people in developing world countries to have access to content on the Internet.
Could this affect Internet users in the US or other parts of the developed world?
I think it’s impossible to predict because we don’t know how much would be charged. We don’t know what impact that would have in the developed world. Perhaps it would suggest that it would encourage Internet companies to segregate who they provide [content to]. Some eyeballs are worth more than other eyeballs to advertisers. You see that in advertising rates at different periodicals, for example, if the demographics go one way versus another. So I don’t think it necessarily just affects the developing world or the developed world. This could be just extraordinary in its impact.
So a big part of the problem is that the consequences are unknown?
That’s my view. It’s asking for trouble because it’s suggesting the model — a model that is clearly working — would need to be revised for no apparent, real reason, other than the economic benefit of a few carriers. I will quickly add that my coalition has major carriers, like AT&T and Verizon, and they also think that this is the wrong way to go.
How far down would this fee go? Would a website like Digital Trends have to pay such a fee?
It’s certainly a possibility. The concept that ETNO has is that somebody would pay in addition — some new source of revenue would be available for the carriers, in order to help them finance their operations.
Who all would benefit from such a payment system?
As it is now, it would subsidize carriers in Europe. [They are] the proponents of it.
How accurate are media reports that characterize this as a UN “takeover” of the Internet?
The way I think of this is not so much the UN or the ITU “taking over the Internet.” The way I think of it is, all of the proposals that will be considered originate with member states, with countries, not with the organization itself. That’s the nature of the UN… So I look to other member states, not to the ITU, for what’s going to happen.
I think that there is a huge threshold question about whether the ITU should be involved in the issues, through these ITRs, at all. And the U.S. position, as articulated last week, was, “No” and “Hell no.” And I think that’s very positive from my parochial perspective. But other governments obviously disagree. And how that will be resolved will be a lot of work between now and December.
I also think that if there is any movement in that direction — and I certainly hope there will not be — it’s not who will take over, but rather, it’ll be the beginning of a piece-part takeover. So, for example, as we just discussed, it could be a takeover of how the economics of the Internet are, which is critically important. Security issues on the Internet — critically important. But it’s not the whole thing. It’s not a wholesale takeover. It would just be a takeover of some of the most important and sensitive aspects.
How much is censorship a part of the overall ITU issue?
Well, I think it is a potential issue. So, for example, there are proposals that have been made that the ITU should play a role with regard to spam. Now, as far as I can tell, nobody likes spam. At least nobody I know likes spam. But one of the primary problems with dealing with this through an international organization like the ITU is that spam is by definition “content.” In this particular case, it is unwanted, unsolicited information. Now, one person’s spam, or one government’s spam, could easily be viewed as another party’s, another person’s, political speech. And so once you get inter-governmental groups involved in regulating these sorts of things, then you no longer have a principled basis to draw lines that are appropriate. And obviously a line drawn in the United States is probably very different than a line drawn in another country. So that’s one example.
Another example would be, there are proposals made to take the ITU’s technical recommendations — these are recommendations that are completely voluntary with regards to certain standards for equipment and things of that nature — and convert them at least in part into requirements, things that governments would have to adopt. And obviously, there are lots of games that could be played, but the impact on innovation on the Internet could very, very substantial. You would basically convert the ability of companies and individuals to put new, experimental equipment on the Internet. It would change it from being a basically a hot-house of innovation on the Internet, to a “mother, may I” type of system.
So new hardware regulations could also be at stake here?
It certainly could, yes — particularly on the network side of it.
Who would be responsible for imposing the new rules?
It’s a very good and important question. And the answer is that this one of the major unanswered questions. Traditionally, for the last 100-plus years, the ITU is neither a regulator, nor does it have any enforcement mechanism. What you point out is, on these new treaty requirements, is, how would they be enforced? How would they be implemented? It is, at the moment, very, very unclear. And so that would be a very major issue, and actually raises significant questions about how any of this stuff would actually operate.