Broadband Cost Recovery

Business Models for Broadband Cost Recovery

The economics of the internet have changed dramatically, but broadband policy has not kept pace.

At the dawn of the internet, email was the killer app and traffic was symmetric. Parties generally exchanged equal amounts of traffic. That is no longer the case.

Today’s internet is dominated by asymmetric traffic flows driven by streaming video, cloud computing, artificial intelligence, digital advertising, and hyperscale platforms. A small number of global technology companies generate enormous and growing demands on broadband infrastructure while consumers and network operators bear most of the associated costs.

Strand Consult’s Global Project for Broadband Cost Recovery examines how broadband policy, interconnection frameworks, and market incentives can evolve to ensure sustainable investment in digital infrastructure while protecting consumers and competition.

The project supports four broad policy goals:

1. Ending anti-competitive free rides on broadband infrastructure

Dominant digital platforms benefit from broadband investment without proportionate contribution to the networks their services increasingly burden. The project evaluates policy frameworks that restore economically rational cost allocation and reduce market distortions created by asymmetric bargaining power.

2. Restoring two-sided market dynamics to internet exchange peering and transit

Historically, internet interconnection evolved through voluntary commercial negotiation among networks, peering and transit providers, and online services. Today, concentrated platform power and extreme traffic asymmetry have weakened normal market-based exchange mechanisms, replacing balanced commercial negotiation with “take-it-or-leave-it” ultimatums, making consumers and broadband networks bear the costs of rapidly increasing traffic flows. Traffic growth is largely driven by technological and commercial decisions made by hyperscale platforms — including AI, streaming optimization, autoplay video, cloud synchronization, and ad-tech architecture — rather than by direct consumer demand or willingness to pay for higher bandwidth consumption.

3. Improving incentives for broadband investment and innovation

Mobile, fiber, submarine cable, satellite, edge, and AI-era network upgrades require sustained capital investment. Broadband policy should encourage long-term infrastructure deployment, resiliency, redundancy, and technological innovation rather than undermine investment incentives by overserving one set of ecosystem stakeholders.

4. Protecting consumers and ratepayers from rising traffic burdens

AI systems, cloud services, streaming video, and ad-tech-driven traffic growth are increasing network costs globally. Without policy modernization, consumers increasingly absorb these costs through reduced investment and/or increased prices, taxes, and subsidies. Such costs would not be born by consumers if the generators of traffic paid for their peak and proportional usage, an uncontroversial concept across infrastructures. The project supports consumer-focused approaches consistent with the ratepayer principles increasingly recognized in U.S. infrastructure policy which include flexibility in payment/compensation models, technological innovation, traffic attribution, and transparency.

For more than 25 years, Strand Consult has researched broadband economics, telecom regulation, interconnection, and digital market structure. The Global Project for Broadband Cost Recovery collects and analyzes evidence from broadband markets around the world, assesses regulatory frameworks, and promotes pro-consumer, pro-investment, and pro-market broadband policy.

The project provides policymakers, operators, journalists, academics, and investors with research, comparative analysis, case studies, workshops, and data-driven assessments of broadband financing and digital infrastructure policy worldwide.

Contact Strand Consult to learn more.