tax – Techdirt (original) (raw)

Big Telecom Eyes More Broadband Usage Caps (And A Tax On Big Tech) As Revenues Sag

from the do-not-pass-go,-do-not-collect-$200 dept

Things aren’t too exciting if you’re a telecom executive right now.

All the hype in tech is singularly fixated on the more headline catching, stock fluffing, and usually very broken aspects of “AI.” 5G, hyped as a transformative world changing tech by overly eager telecom marketing departments, wound up being a consumer dud that users don’t want to pay extra for. And subscriber growth is slowing to a trickle outside of new home builds.

So what is a poor telecom monopoly to do? If you’re AT&T CTO Jeremy Legg attending a global telecom grievance session held at a recent industry event, the answer is to start charging consumers more money for the same product in the form of usage caps and overage fees:

“One thing I would say is the telco industry historically has had these all-you-can-eat business models and I think the world is moving more toward consumption-based business models versus all-you-can-eat business models and so we’re going to have to adapt to that reality.”

By “we,” of course, Legg means you, the bandwidth-purchasing consumer.

We’ve noted for decades that there’s absolutely no technical justification to have usage caps and overage fees on fixed broadband lines. It’s simply the act of price-gouging an uncompetitive market where consumers usually can’t switch to an alternative provider. AT&T has been at the forefront of this movement for decades, so it’s not surprising to see this as their very first answer to sagging revenues.

Of course it’s not all bad news for telecom. The last five year fixation on the obvious problems with “big tech” has allowed telecom to largely skirt under the internet policy radar. You don’t hear much about efforts to rein in telecom monopoly power anymore; outside of some freshly restored net neutrality rules that probably will never be enforced and may not survive the next presidential election.

International telecom executives know they need something to [goose stock valuations](http://"The reality is that our return on investment, our growth, is not good enough, and we can't be happy with where we are as an industry at the moment," said Kim Andersen, the chief technology officer of Australia's Telstra, in a DTW call to arms. "We need to reinvent this industry and save this industry.") and spike sagging revenues:

“The reality is that our return on investment, our growth, is not good enough, and we can’t be happy with where we are as an industry at the moment,” said Kim Andersen, the chief technology officer of Australia’s Telstra, in a DTW call to arms. “We need to reinvent this industry and save this industry.”

In telecom, of course, that won’t actually involve being innovative or developing new exciting products people actually like. Because what most people want is a simple, dumb, inexpensive pipe to the internet. And it most certainly won’t involve trying to compete harder for subscriber affections, because that again would involve lowering prices, expanding access, or improving low-quality customer service, all stuff that harms short-term quarterly returns.

Enter the other big looming telecom gambit: the effort to force tech companies to pay them billions of dollars for no reason. Pitched to regulators in the EU and U.S. as a way to shore up broadband to areas telecoms historically couldn’t care less about, the idea effectively involves pretending that tech companies get a “free ride” on the internet, then imposing extra, duplicative telecom surcharges simply for existing.

I’d recommend this Internet Society piece on these so-called “sender pays” initiatives and how they ultimately just break the internet while driving up costs for everybody.

Of course consumers and enterprise broadband customers alike pay an arm and a leg already for broadband access thanks to widespread telecom monopolization. And despite a steady stream of billions in subsidies, those monopolies’ fiber expansions are mysteriously always left somehow half-complete. And now they’re proposing forcing tech giants (read: you) to pay for more fiber you may never see.

Despite this being a ham-fisted cash grab by an industry long known for ham-fisted cash grabs, these efforts are gaining more traction than you might think. The model has seen some success in South Korea, driving companies like Twitch out of the country and driving up costs for consumers. In the EU, telecoms are pushing for a tax for any tech company that accounts for over 5% of a telco’s average peak traffic.

The telecom industry effort has so far seen little meaningful traction under the Biden administration. But if Trump wins the next election, I 100% guarantee that one of FCC Boss Brendan Carr’s (R, AT&T) top priorities will be pushing big tech companies to pay telecoms billions of dollars in new, senseless telecom taxes in exchange for a bunch of layoffs and fiber networks you’re unlikely to ever actually see.

Filed Under: broadband, caps, high speed internet, sender pays, tax, telecom, wireless

Canada Imposes 5% Tax On Streaming To Fund Local News, Diverse Content

from the get-ready-to-pay-more dept

Thu, Jun 13th 2024 05:27am - Karl Bode

Canadian Regulators are leaning on new authority built into the 2023 Online Streaming Act to impose a new 5 percent tax on streaming TV and music services like Netflix and Spotify; funding that the regulator says will then be used to help fund Canadian broadcasting.

