It is fascinating to see the heated debate that Airtel’s Zero and Facebook’s Internet.org have triggered. However, the current net neutrality debate in India seems premature and misses the point. The debate we need to have is not how to create undifferentiated access for service providers but how to create wide-reaching and affordable internet access for all Indians. At this stage in India’s broadband journey, connectivity is the key issue.
The concept of net neutrality has been around for well over a decade. Net neutrality aims at averting blocking, throttling or prioritisation of traffic to prevent broadband providers from disadvantaging consumers by controlling access to select services and to avoid discrimination of smaller online service providers. The underlying idea is that an open internet fosters innovation and allows customers to have access to all services.
With the rise of wireless broadband, the debate intensified and created major differences in perspectives. The reason lies in the technical and economic realities associated with mobile networks. Mobile is a shared bandwidth between users in a particular antenna location (or base stations). Increasing traffic reduces the bandwidth available to each user and can even crowd out some. The real, contentious issue here is video-streaming, as it consumes a disproportionate amount of bandwidth (30-40% of data traffic in India, and expected to rise to 60%). To deliver the unquenchable thirst for more data and video, operators need to continuously deploy more coverage, capacity and spectrum. This requires huge investments, especially in India where spectrum is expensive. Naturally, operators raise the question whether service providers with a disproportionate share of traffic should have a free-ride on their investments. To this extent, operators are seeking to get providers to fund a component of the cost of delivering such services. Already in the US, Comcast and Netflix have entered into a commercial arrangement. These arrangements both benefit consumers and rebalance the burden between broadband and online service providers.
In fact, consumers should ask the question whether net neutrality always results in a better customer experience? Unfortunately, in mobile networks, content-heavy services consume a huge surplus that can affect the experience of others. Frequently, analogies of electricity utilities or highways are being used to justify the need for net neutrality. However, the comparable implication in mobile networks would be that, if one household wants to run a heavy-duty air conditioning, neighbours would not have sufficient electricity left to power their fridges, or when one consumer wants to drive his luxury car on the highway, other drivers need to go for a pit-stop.
In any case, the current net neutrality debate seems premature for India. The broadband infrastructure is still insufficient and needs urgent acceleration. As we have consistently seen in other countries, broadband adoption is directly linked to coverage. India needs 80% to 90% coverage with 3G or 4G to achieve a step change in broadband adoption. This requires significantly more investments in towers, fiberisation of base stations, and spectrum. Contrary to common perception, Indian operators do not generate sufficient returns and have a very limited investment capacity. Without structural improvements in the industry, India is going to wait for a long time before the majority of Indians will have broadband access. Contributions and efforts by internet companies can certainly help ease that burden and make internet access more affordable for the masses. Else, consumers might end up paying through higher data charges.
Airtel’s Zero, Facebook’s Internet.org and similar efforts of zero-rated or sponsored data need to be seen in this light. The concept is not new and has been effectively used by many operators globally and in India for over a decade. In fact, free browsing on Google or Yahoo! or social media plans for Facebook, Twitter, WhatsApp, etc, have played a key role in driving the widespread adoption of mobile internet in the first place. Neither do they constitute a deliberate and sustainable bias towards industry leaders nor does it imply higher charges to consumers. Consumers can consume more megabytes for the same rupee amount, as some usage is now zero-rated.
Telecom operators should be allowed to differentiate services on the basis of value and quality; for example, by charging more for those services that might be offered beyond the ‘best-effort’ internet, by making targeted offers to different groups of consumers, or by charging service providers for better delivery. Imposing an excessively rigid interpretation of net neutrality to ban differential or zero-rated pricing is certainly counterproductive at this stage in India’s broadband journey.
Of course, level-playing fields for online service providers must be maintained. Open access must be non-negotiable and leading online service providers cannot be allowed to influence telecom operators to disadvantage their online competitors. This is where anti-competition laws and the regulator come in. In fact, regulators are already paying a lot of attention to this issue, as we have seen especially in the EU. Notably, the FCC, the regulator in the US, who has been spearheading most of the net neutrality debate, has decided to determine only on a case-by-case basis whether a particular zero-rated or sponsored data service is being used anti-competitively.
At the end, consumers will decide. Which operator would block YouTube videos or try to deliver poorer video quality? This can only end up in high customer dissatisfaction and churn. Differentiated consumer charging for voice-over-internet calls has been tried by several global operators before. However, consumers rejected it and operators have refrained. Similarly, messaging services such as WhatsApp, Viber or LINE have cannibalised SMS. Operators have reacted constructively and created integrated voice, SMS and data plans that have resonated well with consumers, as evidenced by the success of Vodafone’s RED plans in Europe.
India should focus on what it will take to make broadband accessible for everyone. Net neutrality is a good concept to create an open internet and foster innovation but it should not prevent pricing concepts by operators or economic support by online service providers that help make broadband more affordable for Indian consumers.
The author is partner, Head of Communications, Media & Technology, AT Kearney India