Analysys Mason (AM) has published a new report that is intended to “bring a clear and evidence-based perspective to the global debate regarding whether network usage fees should be introduced”.

AM says that its report explains the interdependence of various stakeholders in the internet ecosystem and the mutually beneficial arrangements that they currently enter into for internet interconnection. It considers the relationship between content and application providers (CAPs) and internet service providers (ISPs). It also examines the implications of mandating that CAPs pay ISPs network usage fees linked to traffic flows between their networks, concluding that such a mandate would be “harmful to end users and the global internet ecosystem”.

AM explains that the report highlights the significant investments that CAPs make in global internet infrastructure (over and above their investments in content, innovation, research, and development). Contrary to the assertions that CAPs are not investing in internet network infrastructure, the report finds that in the last decade, CAPs invested USD883 billion in digital infrastructure. This builds upon analysis conducted since 2014. The report finds that between 2018 and 2021, CAPs increased their annual spend by over 50% compared to the 2014 to 2017 period, investing over USD120 billion in digital infrastructure, including hosting, transport, and delivery networks. AM says that these investments “not only support the delivery of CAPs’ own services, but also support the ISPs’ business”.

AM says that the combination of investments by CAPs and ISPs, as well as freely negotiated interconnection on the internet, has evolved over time to support increased traffic demand from end users. Investments made by CAPs improve quality of experience for broadband users and save ISPs over USD5 billion each year in network and transit fees. The voluntary agreements between CAPs and ISPs ensure that growing demand from end users can be handled sustainably without increasing network costs over time. AM says that this framework “ensures that ISPs do not shoulder all the cost of digital infrastructure, while enabling end users to gain access to diverse and high-quality online services”.

The report finds that the imposition of network usage fees would “risk creating barriers to entry and growth for smaller and new CAPs”. In broadband markets, mandated network usage fees “also risk increasing costs for many ISPs, by reducing CAPs’ incentives to invest in infrastructure and processes that help optimize traffic delivery for ISPs, such as caching content closer to end users”. These higher costs might translate into lower quality of experience for end users, AM says.

The report also finds that current proposals for mandating network usage fees “rely on arguments that falter under scrutiny”. According to AM, proponents of these fees tend to “mischaracterize the relationship between traffic delivery and cost, while understating ongoing investments by CAPs in internet infrastructure, as well as private- and public-sector investments in ISP networks”. AM also believes that “[s]ome arguments made in favour of network usage fees also appear to be based on an inadequate understanding of internet interconnection”. In AM’s view, if introduced, network usage fees would result in “a shift away from the voluntary interconnection regime that continues to drive the rapid growth and impact of the internet”. AM therefore encourages policy makers to scrutinise any network usage fee proposals carefully, while taking a holistic perspective on the potential harmful impact of those fees on the wider internet ecosystem.

To read AM’s news release accompanying the report in full and for links to both the summary and full reports, click here.