According to the Canadian Radio-television and Telecommunications Commission (CRTC) announcement, the plan should drive $200 million in new funding annually to local news and a variety of other public interest content:

“The funding will be directed to areas of immediate need in the Canadian broadcasting system, such as local news on radio and television, French-language content, Indigenous content, and content created by and for equity-deserving communities, official language minority communities, and Canadians of diverse backgrounds.”

The fee systems effectively mirrors the fees already imposed on local broadcasters. Past efforts on this front (in the U.S. and Canada) haven’t been received particularly well by streaming giants, and the same applied here. The Digital Media Association, which represents Amazon Music, Apple Music and Spotify, insisted in a statement that the new tax will only expand what they’re calling an “affordability crisis”:

“As Canada’s affordability crisis remains a significant challenge, the government needs to avoid adding to this burden. This is especially true for younger Canadians who are the predominant users of audio streaming services.”

Huge contracts for the likes of Joe Rogan and Wall Street’s insatiable demand for relentless quarterly growth have more to do with streaming affordability than anything else, though in this case the services are correct in that they’ll simply pass the cost of the new taxes directly on to users. Facing slowing subscriber growth, streaming giants have already been pretty relentlessly raising rates.

That said, real journalism (especially independent and minority owned) is consistently facing a funding crisis, and much of the conversation (both in the U.S. and Canada) tends to be centered around what isn’t possible, shouldn’t be done (usually framed around the interests of giant corporations), as opposed to actually fixing the problem.

At the same time, similar efforts are often derailed by corruption, and there’s no guarantee the money guaranteed for useful things actually finds the way it its original destination.

Efforts to tax streaming companies to help fund broadband deployment in the States, for example, risk being hijacked by telecom giants looking to exploit corrupt policymakers simply to pad their wallets. Municipalities in Texas have also tried to tax Netflix with a fairly broad disdain for existing law and no particular public interest initiative in mind.

Filed Under: canada, crtc, journalism, streaming, tax, video

French Collection Society Wants A Tax On Generative AI, Payable To Collection Societies

from the corruption-corruption-everywhere dept

Back in October last year, Walled Culture wrote about a proposed law in France that would see a tax imposed on AI companies, with the proceeds being paid to a collecting society. Now that the EU’s AI Act has been adopted, it is being invoked as another reason why just such a system should be set up. The French collecting society SPEDIDAM (which translates as “Society for the collection and distribution of performers rights”) has issued a press release on the idea, including the following (translation via DeepL):

SPEDIDAM advocates a right to remuneration for performers for AI-generated content without protectable human intervention, in the form of fair compensation that would benefit the entire community of artists, inspired by proven and virtuous collective management models, similar to that of remuneration for private copy.

This remuneration, collected from AI system suppliers, would also help support the cultural activities of collective management organizations, thus ensuring the future employment of artists and the constant renewal of the sources feeding these tools.

That sounds all well and good, but as we noted last year, collecting societies around the world have a terrible record when it comes to sharing that remuneration with the creators they supposedly represent. Walled Culture the book (free digital versions available), quotes from a report revealing “a long history of corruption, mismanagement, confiscation of funds, and lack of transparency [by collecting societies] that has deprived artists of the revenues they earned”. They also have a tendency to adopt a maximalist interpretation of their powers. Here are few choice examples of their actions over the years:

SPEDIDAM’s press release is interesting as perhaps the first hint of a wider pan-European campaign to bring in some form of levy on the use of training data for generative AI services. That would just take a new bad idea – taxing companies for simply analyzing training material – and add it to an old bad idea, that of hugely inefficient collecting societies. The resulting system would be a disaster for the European AI industry, since it would favor deep-pocketed US companies. Moreover, this approach would produce no meaningful benefit for creators, as the sorry history of collective societies has shown time and again.

Follow me @glynmoody on Mastodon. Originally posted to Walled Culture.

Filed Under: ai, ai tax, collection societies, copyright, culture, fairness, tax
Companies: spedidam

from the how-very-french dept

This blog has written a number of times about the reaction of creators to generative AI. Legal academic and copyright expert Andres Guadamuz has spotted what may be the first attempt to draw up a new law to regulate generative AI. It comes from French politicians, who have developed something of a habit of bringing in new laws attempting to control digital technology that they rarely understand but definitely dislike.

