1. Net neutrality nonsense

Net neutrality nonsense

Net neutrality: Not charging extra for VoIP services sounds appealing, but who is going to fund the rollout of India’s telecom?

By: | New Delhi | Updated: March 31, 2015 7:22 PM

If Google has a Project Loon and Facebook an internet.org it is because they realise telecom infra needs to be paid for and they can’t just clog it up

Given the pasting Bharti Airtel got over its decision to charge a higher data rate for voice-over-internet services like Viber, it is not surprising it chose to beat a hasty retreat. But Bharti Airtel’s strategic retreat should not be seen as a victory for the sloganeering over what is called ‘net neutrality’, jargon for treating all data traffic in a similar manner.  The ‘net neutrality’ argument being made sounds logical, but it is inappropriate for India for a variety of reasons, and all of these will be examined by the Trai before it comes to conclusion on how to treat such services.

Even before we begin to examine the ‘net neutrality’ argument, it is important to keep in mind there is no common view on how such neutrality is to be achieved globally; much of what is being discussed in OECD countries are just various options. In even the US and Europe where data penetration levels are upwards of 70% (voice penetration is at 100%) – this means the telecom networks have all been rolled out – telcos have said they will reconsider future investments if the cream is going to be taken away by the Googles of the world, and this is when data packages are far more expensive in the US and Europe as compared to what they are in India. That’s why Google is working on creating its own internet network through Loon ballons, and that’s why Facebook – another big guzzler of telecom data networks – is working on internet.org which seeks to compact data so as to reduce the clogging up of data networks built by telcos at their own expense.

If this is what is happening in developed markets, the situation is a lot more adverse in India. For one, around 40% of Indians still don’t have voice networks, and data penetration is just a little over 12%. If a network has to be rolled out to meet these needs – EY estimates Indian telcos need to invest Rs 2.5 lakh crore over the next 7 years – someone has to pay for it. If, on the other hand, data-guzzlers like Viber and Skype are to clog up all the networks, what incentive do telcos have to roll out the networks considering just a tenth or so of their revenues come from data services?

The profits from data services, the maths makes it obvious, are not enough though proponents of ‘net neutrality’ will argue the Bharti Airtels and Vodafones make enough money from bandwidth charges and should be happy with that – this is the same argument which says a restaurant owner does not pay for making the road that services the outlet.

An additional point that needs to be kept in mind is that, even today, telcos contribute 5% of their revenues to what is similar to ‘net neutrality’ – 5% of revenues are paid out each year for the Universal Service Obligation which is used for funding rural broadband. If this same revenue was to be used to fund the telcos’ own networks, they wouldn’t be as averse to voice-over-internet clogging up their networks. Short point: if net neutrality is the public good it is being made out to be in the new Digital India, like an LPG subsidy for instance, let the government cut cheques to pay for it – roads, to use the restaurant-road analogy, are paid for by the government, not private firms. Unlike in the OECD countries, India dramatically over-charges for spectrum, so much so that most of the capex of telcos comprises spectrum fees. On top of this, telcos pay around 28% of their annual revenues by way of licence fees, spectrum and microwave charges and service tax.

Let’s also get it clear that while ‘net neutrality’ is a compelling idea, too much is being made of it. If you move away from telecom, while there is ‘net neutrality’ in other sectors as well, it is not absolute. In the electricity sector, all consumers using under 300 units of electricity in India pay a lower flat rate, but this uneconomic pricing is made possible by charging those using over 1,000 units a month a higher price – so there is ‘neutrality’ in rates, but only within each block of usage. Airlines are ‘neutral’ in that they give equal access to customers, but charge different rates for different seats within the same aeroplane, and charge people different rates for the same seat depending upon when they book. And in the good old days – or bad old days, depending on how you view private telcos – when government-owned PSUs ruled the roast, local calls were subsidized by charging customers a hand and a leg for domestic and international long distance calls; charging them a flat rate – which is what the ‘net neutrality’ debate boils down to – would have killed telephony in India even before it took off.

If Bharti Airtel is guilty of anything in the VOIP debate, it is of getting its strategy wrong, of not being able to convince people differential pricing lies at the heart of every business, and that it is the better-heeled customers who can afford smartphones who are benefitting from cheaper VOIP calls at the expense of the less fortunate who are paying many multiples more for their plain vanilla phone calls. The fact that other telcos chose not to follow Bharti Airtel’s example and jack up rates for VOIP services – Bharti Airtel backed down only because it realized it would lose customers to its rivals – also proves Indian telecom isn’t anywhere near the oligopoly it is made out to be.

