Tag Archives | net neutrality

Kudos to TRAI—India ain’t a banana republic

The TRAI letter to Facebook on the issue of Free Basics has demonstrated that our institutions have enough discretion to stall veiled attempts in shaping public policy  

Asserting itself, TRAI in a strongly worded letter on 19th January, criticised Facebook calling its Free Basics campaign a “crude” attempt. It accused the social networking site of turning the consultation over differential pricing of data services into an “orchestrated opinion poll” to push its Free Basics. The company had run an aggressive campaign with full page newspaper ads. Reportedly, it spent more than Rs 300 crores. Free Basics allows users to access certain sites without data charges. However, there is nothing free about it. In addition, Facebook reworded the TRAI’s questions in its consultation paper into template responses which reduced users’ choice. The regulator had sought the views of stakeholders on differential pricing on data services being offered by operators. The responses sent by Facebook did not adequately cover the issues that TRAI was bringing out. The regulator pointed out that such interpretations as done by Facebook would have dangerous ramifications for policy making in India.

The number of responses received by TRAI is also bone of contention. TRAI said that it received only 1.89 million responses. Facebook on its part, stated in an email on 13th January that no mails could be delivered to the TRAI id after 17th December, 2015 and contested that it had sent more than 11 million responses. TRAI promptly replied as to why Facebook had to wait for 25 days before bringing this to notice. There was a certain degree of coercion and a lack of transparency in the manner that Facebook took the consent from its subscribers. The regulator had asked Facebook to tell its users to specifically answer queries raised in the paper. The responses sent by Facebook were not relevant to the questions posed by the regulator and instead it was a veiled attempt for its ‘Save Free Basics’ campaign. However, the regulator has stated that it will consider all the relevant responses sent by Facebook.

This stand off between the regulator and Facebook has come at a time when the social media giant is trying to vigorously establish its footprint in India. With this approach, TRAI has effectively demonstrated that it will not stand for being bullied by a multi national corporation trying to have its way. Whether Facebook backs off, or escalates this further remains to be seen.  On 21st January, TRAI is holding an open house on differential pricing and net neutrality involving all stakeholders. It will be interesting to watch the development as it will have a major impact on the internet services.

 

Guru Aiyar is a research scholar with Takshashila Institution and tweets @guruaiyar

Featured image: Uniqeulycat(Cathy) Smith licensed from Creativecommons.org

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Why Free Basics is a bad idea

Free basics violates the basic principle of net neutrality despite being within the four corners of the law and must not be allowed

 

In the last couple of days, Facebook has inundated Indian newspapers with full page ads about Free Basics. The savvy marketing seeks to woo the consumer by asking an innocent question like who could be possibly against free internet? Mark Zuckerberg has tried to make a convincing case in his blog post in the Times of India. In trying to corner a slice of rapidly growing Indian market, free basics junked its old avatar of Internet.org and tried to position itself as messiah of the poor and needy. What could be the main objections to Free Basics? What did the campaign for free basics achieve?

There is nothing ‘free’ about it. When Free Basics planned to launch with Reliance Jio network, its aim was to corner a giant share of the Indian market with selective apps and ads riding on its application. Of course the apps on Facebook are free but what about other start-ups and entrepreneurs/businesses? Simple analogy will be to compare a newly built superhighway, which allows only Mercedes or Audis to operate and discriminates against all other forms of transport. The Telecom Service Provider (TSP) will provide good network speeds for Facebook. What stops TSPs from giving slower/limited access to other websites? Mark Graham, Associate professor of Oxford University argues that free basics is able to read all the data passing through its platform in whatever form it may be. Big data is the oil of the future. E-commerce companies are ever hungry for data. Making Free Basics succeed would only mean cartelising the Internet with some specific telecom service providers having a greater share of the market. Free Basics would ride on some specific TSPs and nothing stops it from setting its own terms and conditions.  It would mean shifting from the consumer to certain clients and their business interests. Nikhil Pahwa, well known Internet activist quotes evidence from research to say that less & low income groups prefer access to unrestricted Internet. Free basics is no way altruistic or charitable in its approach.