There are only four articles in the text of the proposal, which are intended to be added as amendments to existing French laws. Despite being short, the proposal contains some impressively bad ideas. The first of these is found in Article 2, which, as Guadamuz summarises, “assigns ownership of the [AI-generated] work (now protected by copyright) to the authors or assignees of the works that enabled the creation of the said artificial work.” Here’s the huge problem with that idea:

How can one determine the author of the works that facilitated the conception of the AI-generated piece? While it might seem straightforward if AI works are viewed as collages or summaries of existing copyrighted works, this is far from the reality. As of now, I’m unaware of any method to extract specific text from ChatGPT or an image from Midjourney and enumerate all the works that contributed to its creation. That’s not how these models operate.

Since there is no way to find out exactly who the creators are whose work helped generate a new piece of AI material using aggregated statistics, Guadamuz suggests that the French lawmakers might want creators to be paid according to their contribution to the training material that went into creating the generative AI system itself. Using his own writings as an example, he calculates what fraction of any given payout he would receive with this approach. For ChatGPT’s output, Guadamuz estimates he might receive 0.00001% of any payout that was made. To give an example, even if the licensing fee for a some hugely popular work generated using AI were €1,000,000, Guadamuz would only receive 10 cents. Most real-life payouts to creators would be vanishingly small.

Article 3 of the French proposal builds on this ridiculous approach by requiring the names of all the creators who contributed to some AI-generated output to be included in that work. But as Guadamuz has already noted, there’s no way to find out exactly whose works have contributed to an output, leaving the only option to include the names of every single creator whose work is present in the training set – potentially millions of names.

Interestingly, Article 4 seems to recognize the payment problem raised above, and offers a way to deal with it. Guadamuz explains:

As it will be not possible to find the author of an AI work (which remember, has copyright and therefore isn’t in the public domain), the law will place a tax on the company that operates the service. So it’s sort of in the public domain, but it’s taxed, and the tax will be paid by OpenAI, Google, Midjourney, StabilityAI, etc. But also by any open source operator and other AI providers (Huggingface, etc). And the tax will be used to fund the collective societies in France… so unless people are willing to join these societies from abroad, they will get nothing, and these bodies will reap the rewards.

In other words, the net effect of the French proposal seems to be to tax the emerging AI giants (mostly US companies) and pay the money to French collecting societies. Guadumuz goes so far as to say: “in my view, this is the real intention of the legislation”. Anyone who thinks this is a good solution might want to read Chapter 7 of Walled Culture the book (free digital versions available), which quotes from a report revealing “a long history of corruption, mismanagement, confiscation of funds, and lack of transparency [by collecting societies] that has deprived artists of the revenues they earned”. Trying to fit generative AI into the straitjacket of an outdated copyright system designed for books is clearly unwise; using it as a pretext for funneling yet more money away from creators and towards collecting societies is just ridiculous.

Follow me @glynmoody on Mastodon. Originally posted to WalledCulture.

Filed Under: ai, collection societies, copyright, creativity, france, tax

Publishers Lobbied To ‘Axe The Reading Tax’ On Ebooks, Then Paid It To Themselves

from the lobbying-for-profits,-not-public-benefit dept

One of the (many) villains in “Walled Culture” the book (free ebook versions) is the publishing industry, specifically in the context of the transition from analogue books to ebooks. What could have been one of the most important expansions of the power and possibility of the book form became instead its opposite – a diminishment of both. As a result of publishers’ greed, ebooks became something you rented, rather than owned. Libraries are particularly hard hit: publishers typically only allow the books they license to educational establishments to be lent out for a limited number of times, or for a limited period. Publishers achieved the feat of using the shift to powerful digital technologies to make books less useful, purely in order to boost their profits.

The Walled Culture book explains in detail how the industry was able to do that thanks to bad copyright laws being abused yet further. But there’s a footnote to this transition that I was unaware of when I wrote my history of copyright in the digital age, but which underlines the extent to which most publishers are driven purely by the bottom line, and care little for readers or writers.

