U.N. could tax U.S.-based Web sites, leaked
docs show
Global
Internet tax suggested by European network operators, who want Apple, Google,
and other Web companies to pay to deliver content, is proposed for debate at a
U.N. agency in December.
by Declan McCullagh and Larry
Downes
June 7,
2012 11:58 PM PDT
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.
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 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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