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  1. A
    Jan 5, 2015 at 8:38 pm
    Paid press selling BS
    1. A
      Avira Thomas
      Jan 5, 2015 at 4:22 pm
      The nonsense is the only thing that's free with this article, telcos are in the toll collection business, net neutrality doesn't prevent them from creating new products and services that generate more revenue. The airline ticket example is as dumb as it gets, if Airtel is free to charge extra because they are in the apparently selfless (according to the author) business of creating a telecom revolution, then other ISPs should be free to block traffic to websites that generate click bait to drive up advertising revenue, I guess the author might disagree as it might eliminate his meal ticket. Airtel and other COAI clowns should be happy with the government provided monopoly and try to improve their billing skills at least, cap advertising costs and improve profitability. The telcos are least interested in expanding their networks, how many rural areas did Vodafone or Airtel cover, uso is a way to make them pay so that they can poach BSNL customers down the line.
      1. I
        Apr 25, 2015 at 7:53 pm
        Looks like a paid article by telecom operators. Nonsense arguments.
        1. Kushal Verma
          Jan 6, 2015 at 4:04 pm
          It's makes perfect business sense for Airtel to go that way. Since all these telecom company have invested so much, the business needs to make money. Net neutrality is dreamy picture of the ideal world, otherwise the first thing that should be shut down in Internet
          1. K
            Jan 5, 2015 at 2:44 pm
            truck load of .. if the googles/facebooks/twitters/youtubes/skypes/etc where not there in the first place would Airtel and Vodaphone have their customers? How does your logic hold for whatsapp (which is also being considered) which consumes very little bandwidth? Please understand that the Internet growth is because of these services/content and not because the telcos are providing higher bandwidth to the end customers (telcos are still playing catch up), specially in Indian context where we get sub standard internet connections. You are in essence telling the indian consumer to pay for the internet infra. which has not been provided to them as yet and there is no urance that the telcos will channel the additional income to improve the reach! Its like asking us to fund McDonald's to serve us better burgers, get the logic? You cannot compare Indian market with US/Europe, the logic that works in India is 'volumes' of s. About 5 years from now, both the voice and data penetration will go up and make the telcos 'more' profitable, till then telcos need to continue investing! I as a consumer/customer want to pay a fixed price for the Bandwidth and the data transfer limit (FUP) without having to bother for each service i am using, is that too much to ask for? From where I see, Telcos are now becoming more greedy and want a piece of the pie (read revenue sharing) as they are not able to remain compeive and generate more revenue from existing services and business model. By the way, i stay in Viman Nagar, Pune and pay INR 2600/- (USD 42.62) to Airtel for a 8MBPS connection. Please do respond and let me know how this is cheaper than any internet connection in US or Europe?
            1. R
              Apr 8, 2015 at 2:16 pm
              How much was the author paid to write this article?
              1. A
                Jan 6, 2015 at 12:39 pm
                Paid article. Not reading financial times anymore
                1. A
                  Apr 7, 2015 at 2:25 pm
                  If its a matter of investing in spectrum licensing and infrastructure that's causing this, Airtel should move out sell off their business and move out of it. Let someone more efficient manage it. No one's forced them! This so much sounds like auto union going on a strike against Ola just because their fixed rate lobbing no more works when cab aggregators come into play with 'neutral' market based prices.
                  1. A
                    Akshay Bhalotia
                    Apr 11, 2015 at 11:27 am
                    Is this person for real? Indian Express, you've hit a new low. Kudos!
                    1. akshay tarfe
                      Apr 7, 2015 at 3:37 pm
                      Okay so you think internet is cheaper in India and not giving you enough revenues then increase those prices and compete with other carriers. Why charge and track down use of each app and service by the consumer. Didn't expect such ty article from the express group!
                      1. Andrew Milton
                        Apr 16, 2015 at 1:16 am
                        Financial Express! Its more like Comedy Express. What a lame justification given by such a pathetic media. Me as a user pay for internet data packs to use Internet. Telecom operators doesn't have permission to charge extra for certain sites. Mr. Author justify this. You buy a home from someone for a huge amount. After selling the home to you, he is asking rent for you staying in the house on afternoons. If you will pay the rent, I will drop advocating for Net Neutrality. This article makes me wonder that if Financial Express is gaining any financial aid incentive for posting such a crazy, useless, pathetic article. Kudos to the chief editor, if someone such like that still exist.
                        1. A
                          Jan 5, 2015 at 3:22 pm