It concerns the taxing of books in the UK. Most goods there are subject to a Value Added Tax (VAT), which is a simple percentage of the sale price – generally 20%. However, certain classes of goods are exempt: this applies to things like food, children’s clothing, and also books. Or rather, to physical books: one quirk of the early ebook market was that ebooks were taxed at 20%, even though physical books were not. This led to a 2018 campaign with the catchy slogan “Axe the reading tax”. It was led by the Publishers Association, which wrote in a press release at the time:

Stephen Lotinga, CEO of the Publishers Association, said: “The government must do everything it can to cut the unfair tax on ebooks, magazine and newspaper online subscriptions.

“It makes no sense in the modern world that readers are being penalised with an additional 20% tax for choosing to embrace digital.

“Whether a book, newspaper or magazine is electronic does not change the principle that we should not be taxing reading and learning.

It was a powerful campaign, backed by just about everyone who cared about books, reading, education and knowledge. It had an extensive Web site Axethereadingtax.org, with lots of very good reasons why the tax should be abolished, such as:

A simpler VAT regime would benefit universities and libraries in terms of freeing up resource and money, as well as students buying educational materials.

And…

Digital formats are vital for the blind and partially sighted, who can listen to audiobooks or read in the largest print sizes on electronic devices, for those with dyslexia and for elderly or disabled people who may lack the physical capabilities to handle print books easily.

The extra 20% tax meant that everyone was paying higher prices for no benefit. The Publishers Association pointed out:

Removing the VAT from ebooks and epublications would mean that people who buy them would benefit from lower prices. The impact on the government would be a modest reduction in VAT revenues and is small relative to reduced VAT revenues from other goods and services which are zero-rated, including caravans and hot takeaway food.

The good news is that in 2020, the UK government finally removed the 20% VAT on ebooks. The Publishers Association was rightly triumphant:

We are thrilled that, as of 1 May 2020, the unfair 20% VAT on eBooks and digital newspapers, magazines and journals has been removed. Knowledge and learning are vital, whatever format you favour.

Three years later, it’s interesting to see how that has worked out in practice, and fortunately Tax Policy Associates have done the calculations. Here’s what they found:

The VAT cut means that ebook publishers could have cut their prices by 17% and made the same profit. They didn’t. Over this period there were 8%+ price reductions for comparable products – computer game and app downloads – where there was no VAT cut. There were no overall price reductions for ebooks.

We also analysed individual pricing data for the 30 best-selling ebooks on Amazon UK in 2020 (as Amazon is by far the most significant ebook retailer). Only four out of thirty showed a sustained price reduction which could plausibly have been attributed to the May 2020 VAT cut. That likely overstates the effect.

UK government figures show that dropping VAT on ebooks cost the state £200 million. In theory, that is £200 million that could have flowed to everyone buying ebooks, in the form of lower prices. Here’s where it actually went:

Amazon generally retains a royalty of around 30%, so we can say that of the £200m annual cost of the VAT abolition, Amazon received about £60m and publishers/authors about £140m.

To put these figures in context, the publishing industry’s UK profit in 2021 was probably around £200m. Even after increased author royalty payments, this looks like a very significant enhancement to publisher profitability.

This is a perfect example of the how the copyright world operates. It lobbies for changes in the law, claiming that the public is suffering in some way, and exploits the willingness of creators to help put pressure on the government to right that wrong. But when those changes are made, the companies do not pass on the benefits to the public or creators, but keep most of it for themselves.

In the case of axing the reading tax, it was indeed axed – but none of the claimed benefits for universities, or the blind and partially sighted materialized. The publishers kept book prices the same, which means that they picked up an extra 20% of an ebook’s price, since they no longer had to pay VAT. In effect, the tax was still there, but now it simply went to publishers, not the government. All the problems the Publishers Association complained about in terms of the harm to books, reading, learning and education remain. But publishers have become much richer for zero additional work, so suddenly these things don’t matter any more…

Follow me @glynmoody on Mastodon or Twitter. Originally posted to the Walled Culture blog.

Filed Under: books, ebooks, publishers, tax, uk, vat
Companies: publisher's association

The FCC Ponders A Hugely Problematic Tax On WiFi

from the this-won't-end-well dept

Thu, Nov 18th 2021 06:35am - Karl Bode

For years, we’ve noted how telecom and media giants have been trying to force “big tech” to give them huge sums of money for no reason. The shaky logic usually involves claiming that “big tech” gets a “free ride” on telecom networks, something that’s never actually been true. This narrative has been bouncing around telecom policy circles for years, and recently bubbled up once again thanks to FCC Commissioner Brendan Carr.