There are times when media blitz campaigns have certain unintended consequences. Facebook’s campaign has had one positive effect. It coalesced the Indian middle class opinion that those who cannot afford connectivity must be provided some basic free connectivity as an entitlement. This is a little surprising because the middle class sentiment is largely pro free markets and anti subsidies. The public policy on this subject is yet to emerge with some sense of clarity. The government’s National Optical Fibre Network(NOFN) project is expected to be in place in two to four years which will form the backbone infrastructure for Digital India. This is not an argument for freebies. But neither Free Basics is the answer. For the time being, focus must be to prevent Free Basics from succeeding.

 

Guru Aiyar is a research scholar with Takshashila Institution and tweets at @guruaiyar.

Featured image credit: Link-up with Mosman Library on Facebook, licensed under Creative Commons.

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An analytic framework for the net neutrality debate

Developing an analytical framework to talk about policies around net neutrality and why it is so hard.

By Soren Dayton

It is very easy to see telecommunications policy in local terms, as it is an industry that is literally grounded in a particular place. Indeed, speaking as someone who has been a consultant to US telecommunications companies, a remarkable amount of time and energy is spent, at least in the US, focused on issues like siting towers, getting access to particular places to lay cable, etc.

Given the salience of the net neutrality debate in India, it might be helpful to step back a little and try to consider it both in comparative and more abstract terms. One of the features of the net neutrality debate is that while the top-level messages have stayed the same at various times and places — “every bit is equal” versus “don’t over-regulate and restrict business models” — the underlying technical and policy questions have shifted with both jurisdiction and contemporary technology. In fact, the constancy of those messages in the various contexts, when you consider what the underlying policy differences are, should give you pause about them.

Rather than try to define net neutrality, I want to provide an analytical framework to allow us to talk about policies around net neutrality and why it is so hard. This should help explain why, in spite of there being no rules mandating net neutrality there also haven’t been significant violations. This is why US Federal Communications Commissioner Ajit Pai has said that net neutrality, “a solution in search of a problem”. But it also shows why this might change.

So how should we understand net neutrality? I think it is helpful to focus, in schematic terms, on the changes of two numbers over time. The first is the cost of transmitting a given amount of data at a given level of performance (speed, latency, minimum speed, etc. — I would note that limiting to the total set of variables is hard, so this is just a sample). Think of it as: C (data, latency, average speed, minimum speed etc.)

The important thing to realise is that due to technical and economic innovation by the carriers, this cost should fall over time for any set of variables, assuming that there aren’t severe problems in policy such as spectrum scarcity or in competition.

At the same time, innovation by the application providers should drive another number up: the economic value that can be extracted from that data, which we will call V: V (data, latency, average speed, minimum speed, etc.)

When the internet was created, the costs of data connectivity were very high and commercial value was very low, so C > V. Since then, costs have fallen and companies have created new ways of extracting value. At some point in the future (this is schematic, so we don’t know when) V > C, that is the economic value created by the application logic will outweigh the cost of transmitting that data.

The whole debate about zero-rating and ‘freemium’ business models occur when C is very close to V. Facebook is willing to pay for your data costs when the activity you generate on Facebook creates more value for Facebook than the cost of that data.

This framework also explains why net neutrality was an abstract debate, “a solution in search of a problem,” when C > V. Internet access is being consumed as a leisure good.

This framework also explains why it is suddenly an interesting debate, as C and V get close. Because internet access generally creates value, there is a potential additional source of revenue for the carriers. Both the carriers and application providers are planning for the future, where the carriers are eyeing a future source of revenue and the application providers are trying to plan for and control their future costs.

Part of the conceptual problem of the net neutrality debate is that we are making policy in an environment when C is roughly equal to V about a world in which not only will V > C, but V – C will get larger over time. We are trying to make policy about a world that are aren’t in and have trouble really foreseeing.

If you accept this framework, the policy question in the future should be: what input should policy have in the distribution of V – C, especially as it grows? Net neutrality, as a policy, is really about putting the thumb on the side of the application provider to limit the amount of V – C that can go to the carrier.

The position of the application providers is, not unreasonably, that the market power is of the carriers will mean that they pocket an outsized amount of V – C. While the carriers point to the increasing size of the markets on the application side (and in the case of mobile, the device side).

My own instinct based on experience in the policy debates in the United States is that the growth of Apple and Google suggests that they have more leverage over the carriers than they care to admit and that we generally perceive. Indeed, one of the most remarkable demonstrations of the changing balance of power has been the ability of Apple to force the iPhone down the throats of carriers around the world. Any rich world telecom executive will tell you that being able to serve the iPhone is a major driver of profit. And, indeed, Apple has found technological innovations in the design of radios in their phones that means that they have nearly universal devices, allowing the phones to work on nearly every network, turning the network into a commodity.