                          Sunil Jain, your article is full of wrong examples and wrong similies. The only thing you get right is that the telcos are hugely burdened by the government levies comprising the spectrum, license fee and other levies. But that needs to be a separate discussion and is not good enough excuse to break apart internet as a service. To talk about some of your examples and logic: it is not Google or Facebook that is clogging up the telcos' networks, it is the customers of the telcos, who, in turn, pay the telcos for it. Google and Facebook pay for their bandwidth at their own data centres. The arguments that these companies are clogging or riding the telcos' network for free is nonsense. How the heck is net neutrality similar to the USO?? Just because both of them are for public good, doesn't mean that they are similar. There can be a separate argument about the desirability of USO but it doesn't justify charging separately for VOIP. You say if net neutrality is for the public good, then let the government pay for it. Well, by that logic the w telecom is for public good. Toothpaste too is for public good. Should the government pay for everything that is for public good? Net neutrality is not about socialist subsidies. It is about the integrity of a well defined service known as internet. If a consumer is paying for internet, the supplier has no right to dissect the service arbitrarily and start differential charging. The real reason Airtel wants to charge for VOIP specifically was that it was competing against its costly voice service. Shortchanging the internet customer for its alternative service is unethical. The parallel with electricity charging is absurd. The way there are different charges for different usage, you have different billing plans for internet for different usage. But it would be stupid for electricity companies to charge differently for electricity used for watching TV and electricity used for lighting. It shouldn't matter to them! Similarly, once the user is paying for data, it shouldn't matter to the ISP how the user is using the data. Your comparisons with airlines and old days of telecom charging simply don't have the analogy in them. About your point related to telecom oligopoly, Airtel did not back down. Its purpose was to maneuver TRAI into taking its side, in which it succeeded. Their 'backing down' is only temporary and they are forcing TRAI to support their move. Lastly, about the costs of spectrum fees, remember, they were given to operators through auctioning. The operators, including Airtel, CHOSE as per their own free will to bid exorbitantly. Now they are crying that their services aren't financially viable. Whose fault is it?
                          1. a
                            Apr 17, 2015 at 12:31 am
                            Net Neutrality - every bit of data must be free. Correct. TelcomCo. can not and must not control sites and speed except four major killer of voice call business i.e. viber, skype, whatsapp, messenger, hike should not be allowed to overtake business of indian companies. Just stop them and all else will remain free as it was.
                            1. Ashutosh Sharma
                              Jan 5, 2015 at 11:21 pm
                              How stupid an author can be to be allowed a post on financialexpress? My guess is, you have to be as smart as monkey so as to hit keys on a keyboard.
                              1. B
                                Apr 14, 2015 at 4:44 pm
                                wow... there goes objective journalism out window.... a completely one sided, heavily prejudiced argument. The author clearly has ulterior motives or may be this is a article written by Airtel's PR. agency. Either they have done a very poor job at writing this article. The real danger of loosing net neutrality is that, it will allow private firms to restrict flow of information and influence opinion. This is truly dangerous for a country of 1.2 billion and internet adoption is increasing in double digit percentage year after year. Allowing private firms to censor the internet will be a travesty and will result in handing over real power to corrupt and greedy corporates. Its truly saddening to see that FE is blatantly justifying corporate greed instead of protecting the future health of our great country. Whatever little shred of respect Financial Express had in my mind has been completely obliterated.
                                1. m
                                  Jan 5, 2015 at 6:00 pm
                                  how much Airtel paid to you mate? to write this noncense? didn't telecom companies earn now? If any company want to show the graph lines going up every 3month, they should invent something and invest their money on new ideas, not to -up their user base. Airtel just did that.
                                  1. D
                                    Dhruv Sengar
                                    Jan 5, 2015 at 3:29 pm
                                    Interesting attempt, but I am afraid you've failed grasped the underlying concepts. While industry players are free to charge for their services, preferences to websites or bandwith hurdles to others is an extortionist approach. Their actions harm all the players that leverage the internet to provide compeive services. And please do not mix concepts such as the Universal Service Obligation to the argument. Companies directly benefit from creating a market through greater penetration of their services.
                                    1. D
                                      Apr 21, 2015 at 3:42 pm
                                      A lot of new startups actually make our life easier. If you do not give a level playing field to new internet startups, they cannot make our life easier. You don't pay different rates to reach different stores on the same road. The charge for using the road has to be flat. If a roadways company charges differential prices for reaching different stores on the same road, it creates confusion for the end customer. The roadways is jealous of the restaurants making money though the road is already making good money in the toll fees. Can't you understand this? Go look at the life of a startup entrepreneur! Then you will understand the struggle he goes through.
                                      1. A
                                        Apr 15, 2015 at 7:11 pm
                                        Ill researched article. The analogies are absolutely meaningless and irrelevant.
                                        1. A
                                          Akash Gupta
                                          Apr 13, 2015 at 12:06 pm
                                          No wonder Indian Express is reduced to no more than a 'Dying Star' - just a shadow of it former self!!
                                          1. M
                                            Jan 6, 2015 at 9:19 pm
                                            Mr. author needs to look at the balance sheets of companies like Airtel before blabbering bull! Teleco's have been making huge profits so far. The argument provided by the author is -they have enough money to fund their further infra investments. Btw, Financialexpress, stop posting articles by authors paid and supported by crony capitalist.
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