Carr’s push basically involves parroting AT&T’s claim that big tech should be funding AT&T network upgrades. You’re to ignore the fact that giants like AT&T routinely take billions in tax breaks and subsidies for network upgrades that never arrive. This quest to punish “big tech” with unnecessary new surcharges is something that’s also supported by the National Association of Broadcasters, who have long hated companies like Microsoft’s efforts to use unlicensed spectrum from unused television channels (aka “white spaces”) to deliver new broadband options.

The FCC does desperately need to find more funding revenue to shore up programs like the Universal Service Fund (USF) and E-Rate, which help provide broadband access to schools and low income Americans. So it recently announced it would be considering a new tax on unlicensed spectrum. Pressured by NAB, the Biden FCC’s plan would assess regulatory fees on ?unlicensed spectrum users,? which would include users of Wi-Fi, Bluetooth and other consumer wireless devices. It’s a tax on tech, proposed by telecom and media companies that want to punish their ad and data collection competitors in tech.

Harold Feld, who probably knows more about wireless spectrum policy than anybody, has penned a helpful piece over at Forbes explaining why this is a terrible idea. He outlines that NAB’s real goal is to punish companies like Microsoft for daring to use spectrum the broadcast industry falsely believes belongs to them:

“The NAB has made it abundantly clear this is payback against tech companies ? particularly Microsoft. Broadcasters don?t just claim to own their individual channels. They claim to collectively own all ?broadcast spectrum.? About 10 years ago, the FCC authorized unlicensed access to unused television channels, aka ?TV white spaces.? Broadcasters vowed to strangle the new technology in its cradle rather than share ?their? spectrum and, unfortunately, were largely successful. But in recent years, Microsoft has tried to resurrect the TV white spaces as a way of bringing broadband to rural America.”

The FCC’s proposal may go nowhere. Interim (and soon permanent) FCC boss Jessica Rosenworcel may just be doing her due diligence, and opening the door to a conversation about various options to shore up dwindling FCC broadband program funding. But Harold makes it very clear the proposal, if adopted, would be hugely problematic and defeat the benefit of unlicensed spectrum:

“The idea that a tax on unlicensed spectrum would only hurt Microsoft or ?big tech? is absurd. The whole point of unlicensed spectrum is that it?s open for everyone to use. The effort by broadcasters to impose a Wi-Fi tax should be as laughably ridiculous as modem taxes and email taxes. But rather than simply deny the proposal, the FCC has put it out for public comment.”

While Harold’s correct that this particular push belongs to NAB, the broader push to hit “big tech” with various new FCC regulatory fees is something also being supported by telecom giants, and the regulators who love them. Both broadcasters and telecoms realize the FCC is desperate for new funding for low-income programs, and want to exploit that with efforts that predominately benefit themselves. For NAB, it’s punishing big tech for daring to innovate using spectrum it falsely thinks it owns. For AT&T, it’s forcing “big tech” to pay for network upgrades it routinely fails to finish despite billions in tax breaks, regulatory favors, and subsidies.

Filed Under: bluetooth, broadcasters, e-rate, fcc, radio, tax, usf, wifi
Companies: nab

FCC's Carr Still Pushing A Dumb Telecom Tax On 'Big Tech'

from the misdirection-ahoy dept

Mon, Sep 20th 2021 06:24am - Karl Bode

A few months back we noted how FCC Commissioner Brendan Carr had taken to Newsweek to dust off a fifteen year old AT&T talking point. Namely that “big tech” companies get a “free ride” on telecom networks, and, as a result, should throw billions of dollars at “big telecom” for no real reason. You’ll recall it was this exact argument that launched the net neutrality debate, when former AT&T CEO Ed Whitacre proclaimed that Google wouldn’t be allowed to “ride his pipes for free.” Basically, telecom giants have long wanted somebody else to fund network builds they routinely leave half finished despite billions in subsidies.

Carr, who has been trying to seed this idea in the press and policy circles for months, was back at it again last week, pointing to a new Oracle-funded study that suggests funding broadband expansion via a tax on advertising revenue:

As usual with Carr, there are a few problems here.

The study in question took a look at the FCC’s USF system, which helps subsidize broadband expansion and provides some small broadband, wireless, or phone discounts (a paltry $9.25 per month, to be specific) to low income Americans. At no point does the study actually suggest companies like Google get a “free ride” on the internet. Nor does it suggest “big tech” alone is responsible for funding the program. It does recommend that taxing bloated adtech revenues in general might be a good way to shore up lagging USF contributions.

