The Financial Viability of Net Neutrality

Why open internet service provision also needs to be  financially feasible

The basic challenge for internet service provision is to find a balance between keeping it financially viable while maintaining an open internet. This requires a policy that provides space for Internet Service Providers (ISPs) to grow but ensures that they do not throttle access to any online data. The best way to arrive at this policy would be to consider the incentives of both ISPs and consumers.

In order to make internet service provision financially feasible and open, we would need a business model which is viable, inclusive and provide equal access to all data on the net. Viability would help internet service providers to increase investment in infrastructure. Increased inclusiveness would enable more people to benefit from access to the internet . Finally, equal access to information is essential for maintaining a liberal and open internet.  Keeping all the three objectives in mind, there are two ways to go forward.

One is to allow ISPs to discriminate different data packages but allow the free entry and exit of firms in the telecom sector. The resulting competition in the market would increase access to data would allow consumers to switch between ISPs. Moreover, if ISPs were allowed to sell or sub-lease their spectrum to other interested parties would be able to exploit the market potential further. This would  make the market more competitive and profitable. The Competition Commission of India (CCI) can secure the market from exploitation by ISPs .

The second way is to protect net neutrality by ensuring that no data discrimination takes place on the broadband mediums like, cable and wireless network. However, in this case ISPs and content providers should be allowed to get into mutual agreements that does not result in data discrimination. Since the first option is a far-fetched possibility in the current set-up, let us explore the second one.

In order to keep the internet free and open, it is important that all data is treated equally on the internet regardless of the source. Additionally, it is also a major prerequisite for India to remain globally competitive as net neutrality is the norm in countries like USA. That said, it does not mean that ISPs should be restricted from entering into contracts with content providers. If Flipkart wants to undertake a joint marketing initiative with Bharti Airtel, it should be allowed to so. For example, Flipkart can give benefits to Airtel from sharing their customer base. To be extremely clear, such collaborations should not hinder access to any other internet sites. This will maintain a level playing field for all content providers.

This level playing field is a necessity for new entrants into the market. That being said, it is a rite of passage for start-ups to compete with established players for a market share. Content provision on internet is one of the few examples where cheaper methods of promotion, like word of mouth publicity, can help in capturing a large market base in a short period. Therefore, if net neutrality is maintained the onus is on these start-ups to build the capacity to secure a market share. I would like to conclude by quoting this pertinent observation by Shashi Shekhar :

“Ultimately, for digital innovation to thrive in India, the service providers and the application start-ups should learn to co-exist with mutually beneficial business models.

Devika Kher is a Research Associate at Takshashila Institution. Her twitter handle is @DevikaKher

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