1. Tailor net neutrality to suit Indian market realities

Tailor net neutrality to suit Indian market realities

It is critical that wireless ISPs be allowed flexibility to manage their traffic given the spectrum constraints

By: | New Delhi | Updated: July 16, 2015 7:26 PM
net neutrality

It is critical that wireless ISPs be allowed flexibility to manage their traffic given the spectrum constraints (Reuters)

With a billion people with no experience of the internet use, India cannot afford to overestimate the demand, relevance or affordability of internet access. Expanding user base would require more innovation in pricing, content creation, and attractive bundling by ISPs

There is a net neutrality debate raging in the country, but there is a worrying absence of rigour. Much of the popular commentary lacks India-specific analysis and advocates practices adopted by minority of countries that cannot be considered India’s peers in any way. I argue below that it is risky to underplay India’s unique challenges and that hasty action on net neutrality can hurt the billion Indians who are yet to access the internet.

The problem is not with net neutrality per se; there is merit in its requirement that internet service providers (ISPs) not block, slow down or prioritise any internet traffic for purely commercial reasons. However, the devil is in the details. Experts, including Nobel laureates (Eugene Becker) and internet luminaries (Robert Kahn et al) and many others, question the need for and scope of net neutrality rules. Over 90% of world’s countries do not mandate net neutrality. The provisions in the four countries, viz. US, Brazil, Chile and the Netherlands, that do, have key differences. For instance, zero-rating, the practice of an ISP offering its users free access to selected websites, is legal in US but not in Chile. Similarly, opinion is divided on whether an ISP should provide equal and identically priced access to all websites and services, without exception, or, only to all similar services e.g. gaming, or VOIP. Vocal advocates of net neutrality in India want no exceptions.

The problem with strict net neutrality is its stubborn, uncompromising “all-or-nothing” approach to internet access. Its supporters, for example, regard any ISP providing cheap or free access to select websites as market abuse or as an attempt to “fragment the internet”. Ironically, they end up implicitly prioritising rights of those who can access the internet over the overwhelming majority in India that still can’t. The latter may arguably welcome a limited but cheaper option, the absence of which might explain—at least partly—why barely 15% of Indian use the internet and why they consume dismally low amounts of data (150 MB). The numbers in comparable (BRIC) countries, and in those that mandate net neutrality, are several times higher.

To treat all zero-rating as market abuse, without any market analysis, defies elementary principles of competition regulation. Yet, the report of the government’s committee on net neutrality does just that. It suggests that zero-rating players play a “gatekeeper” role, and are presumably, a sort of monopoly. This is absurd. There is simply no content or network player which is in a position to exercise monopoly power in India. For instance, the market share of India’s largest mobile operator Airtel, is not even 25%. All websites that are accessible free through Facebook’s internet.org are available through at least 10 competing ISPs. No developed or developing country offers a higher choice of network players. The cost of moving your account to a competing operator or technology—you can retain your original phone number too!—is capped officially at Rs19! Over 100 million users have already changed operators. The competition in India’s internet access market is not a matter of opinion. There are, admittedly, several other daunting challenges, e.g., slow speeds, call drops, etc. However, competition in India’s ISP market offers unique protection on the net neutrality front.

From a net neutrality perspective, India is qualitatively different in another important sense. This is in the predominant mode of internet access. In most developed countries like US, people rely on fibre and cable where capacity is high and easy to expand. However, most Indians use wireless networks where traffic is constrained by spectrum, a finite natural resource. This shortage is made worse by fragmented spectrum divided among many more players than is the norm internationally. It is illogical to argue that capacity of wireless networks can keep pace with ever expanding demands of content, especially video, unless it is augmented by fibre and cable as in developed countries. It is therefore critical that we allow a degree of flexibility to wireless ISPs to manage their traffic. Recall that net neutrality obligations in US did not apply to wireless operators till early this year. India would be wise to consider a similar approach till, at least, the proposed National Optical Fibre Network (NOFN) is in place.

However, this is not to underestimate the risk of market abuse. Restrictive practices, collusive behaviour, arbitrary changes in priority of traffic, and similar anti-competitive practices must be monitored closely and punished. The Competition Commission of India has the mandate and powers to deal with all of them. However, there is little justification for ex ante, or, advance action in anticipation of mischief. More so, since the documentation and advocacy for strict net neutrality is conspicuously short on specific examples of violations. It offers little evidence of consequent harm to consumers in markets that do not mandate strict net neutrality. While this is no ground for complacency, we cannot justify off-the-cuff determinations of unfair competition or market abuse, ignoring well-established economic criteria in use by regulators worldwide.

India must encourage, not discourage innovation that brings more users to the internet and stimulates data usage. It has a huge stake in internet-based services including communications, health, education, governance, etc. However, with a billion people with no experience of the internet use, India cannot afford to overestimate the demand, relevance or affordability of internet access, especially in rural areas. To expand user base and usage requires more, not less, innovation in pricing, content creation, and attractive bundling by ISPs. India’s operators pay some of the highest levies in the world. The few countries that have mandated net neutrality already have over 50% internet penetration and face few, if any, of these challenges.

India’s regulators and policymakers cannot justify copycat action on net neutrality. Given the low levels of internet access and the reliance on wireless technologies, it is premature to insist on strict net neutrality norms. India, along with other developing countries, must reject doctrinaire net neutrality. It needs its own version that meets its own strategic and developmental priorities.

The author is a telecom consultant

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