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Net Neutrality is like Net Neutrality

Internet has been a disruptive(pardon the cliche) force for at least 3 generations now; it has created a knowledge revolution not seen since the invention of the press. India, due to various reasons, entered this disruptive realm a little late but the knowledge revolution has definitely kicked off here.

The recent “zero rating” debate has resulted in outrage-over-load on the internet, with people trying to explain the situation through analogies ranging from airports to public parks to roads to enter-your-pet-peeve-here. The net-neutrality debate has to be viewed, devoid of analogies, from the perspective of the users, telecom operators, content developers, and regulators.

As a user(data user, particularly), it is obvious to gravitate towards the cheapest and the most reliable telecom operator and choose to use data in any way possible. A proportion might opt for zero-rated products purely because it maximise the users’ interest; however, if such products result in disincentivising the users from accessing other content, the users are at a disadvantage. These products can potentially result in quasi-censorship, and in the extreme case can stall the knowledge revolution. Therefore, it is reasonable to expect that every packet of data is treated similarly and not be worried about the revenues or fortunes of the telecom operators.

As a telecom operator, it is natural to device strategies that maximise profits and acquire market share. In the Indian context, since the sector is regulated, such a behaviour(purely rational) has automatically created oligopolies which has in turn resulted in the regulator establishing rules that deny the operators several sources of revenue. In addition, content providers have created innovative products that are directly in competition with the basic services offered by the telcos. In such a muddied scenario, the operators are trying to create pricing strategies that help them benefit from the creativity/innovation of content developers, well within the regulatory framework, at the expense of the neutrality of the internet and in turn the consumer.

As content developers, it is natural to espouse the case for net-neutrality as a neutral internet benefits them. However, once the content developers acquire strategically large user-base, it is no longer in their interest to  vehemently vouch for net-neutrality. A neutral net has the potential to create competitors that can threaten these large players. The behaviour of Indian firms of initially tying up with these zero-rated products indicated the same(after the backlash on twitter and other social media, the firms are now purportedly trying to #savetheinternet).

Lastly, in a sector that is exceedingly important from the point of view of India’s national interest, the regulator plays a crucial role. In an ideal world we don’t need regulation, but in such a world the internet is also neutral. Therefore, the regulator’s two major tasks are to enhance social welfare by protecting the consumer interest and to create an environment that is conducive for business — that will further enhance social welfare. A neutral internet will definitely benefit the consumers’ interest; but since the regulatory framework is not conducive for business, it appears that net-neutrality is in conflict with business interests. The situation can change if the regulatory framework is eased and the markets are opened up. Easing of regulatory hurdles can grant existing operators the freedom to respond to market changes with positive or negative price changes, without impinging on the neutrality of the internet.  Opening up of the markets, can encourage new entrants and allow for mergers & acquisition(currently, both these tasks are nearly impossible) which will create real competition among these firms. This is not an easy problem to solve. The regulator has its work cut out and it will be interesting to see how things unfold.

Varun Ramachandra is a policy analyst at Takshashila Institution and tweets @_quale

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