Another way of stating this problem is, as V – C grows, should something that has always been a one-sided market become a two-sided market, and how should that be regulated? This is why Niranjan Rajadhyaksha has said that the economics of net neutrality is uncertain, referring to the work of Nobel Prize winner Jean Tirole. That’s why my own policy preference would be to keep a sharp eye on the question, but be slow to make policy, recognising that it will be made into a rapidly changing environment in which we don’t actually have good instincts about how the markets will work or even what the markets will be.

Now turning to real-world policy, you can see how the net neutrality debate might work in different places. In a place like India, where internet penetration is low and a primary objective of policy might be to get more people online, carriers might argue, in a way that is both self-serving and may align with the public good, that some of V – C should be reserved to get more people online. This is a generous understanding of the argument that Internet.org and Facebook make.

In a place like the United States where penetration is high and the limiting factor for further penetration is typically not cost but perceived need, the question is probably different. It is how to distribute V – C in such a way that the cost is optimal for consumers. Here, antitrust regulation would seem to be the preferred tool to ensure that the carrier’s don’t exert too much market power. The arguments for net neutrality in the US turn on the idea that antitrust regulation is too slow and that regulators are subject to capture.

Soren Dayton is a public affairs and political consultant from Washington, DC, on sabbatical and living in New Delhi. The views expressed are personal.

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Net Neutrality: Innovation in the Age of the Internet

How the debate about Net Neutrality can learn from the successes (and failures) of Intellectual Property Rights

Net neutrality is currently a topic en vogue; various pundits, netizens and companies have weighed in on whether or not regulations are required to keep the internet open and equally accessible to all. While the debate often involves phrases like “free market”, “data discrimination” and “walled gardens”, the argument is really one about innovation. In fact, the phrase “net neutrality” was coined by Tim Wu in his paper, Network Neutrality, Broadband Discrimination, where he observed that the “questions raised in discussions of open access and network neutrality are basic to both telecommunications and innovation policy”. As such, both sides of the net neutrality debate ultimately rely on innovation as a justification for their arguments. The most popular defence for net neutrality critiques “access tiering”, where telecom providers charge web sites and application providers more for premium, high speed services. The argument is that start-ups will not be able to afford such rates and will therefore be unable to compete with established firms. This is invariably followed by the statement that the internet has had the impact that it has had because of the ability of such start-ups to distribute their new and innovative ideas on a global scale. In other words, it is not so much about the potential of access tiering to cause monopolisation as it is its capacity to hinder innovation. On the other hand, detractors of net neutrality argue that increased regulations will only hamper telecom and content providers from innovating new technologies and business models with which to operate.

Given the importance of innovation in the global debate globally it is unusual that debates in India have not discussed it more prominently. The Indian discourse on net neutrality has been characterised more by a debate about free markets vs. regulations than the composition of best innovation policy. This is unfortunate because not only is innovation supremely relevant to the discourse on net neutrality, but much can be learnt from the previous methods of promoting innovation – Intellectual Property Rights (IPR).

One such lesson is the danger of romanticising aspects of the issue. The ultimate purpose of IPR is to legally ensure the expectation of earning money from a new idea so that people have an incentive to invest their time and money to create and innovate. This purpose has been significantly buttressed by the narrative of romantic authorship. The moral argument for securing financial rewards for people who come up with brilliant new inventions, stories or songs is one that very few can counter. However, as with many other laws, the reality is different. IPR, more often than not, secures the interests of publishers and distributors, not authors. This is merely an outcome of simple economics; the people spending money on creating and distributing a product will expect a financial return regardless of whose idea it originally was. It is not to say that the romantic author does not deserve his due, merely that his importance is often overstated.

This very human tendency towards romanticism (especially when discussing human creativity and innovation) must be kept in mind when debating net neutrality as it is very easy to become detached from ground realities. A good example at the heart of net neutrality is the narrative that the internet is a network that has revolutionised society due to its non-discriminatory and open nature. While this is true to an extent, it has prevented certain realities from entering the popular discourse on net neutrality, namely that it is already possible for content providers to pay for faster content delivery. Content providers can cache their data with content-delivery networks like Akamai, who store it in servers across the world so that the travel time to end users is shorter. Akamai, obviously, charges a fee for this service. It is therefore important to be wary of placing undue emphasis on the more appealing or engaging aspects of the net neutrality debate and keep in mind the requirements of a successful internet, whatever they may be.

