A particularly ignorant suggestion

Instead, ministers could look at imposing a charge for them to contribute to the infrastructure they use – namely broadband. Like the debate over the charges foreign lorries should pay for using British roads, tech companies could be charged a license fee for the internet.

The government builds the roads and then charges, through VED and fuel duty, for the use of the roads. There is indeed an excellent argument that foreigners should contribute to those charges.

Broadband: call me picky if you like but I\’m pretty sure that it is BT, Virgin, Sky, various cable companies and the like that provide the internet in the UK. I could be wrong of course but I\’m not aware that this is a government provided piece of infrastructure.

If any fee is to be paid for corporate access to that infrastructure then I see no reason at all why that fee should be paid to government.

Plus, of course, there are two basic viable models to pay for the internet. Charging those who place content on it or charging those who wish to have access to the content placed thereon. As it happens everywhere uses the second model. Consumers are already paying the charges to build and maintain the infrastructure. There isn\’t anything being not paid for.

There is one technical bit that perhas someone could clear up for me. Are the backbone providers charging Facebook some fee for the traffic that goes in and out of their data centres?

6 thoughts on “A particularly ignorant suggestion”

  1. Are the backbone providers charging Facebook some fee for the traffic that goes in and out of their data centres?

    I suspect Facebook are big enough to be their own backbone provider. Microsoft and Google, whose arrangements I am more familiar with, certainly run their own peering connections.

  2. Facebook’s data centres will have dedicated fibre links to various internet exchanges. Gross simplification: at an internet exchange point, everybody pays to get into the club, but then trading (data peering) agreements between club members are not monetized, because they are of mutual benefit. My ISP wants fast access to Facebook, Facebook wants fast access to me.

  3. “Plus, of course, there are two basic viable models to pay for the internet. Charging those who place content on it or charging those who wish to have access to the content placed thereon. As it happens everywhere uses the second model.”

    Actually both. Everything has to be paid for. Faceboook pays for the servers to host their website and the electricity to run them, and for the connection between their servers and various exchanges. We pay our ISPs for the connection between our houses and the ISP; the ISP pays for the connection between the ISP and an internet exchange. Internet exchanges pay for backbone connections to other exchanges.

  4. Both the road network and the internet provide a consumer surplus. That is, the benefit of the thing they offer (getting from A to B quickly, sending emails) significantly exceeds the cost. In both networks costs keep falling as technology improves: fuel economy has leapt and the internet keeps getting faster.

    If you’re a government desperately seeking revenue, stealing that consumer surplus is one of the easiest options. In fact if you just steal the annual growth in that surplus, e.g. a fuel duty escalator, then people barely even notice it. Furthermore if you have control over the thing which provides the surplus (roads, but not the internet) then you can artificially restrict supply and justify your taxes on congestion grounds; or just invoke the green monster.

    Both congestion and the environment are externalities, and should indeed be taxed; but note how the government has some control over congestion by way of how many roads are built. They pulled off the same trick with mobile phone frequency auctions: sell off an artificially restricted range, thereby capturing as much consumer surplus as possible.

    Now they’d like to repeat this trick with the internet. Sadly they’re overlooking the fact that they don’t control the underlying physical asset in any meaningful way. However as long as there’s a great shiny consumer surplus sitting there, they’ll keep looking for ways to tax it.

    Incidentally, isn’t this content-providers tax the exact opposite of the Guardian’s proposed content-reader tax?

  5. Content providers like Facebook/Google/Yahoo/etc will get their content to eyeballs by a combination of direct peering with ISP’s and via third party “transit” provided by a large ISP. They usually run “open” peering policies to encourage direct peering, as you can see here:-

    https://www.facebook.com/peering/

    The rule is, the larger you are, the more every ISP wants to peer directly with you to cut out the transit costs.

    RADB data isn’t very illuminating, but route server data for FB suggests they take transit from Level3, Telia and Sprint amongst others.

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