Column: Go for zero-rating

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Published: April 20, 2015 12:20 AM

Net neutrality is good, but bridging digital divide is even better. Zero-rating would help bring the unconnected online

India is standing at the cusp of a digital revolution today. With prime minister Narendra Modi’s vision of a Digital India by 2020, the country has embarked on a focused journey to bring digital transformation to the lives of all its citizens.

The aim to achieve 600 million broadband connections and 100% rural tele-density with access to information without barriers by 2020 is undoubtedly a gargantuan task. The digital vision encompasses multiple threads, such as of 100 smart cities, broadband highway and e-governance, among others. The success of this journey hinges on the potential to bring the benefits of the internet to the under-served and drive service adoption right from the grass-root level.

Over the past decade, mobile telephony has been one of the largest contributors to India’s growth story. Circa 2003, the country witnessed a revolution in the mobile voice segment. Players started to pioneer innovative models to bring affordable mobile services to the larger populace. Voice plans with aggressive cuts in tariffs, bundled with low-cost handsets, increased the reach of this technology across the length and breadth of the country. This was truly the inflection point of the Indian telecom industry, creating a lucrative market for all stakeholders in the ecosystem.

The mobile revolution also spurred the growth of entrepreneurs across the value-chain of telecom services. Various sub-sectors witnessed growing traction such as the handset market, equipment manufacturing segment, tower and infrastructure segment, content and VAS providers. In parallel, the Indian telecom sector attracted 8% of the total FDI inflows and reached all-time high of $8.9 billion in the decade ending FY10.

With mobile connectivity reaching even the remote and rural parts of the country, it is increasingly becoming hard to imagine one’s daily life without basic mobile services. India is standing at a wireless subscriber base of over 960 million and tele-density of 76.6%. With this, the next phase of growth is hinged upon the proliferation of data services.

India’s appetite for mobile data is continuously increasing, with mobile data traffic growing by 74% in 2014. The current internet and mobile data tsunami has steered the country on a path of socio-economic development and inclusive growth. Digital services also open a plethora of opportunities for all players in the ecosystem. Growing demand for access to data connectivity and local content have a cascading effect and eventually trigger more entrepreneurs to enter the market. Thus, when India rides the digital highway, all stakeholders—the service providers, consumers and the government—will benefit in tandem.

In light of the renewed push for digital connectivity, sponsored data or zero-rating plans are expected to give an impetus to drive the adoption of data services. Sponsored data plans are offerings where data charges on certain types of usage are billed directly to the sponsoring company instead of the customers. As a result, the data used by the app or service is essentially free to customers.

Globally, operators in both developed and developing countries are highly enthusiastic about the potential of sponsored data. According to a study conducted by Allot Communications, approximately 49% of operators globally have offered a plan that exempted certain apps or traffic from customers’ data buckets. According to Rewheel, there are about 75 sponsored data offerings from 38 operators in Europe.

The concept is also gaining popularity in emerging markets to provide free access to multiple apps and data services. Examples include countries such as Brazil, Cameroon, China, India, Indonesia, Ivory Coast, Moldova, Nigeria, Pakistan, Tanzania, and Uzbekistan, with services ranging from advertising, free access to e-commerce apps, banking apps, games and app stores, support for bring-your-own-device (BYOD) by enterprises, education and healthcare.

Despite gaining significant traction by operators, regulators are responding to sponsored data plans differently. In Chile, the telecom regulator has put on hold free access to social networks, noting that this oversteps the rules under the country’s net neutrality law. Similarly, the Norwegian telecoms regulator assumes the zero-rating plans to breach net neutrality guidelines. On the other hand, the US is considering evaluating sponsored data plans on case-by-case basis, to check whether their benefits to consumers outweigh the potential to distort competition.

Mobile operators in the Philippines actively engage in zero-rating. The country has also recently begun to enjoy a prosperous internet start-up culture. A basic search online shows a wide variety of Filipino internet companies, offering services ranging from digital queuing, selling products and helping citizens monitor their electricity use in real time. Tech incubators are springing up, and injecting internet businesses with capital.

Collaborative effort and focus on affordability are musts to run the digital kranti campaign. Looking ahead, if India is to achieve its ambitious vision of a digitally-empowered society and knowledge economy, it is essential to focus on increasing the reach of affordable data services to the masses. For this, all stakeholders such as the industry players—ranging from operators to content developers; the government and consumer groups, all need to work in collaboration to overcome the multiple roadblocks coming in the path of the digital highway.

In a country with low per capita income, where affordability poses a big challenge, it all boils down to the debate about the right pricing for connecting the unserved. It is only then that India will be able to bring the much needed digital kranti and ensure digital transformation in the lifestyles of its aam aadmi.

The author is leader (Global Telecommunications), at EY. Views are personal

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