Should App Providers Pay 'Terminating Access' Fees?

Are major app providers, especially those providing video entertainment, interconnecting networks? If so, do those app providers have an obligation to pay terminating access fees?

The argument might sound odd, but that, essentially, is what some in the European Internet ecosystem argue is the right course.

Ignore for the moment the “justness” or “rightness” of the matter, and consider only the distribution of revenues.

ISPs argue that the immense value being created in the ecosystem leads to revenue streams that largely are captured by app providers and not access providers. Some of those ISPs are calling for revenue sharing.  

Though the language of “level playing field” or “fairness” will be used, the real issue is revenue sharing. ISPs essentially use the older notion of “network interconnection” to press for a sharing of revenue, essentially because some app providers impose high terminating loads on local networks.

Though it is not said, the notion is that an originating traffic provider uses a terminating network’s resources, and therefore should compensate the terminating network for such usage. Never mind that it is a regulatory concept applicable to common carriers. A functional equivalent now is proposed for “termination” of Internet traffic as well.

“The key issue is the unequal treatment of the traditional players and the OTTs, which should really be called ‘over the tax,’” said Francoise Benhamou, a member of the French regulatory body ARCEP.

In some cases, the effort is simply to impose taxes or regulatory rules on similar services, such as streaming video and managed video entertainment services, for example. In other cases the effort is more directly aimed at revenue sharing.

The language often uses a “taxation equity” or “level playing field” context, but the debate really is about terminating revenues, one might argue.

Maxime Lombardini, CEO of Iliad Free, for example, argues that Canal+ pays Free up to €5 ($6.90) per month per subscriber to distribute its video content over the ISP’s access facilities.

In essence, that is a termination fee paid by an app provider to an ISP for landing traffic.