Another way in which IPR is relevant is the extent to which it has adapted to the internet or more accurately failed to. The world wide web is easily the most disruptive technology of our time and it will be unsurprising if future generations end up viewing the advent of the internet on par with the Industrial Revolution in terms of its impact on societies and economic activity. One of the more prominent of these impacts has been on traditional methods for the distribution and publishing of content; the internet has rendered physical book and music stores obsolete for most customers. This has occurred due to new and legal online distribution models like e-books or iTunes, as well as less legal ones like Napster or BitTorrent. Attempts by record companies to use IPR to secure their traditional distribution lines against online piracy have been unmitigated disasters. Lawsuits have been a waste of money because perpetrators are almost instantly replaced even when they are successful while some of the less successful lawsuits show a clear reluctance to accept the changing dynamics of the industry. This spectacular failure of music companies in enforcing IPR in courts demonstrated that the best solutions to adapting to the Internet might not be legal-centric.

One such non-legal solution for many businesses has been the adoption of new revenue models based on the volume of traffic on their websites. Companies measure this traffic in incredible detail and use the data collected in two ways. One is to use to it to invite ads from companies with the lure of targeted and more effective advertising. The other method is to sell the data itself to marketing companies; a great deal can be learnt about consumption habits of consumers through their online behaviour. Google was the pioneer in the first method as a majority of its early growth can be attributed to advertising revenue. Facebook is one of the industry leaders in the second model (though it does also utilise advertising) as the ubiquitousness of Facebook means that user data is a treasure trove for marketers. These new volume-based revenue models are crucial to the debate about net neutrality.

Another way in which firms have adapted to the internet is to update the age-old techniques of hostile maneuvering. Though intended to promote innovation, IPR has sometimes skewed too much in favour of securing financial returns of existing ideas. This has enabled many firms use their IP portfolios aggressively to threaten and browbeat competitors to maintain a big piece of the market. It should be pointed out that the costs of litigation can achieve this same purpose even in the presence of a balanced IP regime. The various patent battles between cell phone manufacturers are an excellent example of the aggressive use of IPR. However, as IPR has been shown to be a comparatively toothless remedy on the internet, firms needed to find alternate methods to secure their market domination.

These methods have invariably been more technical in nature than legal and capitalise either on the traffic dependence of online revenue models or the capacity requirements of data-intensiveness of services like video streaming or VoIP. Advancements in technologies like Deep Packet Inspection (DPI) have allowed companies to discriminate data in a manner not possible during the early years of the internet. Companies can now enter into preferential agreements with telecom providers to ensure that their websites run faster or cheaper than their competitors. Faster speeds attract more customers, especially with data-intensive content, and give companies a competitive advantage. Cheaper data rates for certain websites and zero rating schemes in particular, are even worse in that they can consolidate and strengthen the market share of established firms and prevent entrants from securing enough customers to make their business model operational.

It is at this stage that the last, and perhaps the most important, takeaway from IPR becomes relevant. The concept of Copyright evolved largely as a reaction to another disruptive technology: the printing press. The press drastically changed both the volume and content of books capable of being published; previously most books were biblical as they had to be labouriously and expensively hand-written by monks. Though the process of its evolution was slow, copyright was first codified by the jurisprudentially revolutionary law, the Statute of Anne. Not only was the statute the first law for copyright, it transformed copyright from a tool for monopolisation and censorship to one that encouraged education and creativity. It did this by making the monopoly over a work temporary thus creating the concept of public domain (previously all works were owned by publishers forever). To put it another way, the printing press was such a disrupting technological advancement that it forced a new type of juristic thinking. It can be argued that the internet has had as much of an impact on societies, if not more and as such, will and should lead to the creation of a new jurisprudence. This can be evidenced not only by the debate about net neutrality but also the global concern over privacy and surveillance in the post-Snowden era. It is thus imperative that regulators of the internet do not limit their perspective by willy-nilly resorting to existing models of regulation. In other words, it is hoped that regulators will follow the path laid by the Statute of Anne and themselves innovate a new body of jurisprudence in order to secure innovation on the internet.

