The Big Story: Network access fee debates heat up worldwide
This week, European telecom companies redoubled their push to make large Internet companies pay based on the traffic they generate, a policy that would undermine net neutrality principles and negatively impact the broader Internet ecosystem. The push comes after months of agitating by Internet service providers (ISPs) for the payments, called network access fees, and amid a growing number of jurisdictions that have taken steps toward such policies, including South Korea.
Last year, large European ISPs called on tech companies to pay for a specific portion of the Internet service providers’ network upgrade costs. The ISPs allege that technology companies and other content providers create the majority of Internet traffic and are “free-riding” on the network (despite the fact that Internet users, including individual consumers and businesses, already pay ISPs for access to their networks). Earlier this year, the telecom lobby laid out proposals to facilitate such payments which found favor with some EU policymakers, and the EU is planning to launch a consultation early next year to decide if network access fees should be imposed. Similar policies are being proposed in South Korea. The country began imposing fees based on traffic sent between ISPs in 2016, which has resulted in high costs for content providers. Several proposals would expand those fees to online content providers and allow ISPs to deny traffic from those that do not pay the network access fees.
The serious consideration of the “sender pays” model in the EU and South Korea contravenes a longstanding international focus on net neutrality principles and threatens to spread the policies to other countries. In the U.S., network access fees are supported by at least some policymakers, with U.S. Federal Communications Commissioner Brendan Carr calling for tech companies to pay their “fair share” for broadband network upgrades during an event with EU telecom companies earlier this week. Network access fees based on a sender pays approach is fundamentally bad policy that undermines net neutrality, harms the Internet ecosystem, and will result in increased costs for end users—including through double payment. Policymakers should defend against proposals that undermine net neutrality, which support startup activity across the country and globally and fosters a free and open Internet that innovators can rely on to reach their users and grow their businesses.
Policy Roundup:
SBIR reauthorization passes House. The House voted overwhelmingly this week to reauthorize the Small Business Innovation Research (SBIR) grant program through 2025. The program serves as a critical funding source for many startups engaged in research and development. The legislation now moves to President Biden for his signature.
Merger filing fee, venue package passes House. On Thursday, the House passed a package of three bills related to antitrust. The legislation included the Merger Filing Fee Modernization Act, which would generally raise filing fees on proposed mergers over $1 billion while lowering fees for those under $1 billion, the Foreign Merger Subsidy Disclosure Act, which requires disclosure of any subsidies from certain foreign entities, and the State Antitrust Enforcement Venue Act, which would prevent the consolidation and transfer of various antitrust cases brought by state attorneys general. In June, the Senate passed the venue bill but has not taken up versions of the others. The House package was subject to intra-party conflict on both sides despite being widely seen as the least controversial of the antitrust proposals, and is viewed as a potential test for how other, more controversial bills might fare.
Student debt relief challenged. The Biden administration is facing legal challenges to their efforts to cancel up to $10,000 in student loans for many borrowers and up to $20,000 for Pell Grant recipients. On Thursday, six Republican-led states filed a suit in federal court in Missouri, claiming Biden’s cancellation plan is “not remotely tailored to address the effects of the pandemic on federal student loan borrowers.” Earlier in the week, the Pacific Legal Foundation filed a challenge that was ultimately dismissed, asking for an immediate order blocking the debt relief plan, alleging that providing relief to borrowers could force forgiveness recipients to confront higher income tax burdens in certain states. Also this week, the Education Department announced that borrowers with privately held federal student loans will no longer be eligible to receive loan forgiveness. As we’ve stated in the past, the student debt crisis serves as a roadblock to entrepreneurship for many young Americans. Easing this burden could lead to more innovation and startup creation, particularly for underrepresented founders.
Step toward restoring transatlantic data flows expected next week. The White House is expected to publish a long-waited executive order—designed to address European concerns over surveillance practices in the U.S.—next week. The order, first outlined by the Trans-Atlantic Data Privacy Framework this Spring, is a step toward restoring the Privacy Shield program which had enabled transatlantic data flows and was overwhelmingly relied upon by startups before it was invalidated in 2020. The EU will use this executive order as the basis for an adequacy decision—a months-long process that must be completed before data flows can be restored.
Council for Inclusive Innovation expands to include more federal agencies. On Tuesday, the Department of Commerce and U.S. Patent and Trademark Office (USPTO) announced they were adding five new Co-Vice Chairs to the Council for Inclusive Innovation (CI2)—a committee tasked with developing a strategy for building a more inclusive and expansive U.S. innovation ecosystem. The new co-chairs come from agencies within Commerce, the National Science Foundation, and the Copyright Office. While this committee was initially created within the USPTO, the latest announcement is a positive signal CI2 will take a “whole-of-government” approach to its work, instead of focusing narrowly on IP. This is consistent with calls Engine and 113 startup organizations made to USPTO last year—urging the agency to engage with the “complex barriers underrepresented founders face and propose concrete steps the federal government can take across agencies,” instead of viewing the problem only through the lens of patents.
General purpose AI included in compromise text of EU AI Act. Late last week the Czech Presidency of the Council of the EU released its latest draft text of the proposed AI Act, which suggests including general purpose AI tools in the AI Act’s scope. The AI Act, which would regulate the development and use of artificial intelligence in the EU based on risk, originally sought to balance risk of potential harm with the benefits of AI. Including general purpose AI systems would contravene the original risk-based approach, burden development, and threaten uptake of AI, as a coalition of startup and technology industry organizations argued in a letter this week.
Startup Roundup:
#StartupsEverywhere: New York City, New York. Airpals is a platform working to close gaps in the local delivery logistics market. They have built their technology with “a triple bottom line approach”—focusing on people, the planet, and profit—in mind. We spoke to the Founder, CEO, & Creative Director Joshe Ordonez about the goals she has for Airpals, how she navigates building her workforce as a growing startup, and the ways in which policymakers can support the interconnected tech ecosystem.
