Differential Pricing for Data Services: Telcos’ stance will earn them consumer distrust

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January 21, 2016 12:55 AM

They must adapt to the disruptive changes that technological innovations are bringing to the commercial landscape.

The telecom regulator’s most recent consultation on Differential Pricing for Data Services is one more chapter in the continuing struggle for internet consumer rights in general and net neutrality in particular.

While the debate on net neutrality has flourished and grown, thanks to the internet activist community, I have repeatedly cautioned as this being hijacked by an anti-Facebook/Free Basics rant.

This rant against Free Basics has taken the focus of the debate away from where it ought to be—i.e. the telcos. The Indian telecommunications sector is run by a limited number of players—for years, a few telcos have been dominating the telecom space. They are clearly a shining example of Indian private capital building world-class infrastructure, creating jobs, economic activity and contributing many thousands of crores to the exchequer as revenue share and spectrum fees. However, at the same time, this sector and its players have also created a remarkable trust deficit with consumers through their disregard for consumer rights—something clearly evidenced in the number of TRAI orders for QoS and Consumer Rights being challenged at various courts across the country.

In the most recent instance of this harakiri, telco responses to the regulator’s consultation are brazen and seemingly dismissive of principles dear to consumers of a fair and open internet.

Any informed observer of the net neutrality debate will know that telcos represent the most serious threat to net neutrality in India today. Their objective is to increase their returns (not in itself a bad objective) by increasing control and influence of the net itself, i.e. moving from providing access to the net to influencing and controlling what consumers access on the net. This is what I call ‘cabelisation’ of the internet. What these submissions have proven is that telcos continue to care less, causing distrust amongst consumers.

The “level-playing field” grouse

Take, for instance, Bharti Airtel and Vodafone’s persistent claim with the issue of “levelling the playing field”. In several sections of both their submissions, they argue that commercially-driven differential pricing strategies should be permitted, as this would simply be upholding the principle of “same service, same rules”. Idea Cellular takes this dubious argument a step further, and conveniently offers that differential pricing is a “legitimate business practice”, by making a flawed interpretation of Section 11(2) of the TRAI Act.

They forget to mention that there is no similarity between services provided by telcos i.e. providing access to the internet, and services on the internet i.e. applications and content that use these access pipes to provide innovative services. This is like comparing apples and oranges and saying they can be charged differently.

These can only be considered legitimate business practices if distorting the open and competitive nature of the internet is deemed to be legitimate. Public policy cannot permit the cabelisation of the internet—this will create a situation that even regulations cannot reverse in the future.

Dubious claims regarding “societal benefits”

When all else fails, use the societal benefits card! One more ace in the pack of cards is Vodafone India’s claims with regard to the many “societal benefits” that differential pricing strategies shall deliver to society. It states, “Differentiated pricing also has societal benefits, ensuring that communications and internet services are accessible, affordable and available. Differentiated pricing for data content expands participation in online content. Increasing internet access has been shown to increase productivity, support enterprise and innovation, increase employment and economic growth.”

Telcos have already earned significant distrust amongst consumers with their terrible track record on call drops and QoS. To expect consumers to blandly accept this is to assume policy-makers and/or consumers are ignorant!

The reality is that differential pricing which involves a commercial quid pro quo between telcos and web entities will create significant distortions to the internet and will create medium- to long-term problems for consumer choice and rights.

In fact, ‘societal benefits’ can only be delivered through regulation and policies that ensure a neutral internet.

The recently released World Bank’s World Development Report 2016 makes a case for net neutral options to increase access. It argues that in order to fully reap the benefits of the digital age, the digital divide must be addressed by making access to the internet “universal, affordable, open and safe” and “strengthening regulations that ensure competition among business, adapting workers’ skills to the demands of the new economy, and fostering accountable institutions.”

These two non-negotiable principles of net neutrality feature prominently in my own submission to TRAI, and it remains a mystery how Vodafone’s submission missed making mention of some of these net neutral options, even as they extolled the virtues of “societal benefits”.

The “adequacy of current laws” spiel

Some telcos have stated in their submission that the current regulatory regime has served to adequately protect the interest of consumers availing of telecom and internet-based services.

Vodafone India states, for instance: “The competitive intensity of the market has resulted in largely self-regulatory mechanisms that have ensured the protection of consumer interests.” Given that many of the TRAI’s orders that seek to protect consumer rights are being challenged by various telcos across different jurisdictions seeking self-regulation is akin to asking consumers to take a leap of faith into a known, deep and dark abyss.

The opposite is, in fact, true. There is a need for strengthening the TRAI Act because currently the law doesn’t give it enough teeth to enforce consumer protection and rights and intervene in case of evidence of market or consumer distortion. There is also perhaps a need for a specific net neutrality legislation and rules that are embedded into licence conditions of telcos to make compliance clearer and easier. I have argued this in my submission to the TRAI and have raised this in Parliament and with the government several times.

I have been both a cellular entrepreneur and also chairman of industry association COAI. So I am sympathetic to the industry’s right to advocate a better deal and policy framework for itself. But I genuinely fear that, in the process of doing so, they are forgetting that they are only one stakeholder in telecom and internet sectors. Consumers are an important stakeholder too and telcos’ conduct and position that are adverse to consumers are exacerbating the growing distrust amongst consumers and policy-makers.

Telcos must adapt to the disruptive changes that technological innovations are bringing to the commercial landscape. Policy and regulations must encourage telcos to do this. It is about time they came out from behind all this doublespeak and stand up and front for what the consumers of India deserve—a net neutral internet. Consumers will not settle for anything less.

The author is a Member of Parliament and technology entrepreneur


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