Madhav Chandavarkar is a Research Associate with Takshashila Institution and can be found on Twitter on his handle @MadChap88. The views expressed here are personal

Other responses on Net Neutrality by the Takshashila Community:

Viability, not just Neutrality by Pranay Kotasthane

Net neutrality is like Net Neutrality by Varun Ramachandra

Using price discrimination to ensure Net neutrality by Anupam Manur

The Financial Viability of net neutrality by Devika Kher

How 2ab explains net neutrality by Karthik Shashidhar

Thoughts on Net Neutrality and Zero Rating by GK John

On net neutrality and national interest by Nitin Pai

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Viability, not just neutrality

A healthy market, and not just a neutral net is the key to upholding national interest 

by Pranay Kotasthane (@pranaykotas)

A neutral net — defined conservatively as a denial of abilities that allow one type of internet content to be relayed differentially over others, is a desirable outcome for India. Even so, a neutral internet is not enough to ensure the success of the internet ecosystem. The bigger deal is to remove barriers that prevent all the stakeholders of the ecosystem from having a decent shot at succeeding in their game.  

The reasons for the argument made above can be found in the answers to a set of four questions listed below:

1. Where does India’s national interest vis-à-vis the internet lie?
India’s national interest in a knowledge economy relies on successes at the level of individuals and enterprises, both. Individuals want more & better connectivity to the internet. Provided that the individual is ready to pay for it, he/she should be free to tap the information and knowledge flows from the internet. At the enterprise level, India’s growth agenda requires the success of its enterprises. Given how the three sectors of the Indian economy have developed, we are closest to success in the information space rather than on the shop floor or on the fields.

2. What does upholding this national interest require?
We need the internet ecosystem to succeed as a whole, which means that we need successes in every part of the system—software product creation, communication networks and storage servers. Note that this is in sharp contrast to the arguments that we have been drawn in over the TRAI consultation paper. The paper projects the ongoing debate as a clash of interests between the internet content providers and the communication services providers. For upholding our national interests, as defined above, we don’t have an option. We need ALL the sides to win.

3. What are the factors that will enable all sides to win?
The good news is that this is not a zero-sum game. Though the communication services industry may project that internet content providers are parasites, it really isn’t. It is rather a case of an overly regulated market which is preventing the system from functioning optimally. Removing all unnecessary ex-ante regulations will lead to increased competition and contestability, enabling a healthy market. The three key factors in this regard are:

  • Regulations on the communication service providers must go: The government regulator is trying to optimise for several objectives through the communication providers. As a result, there are restrictions on voice call rates, guidelines for ensuring regional balances in terms of connectivity, caps on additional services like roaming, caps on number of players in each circle, tough merger and acquisitions process to prevent collusion and so on. And all these objectives are being laden on the shoulders of the communication providers who are looking to run a profitable business.
  • No regulation on the internet content providers is acceptable: The question of whether regulations should apply to even the internet content providers is currently being debated by TRAI. Having seen the problems that the communication service industry has got in to, there is no case for these regulations. It is unequivocally against the national interest.
  • Consumers must not be stifled from entering the knowledge economy: This is where the government has a role to play through its own service—BSNL. BSNL needs to be seen as a vehicle for protecting consumer interests should the industry run into troubles. BSNL already has favourable terms and conditions with regards to spectrum allocations. As long as it is not seen solely from the objective of making profit, it will help check collusion in the market by providing a credible alternative.

4. What should be done to bring these success factors to life?

  • We need to lift existing regulations on communication services industry. Beyond the rules that apply to other industries for preventing predatory practices, there is no reason why the regulators should micromanage the operations of the industry. Currently, the communication network providers have been able to hide behind these restrictions, taking the easier path of seeking further regulations on internet content providers instead. Network providers fear passing on their costs to the end consumer and a fearful industry goes against our national interest.  Once the suffocating regulations are lifted, the network providers would be confident of raising prices and fight it out in the market to serve the consumer better. This might well lead to consolidation but that’s the inherent reality of the marketplace.
  • To uphold the interests of the end consumers, net neutrality as a principle must be upheld. This is because communication network providers should not have the unfair advantage of being able to price internet content differently. Once the communication networks are setup, costs do not change with consumers accessing different content. In any case, the communication service providers are free to have fair internet usage policies to prevent induced demand effects.

In summary,  net neutrality is just one of the parameters of the internet ecosystem. Our interests lie in net neutrality and far beyond it as well.

