With 80% of Indians still offline, the regulators’ decision to block free services in favor of wider consumer choice is a risky decision
What constitutes digital equality?
India’s national telecoms regulator thinks it knows, its national consultation on differential pricing for mobile data packages concluding that “zero rating” services, or offering them for free, is discriminatory. And over objections that zero rating practices create more opportunity for the 1 billion digitally disconnected, India has banned them.
This follows months of ferocious lobbying on both sides of the debate, focused around Facebook’s Free Basics offering. In India, as it has done in more than 30 other countries, Facebook has offered a curated, stripped-down internet experience called Free Basics consisting of Facebook itself, BBC News, local news and information, a few NGOs, and dozens of other low-bandwidth services.
Critics argued that the Facebook offering is a degraded internet experience specially marketed to the poor –hardly the ticket to digital equality. Telecom Regulatory Authority (TRAI)’s decision is viewed as a victory for open internet advocates who have been trying to get India to adopt US-style net neutrality rules. Dozens of small businesses seeking their own share of the internet audience also filed comments seeking this result.
Yet Facebook had argued that Free Basics would democratize the internet, bringing disconnected Indians online for the first time. And behind the policy debate, there is an internet land grab with big companies on both sides of zero rating vying to stake their claims to the disconnected.
Roslyn Layton, an academic who contributed to the TRAI consultation and has done research on the economic impact of zero rating, feels the decision is a setback for internet adoption and access in India. “This battle is essentially one between Google and Facebook for the future of India’s digital advertising market,” she said. “Facebook launched Free Basics and Google plans Android One, a low-cost smartphone bundled with Google apps. We should allow both models in the marketplace to compete.”
Carriers use zero rating as a loss-leader in the scramble for subscribers, hoping to get users to pay a little now, and more once they’re hooked online. For Facebook, Free Basics drives new users into the Facebook ecosystem. At the same time, the company is able to use the Free Basics platform to lure more third-party content providers onto Facebook’s servers, and so get a share of more ad revenue and user data.
Zero rating opponents, including Google, have their own plans to grab market share in the southern hemisphere, focusing on spreading the Android ecosystem and building wireless capability.
In late December, TRAI ordered Facebook’s telecom partner, Reliance, to shut down Free Basics until the regulator could take comment on the propriety of zero rating. This order followed the rapid mobilization of net neutrality advocates who succeeded in getting more than a million signatures on a petition demanding an end to Free Basics.
The claim is that zero rating is the same thing as net discrimination. India and the US, although not the EU, has banned “paid prioritization” at the network level as discriminatory, meaning that Facebook would be prohibited from paying Reliance for preferred (as in faster or better) network access.
Net neutrality advocates say that zero rating has the same effect as the banned network practices: some services get preferential access to consumers. This is true whether the service pays the carrier to be fee-exempt or whether there is no cash consideration, as in the Free Basics deal.
There are three related strands to this argument. First, consumers will naturally migrate to the free services, making it difficult for competitors and other new and often local entrants not part of the zero-rated bundle to break through.
Second, consumers may become so accustomed to a stripped-down internet – so embedded in a Free Basics ecosystem – that they don’t even go looking beyond the walled garden.
And third, in the absence of sufficient carrier competition, carriers have an incentive to suppress bandwidth supply and increase prices for data packages outside of the zero-rated services.