But the study also recommends several other things, like helping ensure broadband subsidies are useful by raising the FCC’s current pathetic definition of broadband (25 Mbps down, 3 Mbps up) to something modern and useful, something Carr has actively opposed. Why has he opposed it? Because the telecom industry opposes it. Why does the telecom industry oppose it? Because a higher standard would reveal market failure, a lack of competition, and how that results in substandard and expensive service. It’s a story as old as time at this point.

There are a few things that are true. One, the USF does need more funding. As the report notes, the flatlining level of broadband subscriber growth (because of a saturated market) means that just levying USF fees on broadband and phone lines doesn’t scale with funding needs. It’s not unreasonable to consider expanding the contribution base to the profit-rich adtech sector in general, but again that’s just one idea of several. And Carr distorts it in strange ways that signal he’s not really approaching any of this in good faith.

One, the idea that Google gets a “free ride” on the internet is a bullshit, antiquated talking point telecom giants have been pushing for years. A company like Google spends billions of dollars on their own transit, cloud, and broadband infrastructure. Hell, Google even owns its own residential ISP (Google Fiber). And as the freshly unredacted version of Epic’s antitrust lawsuit against Google shows, Google has (stupidly, frankly) been paying wireless carriers billions of dollars since 2009 simply to not compete with its app store. There’s no free ride with U.S. telecom. Ever. Claims to the contrary are just nonsense.

If you’re familiar with telecom problems and serious about fixing them (and again, Carr is not), your first impulse should not be “make Netflix and Google throw money at it.” Your first topic of discussion should be the endless tax breaks, subsidies, and regulatory favors (see: killing net neutrality) we throw at telecom giants for little to nothing.

Time after time after time entrenched telecom giants promise they’ll cover the world in cheap, next-generation broadband and amazing jobs if only they get “X,” be that merger approval, more subsidies, deregulation, whatever. And time after time after time those promises prove absolutely hollow. Hell, Carr and Trump’s FCC majority is fresh off a scandal in which it doled out more than $9 billion dollars to companies that were gaming the entire FCC process, nabbing huge sums of money by making promises that made no coherent sense.

Carr not only doesn’t bring any of that up here, he never brings it up. He always actively ignores all of telecom’s warts, including the indisputable fact that U.S. broadband is heavily regionally monopolized, resulting in high prices that harm everybody, particularly low income Americans. Like Trump FCC boss Ajit Pai, he’s literally incapable of acknowledging the telecom sector has any such flaws, which should set off alarm bells. If you’re a telecom regulator who can’t admit the telecom sector has major flaws, yet is always incessantly fixated on the flaws of companies telecom has a beef with and you don’t regulate (Pai had this very same mysterious habit), I’d say that’s a pretty solid warning sign you may not be operating consistently and objectively as a policymaker.

Again, I think the telecom and media (Rupert) industries have been working hard in DC for several years to exploit the recent (and usually very valid) animosity against big tech to push several agendas. One is to saddle companies whose ad revenues they covet with additional layers of obligation and regulation, while removing oversight of their own sectors (see: the elimination of media consolidation and net neutrality rules by Carr and Pai). The other is, which is a 20 year old ploy at this point, to push the idea that other companies and industries should be giving them billions in additional dollars for networks that mysteriously always wind up only half deployed.

Filed Under: advertising, big tech, brendan carr, fcc, free ride, net neutrality, tax, universal service fund
Companies: facebook, google, oracle

Australian News Sites Shocked & Upset To Learn They Don't Need To Rely On Facebook For Traffic!

from the wait,-that's-possible?!? dept

I am still perplexed and confounded at how many people seem to think that Facebook is the one at fault for blocking links to news in Australia. Again, the law (that was about to be approved by the Australian Parliament despite Facebook warning them months ago that it would be forced to block news links if it went forward in its current form) would have been a disaster for the open web. And that’s even if you believe that Facebook itself has been a disaster for the open web. You can say that Facebook is the worst company in the world… and still recognize that this was the right move.

