1. Column: Tread carefully on net neutrality

Column: Tread carefully on net neutrality

The DoT committee’s recommendation to embed net neutrality in telcos’ licences is a proposal fraught with risks

By: , and | Published: August 7, 2015 12:34 AM

“Sergeant Buzfuz began by saying, that never, in the whole course of his professional experience—never, from the very first moment of his applying himself to the study and practice of the law—had he approached a case with feelings of such deep emotion, or with such a heavy sense of the responsibility imposed upon him…”
– Charles Dickens,
The Pickwick Papers

During the course of producing their report on net neutrality—the report itself was released last month—the special committee constituted by the department of telecommunications (DoT) must have felt very much like Sergeant Buzfuz did during the trial that the jury eventually decided in his favour in Dickens’ timeless classic.

The emotional outburst on the internet in support of net neutrality grew to a crescendo following the publication of a consultation paper of the Telecom Regulatory Authority of India (Trai) on a ‘Regulatory Framework for Over-the-Top services’ that not so covertly questioned the immediate merit of introducing net neutrality in India.

Not only was the paper a departure from the cogently argued and well-articulated pieces that one had become used to Trai producing in the recent past, there was also much whispering that the regulator had, in this instance, been captured by private interests. There were over a million e-mails from internet users sent to Trai (a sizeable number of these courtesy “savetheinternet.in”) exhorting legislation in favour of absolute net neutrality.

In ordinary circumstances, the consultation paper would have ultimately led to recommendations from Trai for consideration of the DoT. Why that process was not allowed to be played out, one can only guess, but it must have been largely driven by the outburst in favour of absolute net neutrality and against Trai’s effort. In that sense, Trai lost an opportunity to establish itself on the regulatory firmament at time when disagreements between Trai and the DoT are commonplace. We have written about this conflict in a piece in these very columns (Telecom’s cross-connections, February 24, bit.ly/1JNOakM) and thus that aspect need not detain us here. Whatever the reasons, the DoT saw it fit to create a committee on net neutrality, signalling dissatisfaction with Trai’s consultation paper and simultaneously conferring on the committee the responsibility to produce a document that would form the basis of policy formulation that normally should have been the remit of the regulator.

Unlike Sergeant Buzfuz though, the Committee has been unable to convince the jury. Admittedly, the responsibility was immense and the task knotty at best. And we believe that net neutrality is an idea that must be spoken to a little before it will explain itself. For example, it took several argumentative years in the US before being legally adopted. Emotions notwithstanding, the responsibility for crafting a template for India’s much anticipated digital future must have weighed on the committee. In the process, they have sidestepped a few lessons from India’s litigious telecom history. For example, in trying to achieve the difficult and delicate balance between promoting both innovation and investment, the committee recommends an incremental charge for domestic VoIP calls (made using Viber, Skype, WhatsApp) while excluding international VoIP traffic from a similar burden. The rationale is that unlicensed over-the-top (OTT) applications that bypass the existing regulatory regime distort the playing field between telecom service providers (telcos) and OTT providers adversely affecting telcos’ incentive to invest in infrastructure. After all, smartphone users can make calls at one-thirteenth the price charged by telcos for voice services using one of the ‘disruptive’ apps. Two comments are in order here. One, if this is true for domestic calls, it ought to be true for international calling as well. And two, how will we monitor and enforce this artificial separation when technology remains a few steps ahead of regulation and policy. Who can forget the episode of a service provider passing off international calls as domestic traffic in mid-2000s when the former attracted an additional charge of Rs 4.75 per minute in the form of an access deficit charge? Regulatory arbitrage emerged as an undesirable byproduct.

There is no doubt that there is an ‘unavoidable vagueness’ in the idea of net neutrality. How it ends up being defined and applied will depend on the local context, a fact that the committee has emphasised and endorsed. India’s truth is that we are on the cusp of a data revolution that will overwhelmingly be driven by mobile networks, the foundation of Digital India. But while the committee comments on the need to prevent “gate-keeping” (it differentiates between “zero-rating” plans such as free internet coupons that allow free access and plans that limit access to content), the recommendations stop short of a clear response on the very subject that resulted in net neutrality becoming heated in India in the first place. Instead, all tariff plans (including “zero-rating” plans) are recommended to be addressed by ex-ante and ex-post regulation by Trai, kicking the can down the road.

At the same time, embedding the principles of net neutrality in telcos’ licence conditions through an enabling clause is also a recommendation fraught with risks. To not wait for the formulation of a clear and well-defined law merely because a licence amendment is a “simple process” and a more “immediate solution” may be hasty. This is particularly true given the exceptions allowed for the complexities of network management—for a rule incorporating exceptions, clarity and certainty is essential. Without clear legislation to refer to, modifications to licence conditions in a fast-paced and dynamic market like telecom are made at their own peril, inviting a variety of transaction costs (including litigation). Not to put too fine a point on it, but these will become legally enforceable rules with serious implications on business and investment. Perhaps even more importantly, the determination of operators’ duties towards ensuring that Indian citizens’ access to the opportunities that the internet provides will hinge on these words. The path between certainty and expediency must thus be carefully trod.

Nothing should however take away from the extraordinary effort of the committee in producing a document in quick time while meeting a diverse group of stakeholders with violently contrasting views and agendas. When confronted with the latter, one has to pick sides ultimately in consumer interest. That is the raison d’être of regulation. And in the long run, consumer interest will be served by connectivity and access to innovative applications and content. Thus, balancing an open internet that allows disruptive technologies to emerge and thrive while preserving the incentive for infrastructure expansion remains at the core of the debate. We feel it is a balance that is possible to achieve, but for that it is important to divorce the discourse on net neutrality from that on OTT. In addition, regulatory institutions in Indian telecom need to be empowered so that they can serve the cause of the sector. On their part, institutions should remain neutral and unbiased. That would, to a large extent obviate the need to create committees to address matters of regulation and policy, that the existing institutional structure ought to be able to deal with. If it is broke, then it needs fixing, not another committee.

Kathuria is director and chief executive, Kedia is research associate and Urdhwareshe is research assistant, ICRIER. Views are personal

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