Latin America is the last frontier for a global push by major telecommunications companies to have content and application providers, and ultimately consumers, pay extra charges for the use of telecommunications networks – in other words, a push for a network usage fee.
The idea, which has been discussed and rejected worldwide, given its lack of evidence and potential for negative outcomes, has now been shaped into a concrete proposal in Brazil, the largest economy in Latin America.1
Submitted by major telecoms companies in response to the Brazilian telecommunications regulator ANATEL’s consultation on users’ duties, the proposal suggests that services accounting for more than five per cent of traffic volume should pay an additional fee for excess gigabytes on their fixed and mobile networks. This would address an alleged risk of digital infrastructure collapse due to increased data traffic, while giving major telcos greater investment capacity.
The idea is still under discussion. Following the consultation on users’ duties, ANATEL has yet to unveil its results and any next steps. What is clear so far is that a network usage fee is supported by only the few major telecoms operators in Brazil – but not by the evidence.
Various projections conclude that there is no data traffic congestion, but rather a trend of deceleration, both in Brazil and worldwide
The Open Internet Alliance, an organisation I have the honour of leading, has been producing studies and evidence showing the potential negative impacts of network fees on Brazilian society and economy.2 Our alliance currently includes roughly 30 organisations ranging from content and service providers to associations from various sectors, such as small and medium internet service providers (ISPs), digital health, online education and AI. Our allies represent more than 5,000 companies. We are all concerned about the effects of this proposal on the digital ecosystem and ultimately on the internet as we currently know it.
In practice, implementing a network fee would penalise Brazilian consumers, who already pay high prices for internet access. According to the latest digital quality of life index,3 a Brazilian earning the minimum wage must work 353 minutes (nearly six hours) to afford even the most basic broadband plan – seven times more than an American worker.
With a network fee, data-intensive services such as telemedicine and online education would in all likelihood become more expensive. Recently, we demonstrated how Brazilians from lower social classes and poorer regions would be disproportionately affected by the increased cost of internet access.4
The argument from the few telecoms companies supporting the fee is that the increase in data traffic over the past decade has led to disproportionate infrastructure investments. They also claim a significant revenue decline during the same period. Finally, they argue that their return on invested capital is lower than that of content and service providers, positioning themselves as disadvantaged. We counter these claims with four key points.
Firstly, various projections conclude that there is no data traffic congestion, but rather a trend of deceleration, both in Brazil and worldwide. This includes not only our projections,5 based on public data and academic models, but also analysis from Ericsson6 and even the GSMA, an organisation that represents major telecoms companies and which acknowledges that data growth is slowing down in Latin America, except for mobile traffic.7
Secondly, the revenue decline is misrepresented. The alleged drop in revenue includes not only connectivity services but also income from pay-TV packages – a declining market unrelated to connectivity. In fact, despite what is described as a sharp revenue decline, major telecoms company financial reports show growth in key indicators of financial health over recent years, as outlined in the charts below.8
Figure 1: Average returns for major Brazilian telecoms companies, 2012-2023. Source: br.investing.com
Figure 2: Earnings margins for major Brazilian telecoms companies, 2012-2023. Source: br.investing.com
Thirdly, analysis shows that the financial returns of telecoms companies in Brazil are comparable to those of other activities in the infrastructure sector, such as energy and logistics.9
Last but not least, profitability does not justify regulatory intervention. The fact that one economic activity is more profitable than another does not warrant the implementation of public policy. As Brazil’s Ministry of Finance highlighted in its submission to ANATEL’s consultation, there is no evidence of market failure that would justify the imposition of a network fee.10
Despite traffic growth over the last decade, particularly during the pandemic, demand has been absorbed by various players in the connectivity chain.11 Alongside telecoms investments, content providers have established new points of presence in cities like Fortaleza, Porto Alegre, and Brasília. These companies have also launched content delivery networks, bringing videos, photos and texts originally hosted abroad closer to Brazilian users, reducing latency. As a result, even with increased traffic, content quality has remained high placing Brazil as one of the top 30 markets in fixed broadband speed tests, ahead of countries such as the United Kingdom, Finland and Norway.12
In short, from both consumer and market perspectives, there is no problem to solve.
Thanks to sound decisions by the telecoms regulator ANATEL, Brazil has fostered a vibrant environment in which even those outside major urban centres have gained internet access, though much progress remains to be made.
In this open ecosystem, over 50 per cent of fixed broadband internet connections are provided by small regional providers. A network fee would benefit only a few telecoms giants, dealing a heavy blow to competition with the thousands of ISPs that provide over 90 per cent of access in cities with fewer than 30,000 inhabitants.
The change would disrupt not only competition but also the very design of the internet, a complex system involving many stakeholders. As seen in South Korea, this scenario would lead to a fragmented, slower and more expensive internet for consumers, undermining citizens’ and the country’s ambitious digital transformation goals.13 14
As a former congressman and the rapporteur for Brazil’s Internet Bill of Rights, the law that enshrined net neutrality as a fundamental principle, I have spent the last decade highlighting how important an open, free and neutral internet is for our country. The Open Internet Alliance will continue to engage in the debate, demonstrating that in Brazil—and in many other parts of the world—there is nothing ‘fair’ about network usage fee proposals.