The law mandated that if Facebook had any links to news, then it had to negotiate a deal to pay certain news organizations (mainly Australia’s largest news organizations, where Rupert Murdoch is the dominant owner in a news industry that is one of the most consolidated in the world). If Facebook and Murdoch couldn’t reach an agreement, then they had to go to binding arbitration in which an arbitrator would simply tell Facebook how much it had to give Murdoch and other major media owners. Some have argued that this is not a tax, but… having the government step in to force a company to pay money for doing business is, by any normal definition, a tax. Though, this is actually worse than a tax, because it’s not putting the money into the hands of the government to be invested in public works. It’s going to one of the richest people in the world. For what? For failing to adapt to a changing market.

As we noted a few years ago, it’s truly stunning that Murdoch, who has spent much of his life going around the world preaching the gospel of “free market” and deregulation, completely changed his tune when he completely misunderstood the internet, and saw multiple internet investments disappear. So he turns around and demands that the companies who actually innovated simply have to give him money? That doesn’t sound like a free market. It sounds like welfare for a billionaire who’s upset he’s not even richer.

Even so, the most bizarre thing about last week’s story is how many Facebook haters who have insisted for years that Facebook “killed” the news business were absolutely apoplectic that Facebook was getting out of the news business entirely. You’d think they’d celebrate. Facebook can’t keep killing the journalism business if it’s not in that business any more.

The other bizarre reaction — which filled my Twitter feed to a point of ridiculousness for days — was the claim that Facebook was somehow “blocking important news” in Australia, including news about the pandemic and vaccines. Except… it wasn’t. No news was “blocked.” Just links to news on Facebook. All of these news organizations have websites. And many have apps. And they all still exist.

Indeed, the most amusing thing in all of this is that people in Australia are suddenly discovering that they don’t need Facebook for news. The Australian Broadcasting Company (ABC) saw its own news app shoot to the top of the Apple App Store charts in Australia. Ironically, the original draft of this stupid law was so biased towards Murdoch that it originally excluded ABC from getting any money, and was only added later, after some folks pointed out how blatantly corrupt it was to leave them out and just funnel more money to Murdoch. But it’s not just ABC that has benefited. In a Reuters story, News Corp’s executive chairman in Australia, Michael Miller, admitted that direct traffic to their websites was way up as referrals from Facebook disappeared:

?Definitely referral traffic was nonexistent … while at the same time direct traffic to our websites was up in double digits,? he told the inquiry.

That… seems like a good thing? But, of course, this was never actually about helping news organizations like this. It was always about the cash transfers. Because immediately after Miller admits that direct traffic to their websites is way up, he demands that the Australian Competition and Consumer Commission (ACCC) “scrutinize Facebook’s move.”

I mean… what the fuck is going on here?

Rather than having Facebook mitigate your traffic, which is what you’ve been complaining about for years, the company has exited the space, leading to a massive jump in direct traffic. The reaction here shows pretty clearly that the problem is not Facebook. The problem is that News Corp. and other Australian news organizations are too lazy to actually do anything with all of this direct interest. Facebook just dumped a direct connection to users right in these news organizations’ laps — removing Facebook as a middleman — and the news organizations’ response is… to blame Facebook and try to get the Competition authority to go after them. For what? Helping them? This whole thing is so bizarre.

The same Reuters report notes that traffic from Facebook to Australian news sites plummeted after the ban, as you’d expect. But, again, isn’t that what all the Facebook haters wanted in the first place? To get Facebook out of the news intermediary business?

It seems the truth is pretty self-evident: this was all a greed play. They just want Facebook’s money, but they don’t want to actually do the work to earn it.

Filed Under: australia, direct traffic, link tax, news tax, tax, traffic
Companies: abc, facebook, news corp

Australia Gives Up Any Pretense: Pushes Straight Up Tax On Facebook & Google To Pay News Orgs

from the how-dare-you-send-us-traffic-without-paying dept

Last week we wrote about France’s push to force Google to pay legacy news organizations for the high crime of… sending them traffic. That was somewhat expected, as under the EU Copyright Directive, some version of this will show up in every EU country over the next few months (though France’s first approach is particularly dumb). Down in Australia, they’re not subject to the EU Copyright Directive, but it’s not stopping them from taking the same ridiculous approach:

Facebook and Google will be forced to share advertising revenue with Australian media companies after the treasurer, Josh Frydenberg, instructed the competition watchdog to develop a mandatory code of conduct for the digital giants amid a steep decline in advertising brought on by the coronavirus pandemic.

