The impact of network usage fees on the Brazil cloud market

Portuguese version

Policymakers in Brazil are considering regulation that would enforce mandated payments (network usage fees) from large online content and application providers (CAPs) to telecoms operators (i.e., internet service providers (ISPs)). These payments would be in addition to the payments that ISPs receive from end users. 

We find that the imposition of network usage fees would create frictions, costs, and disruptions to a very dynamic set of services which require high investments. This could result in increased costs for the substantial number of organisations, enterprises and businesses, of a wide range of sizes and from a wide range of sectors. This in turn could limit adoption of those cloud services, something which is key to achieving the digital transformation ambitions of the government of Brazil.

We have addressed the rationale and impact of network usage fees in previous papers, highlighting the lack of cost-based justification for such charges in most cases, and the potential impact of mandated traffic-related charges on the architecture and functioning of the internet.  In this paper we focus specifically on the impact of such payments if they were applied to providers of public content delivery networks (CDNs) and public cloud services.