Thursday, September 27, 2012

ISPs Want to Tax App Providers, Now Newspaper Wants to Tax ISPs

Internet access providers have floated the idea of new business models that essentially charge large app providers a fee for imposing "load" on access networks, a move aimed primarily at apps that involve video, ranging from FaceTime on a mobile network to Netflix on a fixed network. 

In a twist, a writer at the Guardian newspaper goes the other way, suggesting that ISPs be taxed to support user consumption of newspaper products. 

"A small levy on UK broadband providers – no more than £2 a month on each subscriber's bill – could be distributed to news providers in proportion to their UK online readership," the article argues. "This would solve the financial problems of quality newspapers, whose readers are not disappearing, but simply migrating online," The Guardian argues. 

Both arguments rest on the assumption that value is being delivered in the Internet ecosystem without "reasonable" participation in the created revenue streams.

But the arguments are advanced from different positions. The Guardian argues that "people willingly pay this money to a handful of telecommunications companies, but pay nothing for the news content they receive" In other words, an app provider argues the access provider should pay the app provider for value created.

Access providers argue the reverse, that the access creates the distribution platform an app provider builds a big business upon. 

In a U.S. context, the newspaper argument can be opposed on freedom of speech grounds, namely that the media has to be free of government control or influence, and any regulation that shifts revenue from an access provider to an app provider therefore makes the app provider dependent on the government for its existence.

That might not be so relevant in a U.K. context. But it is striking that a content and app provider now argues it is the ISPs that are making the money in the Internet ecosystem, and that newspapers provide value for which they are not being compensated. 

Others might argue that "newspapers" are failing in many countries because it is a product people do not want to buy. There are important revenue issues, one cannot deny that. 

But the problem is a decline in demand for the product, which is disrupting the existing revenue model. ISPs are not causing that problem, "people who want to read newspapers" and "advertisers who spend elsewhere" are creating that problem. 

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