As the article notes, the Australian Competition and Consumer Commission had been working to get the media companies and Google and Facebook to come up with a voluntary plan, but since the media companies basically want it all, that hasn’t worked out so well. Instead, the ACCC has now been told to just write up the plan. Make no mistake about this: this is the Australian government, at the behest of a bunch of legacy media companies that failed to adapt to the internet, now taxing Google and Facebook for sending media companies free internet traffic that those companies don’t know how to monetize.

And it goes beyond just having to pay to send them traffic, it also requires Google and Facebook to let media companies know ahead of time if they’re going to make any changes to their algorithms that might impact content rankings. That is ridiculous. It’s basically giving news companies preferred placement in search rankings, and locking those legacy providers in. Why in the world should media companies get special access to the algorithm of either company?

Frydenberg said it was only fair that media companies that created the content got paid for it.

They do get paid for it. They decided to put content on the web. If they don’t like the traffic, they can easily use robots.txt to block sites from scraping them. If they can’t monetize the traffic, that’s on them, isn’t it?

?This will help to create a level playing field,? he said.

This is the exact opposite of a level playing field. This is basically tilting the playing field strongly towards legacy media companies in a manner that is not only silly for the internet companies, but in a manner that makes it nearly impossible for new entrants in the field, as the legacy players get an automatic boost from the free money they get from the internet companies that send them free traffic.

Filed Under: aggregation, australia, journalism, legacy, links, media, news, tax, traffic
Companies: facebook, google

Kenyan Government Risks Squandering The Long-Term Potential Of Mobile Transactions In The Hope Of A Little Extra Tax Revenue

from the laffer-curve-is-no-joke dept

Back in October last year, Techdirt wrote about some unfortunate developments taking place in the African digital world. Governments across the continent are bringing in levies and taxes on Internet use, making it more expensive and thus harder for ordinary people to access the Internet at a time when the digital ecosystem in Africa is starting to take off in a big way. In February of this year, we reported on some evidence that the social media tax in Uganda was indeed causing fewer people there to use the Internet, and for the total value of mobile transactions to drop. Quartz Africa has a post about a new report from Brookings on the steep rise in taxes on mobiles and data in Kenya, and the harms it is likely to cause. Here’s how things have gone from bad to worse:

In June 2009, the Kenyan government, recognizing the importance of enhancing access to mobile telephony, exempted mobile handsets from the VAT. This move increased the affordability of the handsets and made possible the more than 200 percent increase in handset purchases and a 50 percent to 70 percent increase in penetration rates (Strusani and Solomon, 2011). In turn, the use of mobile phones and related services such as mobile money deepened, and Kenya’s total mobile subscribers almost doubled from 17.4 million in June 2009 to 29.8 million by March 2013. Then, the VAT Act 2013 paved the way for the taxation of previously exempted goods such as mobile phones, computer hardware, and software. Now, mobile phone users in Kenya had to pay a 16 percent VAT [Value-Added Tax] on the purchase of a mobile handset in addition to the 10 percent excise tax on airtime, which had been introduced earlier in financial year (FY) 2002/03.Further, in FY 2013/14, the government introduced an excise tax on retail financial transactions at a rate of 10 percent. The Finance Act 2018 then increased the excise tax on money transfer services by banks from 10 percent to 20 percent, on telephone services (airtime) from 10 percent to 15 percent, and introduced a 15 percent excise tax on internet data services and fixed line telephone services.

The report notes the many benefits of promoting mobile payments — things like serving as an economic driver, and encouraging savings and credit. Particularly important for developing countries is the how mobile-based services increase financial inclusion, providing access to banking for even the poorest sectors of society, which can help to reduce overall levels of poverty.

The authors of the study point out that the tendency of taxes to operate on a Laffer curve means that as rates increase, tax revenue from mobiles and data use may decline at some point, making such moves self-defeating. Moreover, if people start to turn back to cash to avoid increased costs of mobile payments, the benefits of digital transactions are lost, including the ability for governments to track and tax transactions more easily, leading to further revenue losses. The report concludes:

The tax policy and design of taxes on retail electronic transactions as well as bank transactions has the potential to reverse the gains that technology has pushed Kenya to the frontier of electronic payments and financial inclusion and back to cash preference and financial exclusion for low-income earners.

The same applies to other African nations that think taxing mobile services is an easy way to raise a little extra revenue. As this new report emphasizes, they may find that that they inflict considerable harm on their digital economies for very little financial benefit.

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Filed Under: africa, kenya, mobile, tax