In March, Iranian internet users suddenly were faced with a significant rise in the cost of their internet. Major internet service providers (ISPs) hiked their prices 30% to 100%. Iranians took to social media in droves to complain. As a population struggling to make ends meet amid their country’s economic crisis, many households risk no longer being able to afford being online.
Iranian officials eventually responded to the outcry by promising to introduce policies to resolve the issue. The increased rates, however, are doubling down on failed government policies that aim at localizing internet infrastructure, traffic, and user habits onto Iran’s National Information Network (NIN). Specifically, a 2017 regulation by Iran’s Communications Regulatory Authority (CRA) forced ISPs to allocate higher speeds and lower costs for accessing domestic content versus international content.
This scheme was supposed to drive users toward domestic content and services and ISPs effectively set their prices to steer users away from foreign online content and services. But that scheme failed. Davoud Zareian, Vice President of Commercial and Customer Services at the Telecommunication Company of Iran (TCI), said foreign traffic takes up 70 percent of Iran’s internet bandwidth, more than double the 30 percent used for domestic traffic. This imbalance in traffic has likely contributed to ISPs raising their rates to meet the costs of the needed international bandwidth, as well as other operating and development costs. For years after obeying price controls that favored domestic content, Internet Service Providers (ISPs) are now relying on the same regulation to justify their rate hikes that still will favor domestic content and services, which authorities can more easily censor and surveil.
Examining the Price Hike
In the weeks before the March 2022 Iranian new year, Iranian internet users were experiencing an unprecedented slowdown in internet speeds and awaiting uneasily the outcome of the repressive “Cyberspace Protection Bill” in Parliament. Then, without notice, ISPs slapped them with a price hike.
Initially there were scattered complaints on social media but after Fars news agency reported the news on March 24 public objection to the price hikes became widespread.
Some analysts warned that the new prices are to prepare for implementation of the so-called “Cyberspace Protection Bill”, if it becomes law.
A chart published by news outlet Zoomit in mid-April shows that rate increases were led by TCI, increasing in cases over 100% compared to last year. On April 7, Sonita Sarabpour, Zoomit’s tech reporter, tweeted that the internet rate from Iranian provider Shatel had increased 100 percent from 200,000 IRR (.70 USD) to 400,000 IRR (1.40 USD) per gigabyte while the company was charging 2,000,000 IRR (7.11 USD) per five gigabytes, up from 1,000,000 IRR (3.56 USD). Asiatech ISPs, another popular ISP, raised its rate 30 percent according to Zoomit. Importantly, these new rates maintain the existing formula that makes domestic traffic significantly cheaper than international traffic.
A primary concern with the new rates is that many in the general public will be priced out of internet access. Households are already grappling with paying a high percentage of their monthly income, on average 8.3 percent, to get internet connections at chronically low speeds with poor service. Many of those households that can still afford basic services, might now need to forgo frequenting international sites.
In the first official reaction to complaints about the rate spike, on April 8, Mohammad Reza Bidkham, TCI’s senior director of communications and international relations, categorically denied that ISPs had increased their rates. The denial rang hollow as people posted documents and their bills as proof on social media.
Speaking with the official Islamic Republic News Agency (IRNA) on April 8, Communications Minister, Issa Zarepour, said internet consumer rates were being “corrected without putting pressure on the people.” He did not explain how the doubling of price would not put pressure on users. He also deliberately used the word “correction” instead of “increase,” in referring to the changes in the cost. By doing so he added to lack of transparency around the changes.
Following widespread complaints and threats of impeachment from lawmakers, on April 13, Zarepour said there were plans to offer two gigabytes of internet for free or at half price.
Meanwhile, in a statement the Communications Regulatory Authority (CRA) pointed out previous internet prices were much lower than what the regulations allow and supported the rate increases to counter the sharp rise in expenses and investment costs to meet growing demand.
2017 legislative failure opens the way to a surge in prices
It is significant that CRA noted that new Internet rates are in line with current regulations. The CRA is a body operating under the Supreme Council of Cyberspace, the country’s highest internet policymaking body. The CRA oversees formulating pricing policies for communications and information technologies and ensuring satisfactory operations of services.
In 2017, the CRA approved a new regulation to set pricing ranges for internet services based on bandwidth. The plan was adopted in the CRA’s 266th meeting on December 12th, 2017, and enforced by ISPs a month later.
State news outlets reported that the CRA’s ordinance was designed to increase internet volume and speed, while lowering usage prices. However, in reality, those were only true for domestic traffic.
What the policy did was set preferential pricing and speed for domestic traffic, making international speeds slower and effectively undermining Net Neutrality Principles. Under the regulations, international traffic speeds could only be boosted only by purchasing additional bandwidth packages, which set domestic usage at 50 percent of international usage. According to the regulation, ISPs could offer other incentives for using the NIN, including free access to content on certain (YouTube-like) domestic platforms such as IPTV and VoD .
These fixed pricing and incentives were inline with the overall strategy of the SCC and President Hassan Rouhani’s administration, which was to expand Iranian National Information Network and strongly incentivize the general public to use local online content and services. At the time the CRC was chaired by Rouhani’s Communications Minister, Mohammad-Javad Azari Jahromi, who played a major role in strengthening NIN’s infrastructure. One of the main advantages Jahromi and other officials saw in local content and services, is that Iranian authorities could more easily censor and surveil them. The platforms, and servers hosting them, are all based in the country and the tech firms are more easily subject to Iran’s regulators, law enforcement, and courts.
Under the 2017 fixed pricing rules, ISPs had to set their rates for a three-year period but at the same time it also gave ISPs the freedom to set the fair usage volume. In other words, the ISPs could interpret the regulations to allow them to charge more when users consumed bandwidth above a certain amount. In the 2020-2021 government budget, legislators included a provision forbidding ISPs from increasing their rates for another year.
Now free of these legal restrictions, ISPs have pointed to inflation, increase in dividends paid to the state (which owns shares in these companies), high network operating and expansion costs to justify increasing their consumer rates substantially. In effect, ISPs claim they are facing the challenge of balancing the cost of operations and development with demand of the general public with accessible prices.
Davoud Zareian of TCI, in a conversation at April 2022 Clubhouse, explained the price hikes by explaining his company’s Revenue Per Subscriber) is about 400 IRR against the operating cost of 480 IRR. He also blamed minimum wage increases.
But the most informative point made by Zareian was that the difference in operating costs between providing domestic or international bandwidth was about 9%, domestic being cheaper. While Zareian claimed this was a small difference, he ignored that 70% of traffic is international, meaning that 9% accounts for a significant share of operating costs. This is assuming Zareian did not downplay the price difference.
Moreover, journalists present during the Clubhouse session, asked how domestic traffic could only be 50% cheaper for consumers, when it is only 9% cheaper for ISPs. In response, Mehdi Salem, the former spokesman of the Ministry of Communications, implied that often the Ministry of Communications settles the difference and that the ISPs “invoice” them.
Regardless of causation, the new prices still maintain the policy that made domestic traffic 50% cheaper but now with much heavier fees. The end result will put even more financial pressure on Iranian users for their preference of international traffic, intensifying the Islamic Republic’s complicated scheme to push users towards domestic content and services, which they can more easily censor and surveil.