[Other responses on this topic by the Takshashila Community: Varun Ramachandra’s take: Net neutrality is like Net Neutrality, Anupam Manur’s take: Using price discrimination to ensure Net neutrality, The Financial Viability of net neutrality by Devika Kher, How 2ab explains net neutrality by Karthik Shashidhar, Thoughts on Net Neutrality and Zero Rating by GK John and On net neutrality and national interest by Nitin Pai]

Pranay Kotasthane is a Research Fellow at The Takshashila Institution. He is on twitter @pranaykotas

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Using Price Discrimination to ensure Net Neutrality

The main reason that telecom companies are unable to ensure higher profits is essentially a pricing problem and the answer would lie in using price discrimination and charging higher for data.

Airtel claims that its revenues are falling due to free internet based services like Skype and Viber. It feels that it is missing out on its share of the pie as people can call each other for no charge using their data packages. To grab their ‘fair’ share, they want to charge the internet companies for allowing their service through their networks. This is a critical blow to net neutrality. However, if they are truly worried about their profits, they can instead resort to pricing their data services higher by using price discrimination.

The new plan proposed by the TRAI backed by Airtel and co. is trying to create a scenario where producers are given preferential treatment. The plan proposes that sellers can pay the internet service providers to ensure that their products get priority over other products. In essence, the data packets that come from their servers should be given precedence over the data packets coming from their competitors. It is this that has been driving the internet activists over the wall, as it breaks the quintessential property of the internet: that of being neutral. Lots of other writers have spoken about how the absence of net-neutrality will throttle small start ups. Others have addressed this issue in terms of the detrimental effects on our national interest. Most of them, though, take issue with the impingement on their personal liberty. If my service provider makes a deal with a company, agreeing to prioritize its data compared to its competitors, I am being robbed of my choice. The prioritization by the service provider is making a choice on my behalf.

The main reason that is given for pushing discriminatory internet services is that the revenues of the telcos are falling: they have previously invested a lot in buying spectrum, investing in infrastructure, etc, but are finding that their main voice and messaging services are being replaced by internet companies who offer the same services for free through the telcos’ infrastructure.

The numbers on the balance sheets of the telcos suggest that the revenues are far from falling. It has seen steady growth in the past few years and what’s more, there is ample scope for them to tap into the ever growing market of mobile internet users. Then, we can assume that they are normal companies wanting more profits through vertical collusion and cartelization. The reason they have not been able to profit as much as they want from the data services that they provide is essentially a pricing problem. If they felt that the internet services like Skype or Whatsapp were free riding on their data, they can easily increase the amount they charge for data. The reason that the telcos are not increasing their prices is perhaps because of the competition between themselves. Despite the market having few sellers, they face an elastic demand curve, where the slightest increase in prices will drive users to other competitors. This is basic market mechanics based on the Bertrand model of competition.

SECOND DEGREE PRICE DISCRIMINATION

The telcos can practice a form of reverse second degree price discrimination. Price discrimination is a concept in economics which refers to the act of charging different prices for similar or same goods to different consumers. There are various types of price discrimination that is followed in the market – based on geographical location, based on income elasticity of demand, based on the quantity bought and so on. When the price charged is based on the quantity bought, it is known as second degree price discrimination. It basically refers to the discount one gets with bulk purchases. However, the telcos can practice reverse second-degree price discrimination, where they charge lower prices for lesser usage and a progressively higher price for large data consumption.

This will ensure that VoIP services, which uses a lot more data is charged higher, as against text only messaging services. This scheme is still neutral in the sense that differential rates are being applied based on quantity and not on type of service. However, the solution of a blanket ban on prioritizing certain services might reduce economic freedom of the consumer. If service based discrimination has to be made, the choice has to be with the consumer. If a person runs his business solely based on international VoIP calls and doesn’t mind paying extra for ensuring reliability and speed, he should be able to access that privilege. Or, for that matter, a Facebook or Twitter addict who wants these apps to be quick such that they can post real time selfies, should be able to choose these apps over say, apps which give real time updates on political happening in Nicaragua. Thus, people can be given a choice as to which data packets have to be prioritized within their limited bandwidth. This will ensure that there is a high degree of net-neutrality, while ensuring economic freedom to the individual consumer.

Anupam Manur is a Policy Analyst at Takshashila Institution and can be reached on Twitter @anupammanur

 

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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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