Net neutrality: The remedy lies somewhere between the ‘free internet’ slogans and the unregulated pricing of content by telecom service providers...
Much has been written on net neutrality in India especially since Bharti Airtel sought to charge the content providers based on the type of data.
The debate seems one-sided with most of the media, politicians, Twitterati and now even the glitterati siding with net neutrality. With the debate being one-sided, is there a point that the collective sentimentality of the people is just missing? In fact, the kind of net neutrality that the majority seeks may not be right to ensure long-term consumer interest.
Internet is a multi-sided platform that connects the content providers with the users. Like any platform, it has its operational costs, and constant pressures to upgrade and innovate. We have seen how moving from narrowband to broadband has brought efficiency not only in our daily conversations but has also opened new opportunities such as e-commerce and e-health. The importance of innovation in the telecom sector cannot be overlooked. One cannot imagine supervising a surgery or teaching mathematics to students in the far-flung Northeast India through an average unreliable narrowband or 2G network. This upgrade, certainly, requires investment.
With the rise of the over the top (OTT) services, internet service providers (ISPs) have lost a large chunk of their revenue base to the Voice over Internet Protocol (VoIP) operators such as WhatsApp and Facebook. On the other hand, OTT services, very often, generate revenue through advertisements. It is important to note that, with the latest technology, OTT apps offer voice and data much like telecom service providers.
Therefore, in the competition law parlance, regular telecom operators and OTT operators compete in the same relevant market. However, there is no level-playing field as telecom operators have to invest in infrastructure such as ducts and towers, unlike OTT players. The OTT apps are successful because of improvement and innovation in the internet services. The votaries of net neutrality should try using the WhatsApp calling feature on their regular narrowband connection! Therefore, in the long run, if the incentives of the ISPs are not ensured, the quality of internet will be stagnant or retrograde.
The peculiarities of the Indian market must be looked into before one takes a side in the raging debate between the proponents and opponents of net neutrality. Thanks to the over-competitive market with eight mobile service providers, India has one of the lowest calling rates in the world. This price war is good for the consumers; after all, this is what the market economy promises!
However, one should see reduced revenues of operators against the backdrop of stratospheric auction prices that they recently paid to buy or retain the spectrum. Furthermore, there is the Universal Service Obligation Fund (USOF) as well to fund the Digital India initiative. Seen together, these policies leave little surplus for investing in improving quality of services or innovation.
One thing is clear—we all want inclusive internet. After all, it has changed the way humans think and interact. There are revolutions and evolutions that owe their genesis to internet. Easy entry at the content provider level is also necessary to promote innovation. We cannot forget that giants such as Google and Facebook were once small start-ups. At the same time, internet has to be efficient and innovative, which can be ensured only if service providers are adequately compensated. How can telecom operators invest and innovate if there are no incentives to do so? Ruefully, the sentimental arguments advanced in favour of net neutrality are not mindful of this reality. The correct approach, therefore, lies somewhere between the ‘free internet’ slogans and the unregulated pricing of content by the telecom service providers.
The Telecom Regulatory Authority of India (Trai) has sought the comments of stakeholders in order to propose guidelines and regulations on net neutrality. Some have argued that there is no need of regulation to ensure net neutrality, since the Competition Commission of India (CCI) is empowered to take cognisance over this matter. The CCI has already started its probe into the Airtel Zero plan. However, not adhering to net neutrality can be a competition violation only if the service provider is found to be dominant in the relevant market. With four big telecom operators in the Indian market, it is really difficult to find one dominant player. Thus, competition law is insufficient to remedy the market failure in this case. This makes a valid case for appropriate regulation on net-neutrality. However, the optimal regulation that increases consumer welfare, both in the short and the long-run, will have to take a practical approach away from the sentimentality of the masses.
The author is assistant professor at the Jindal Global Law School, Sonipat