It has been announced that Trai would shortly come out with a comprehensive consultation paper on net neutrality. While this might be the culmination of an over 24-month process spanning two regulatory regimes, it is interesting to note the recent trajectory. The authority is tantalisingly unveiling its model of net neutrality bit by bit. This is a novel and stimulating approach which possibly gives them the latitude to make strategic course corrections while maintaining the overall movement forward.

In February this year, Trai took quite a historic step—ostensibly for consumer protection and as part of its net neutrality action programme—when it issued the ruling that no service provider shall charge discriminatory tariffs for data services on the basis of content. Further to this, the authority recently issued a consultation on ‘free data’. In the ban on discriminatory tariffs, exemption was however provided to data tariffs charged by the provider to its own subscribers for content internally provided, not received or transmitted over the internet. Discrimination, especially in the matter of tariffs, is essentially a term that has very negative connotations and hence very few would support discrimination or discriminatory tariffs because this implies unjustified, differing treatment or tariffs for similar situations or products. Thus, the Trai action is a truly epoch-making step that should set consumers and reformists dancing wildly with joy. Alas! That doesn’t seem to be happening and doubts and concerns are being raised on several fronts.

The fundamental difficulty with the regulation is that while it is supposed to be dealing with “prohibition of discriminatory tariffs for data services”, it is prohibiting differences in tariffs for services related to demonstrably different content! This being so, it is actually prohibiting even legitimate differentiation of different content-enabling services. Decreeing such sameness or equality would inevitably lead to inequitable treatment. It might be worthwhile to note that even the Right to Equality enshrined in the famous Article 14 of The Constitution of India involves such important principles. There is abundant case law that establishes that Article 14 guarantees equal treatment only to persons who are in similar circumstances or equally situated, that unequals are not only permitted to be treated unequally but also they have to be so treated, that equal treatment to unequals is nothing but inequality. Strong case law also shows that an important consequence of the right to equality is the element of reasonableness. Classification that is unreasonable is clearly open to challenge and judicial review.

Reasonable differentiation of tariffs or benign discrimination for differentiated products and services has been for decades the fundamental basis of effective competition and a working, vibrant marketplace. If, irrespective of content or quality, every product or service had to be at same price, where then, would there be any incentive for differentially uprated quality. Wherever you look in this world, there is, and always has been, healthy differentiation. In malls, neighbouring stores sell similar products (clothing, toiletries, etc) of different brands but charge significantly different prices. Isn’t that acceptable marketing? The internet is the modern marketplace and we need to permit it to function freely without extending specially favourable treatment to particular commercial entities—e.g., content producers, who happen to also be end-users. But then, so are so many other classes of commercial entities who are not content providers and who get disadvantaged in the process. It is unfair and incorrect to extend regulatory favour to the commercial category of content providers.

Protagonists of net neutrality and “no differentiation” demand that there should be “no fast lanes” and “no paid prioritisation”. Are they referring to a real world—do they realise that the prioritisation of packets has always been a fundamental feature of the design and operation of the internet since its inception? Don’t they willingly pay a toll fee for the fast lanes of expressways when wanting to use them than the regular roads? Don’t they happily pay a premium for the prioritisation and content of business or first-class travel in road, rail or air travel? The lobbyists for non-differentiation claim that data charges are the “fuel” for travel in the internet and having paid it, there should be no differentiation or discrimination between widely differing types of content/sites, say, between, e-mail or browsing and YouTube or Emergency Remote Medical Diagnosis! This is plainly incorrect and violative of the principles of reasonableness and natural justice. It is tantamount to stating that since I have paid the basic charges for petrol, diesel or aeroplane fuel, there can be no difference in the charges for different types of travel vehicle or class of travel. Or, like claiming rights to a presidential suite accommodation after paying basic room charges in a 5-star luxury hotel.

Importantly, Trai, in its current regulation, has provided exemption to tariffs for data services to the operator’s own subscribers over its closed electronic communication network, i.e., its intranet, where data is not transmitted externally over the Internet. This effectively means that an operator who has the wherewithal or deep pockets to have his own farm of developers and content providers would be able to provide a rich portfolio of content with regulatory advantage in tariffing and thereby grow his customer base vis-à-vis his competitors. In other words, the regulatory approach would inadvertently but clearly favour and promote vertically-integrated large monolithic operators with huge efficiencies and economies of scale. In the immediate- or short-term, there could possibly be customer benefits through lower tariffs; however, one seriously worries that this regulatory proclivity could be significantly competition-limiting in the medium- to long-term. Small- and medium-sized operators could be edged out of the market, to the disadvantage of the customers. A vibrant and healthy market would surely need to avoid concentration in a limited number of dominant vertically-integrated players.

It is good that Trai is set to launch its consultation paper on net neutrality. Debates on this complex subject have raged in the US and Europe for nearly two decades without an answer found. Authorities there have, however, recognised that if carte blanche permission for differentiated/discriminatory tariffs is bad, so is a blanket ban on these. Many are the opportunities for consumer welfare enhancement through the use of positively differentiated or benignly discriminatory tariffs and wisely, therefore, they adopt a case-by-case examination. India needs to seriously consider this approach for connecting the next billion to the Net.

The author is honorary fellow of the IET (London) and president of the Broadband India Forum

Views are personal