How Net Neutrality should work in India?

As I write this Egypt’s Free Basics initiative has been shut down for its 3 million customers availing of Etisalat’s internet service free of cost. And Google LOONS project reaches 3 million free internet service customer milestone in Sri Lanka.

Here in India a lot of grist for the media mill has been at work here with several well known folks weighing in on the debate, with arguments getting a little emotive rather than objective.

NN, as a concept is indisputable as it appears fair and egalitarian, so hard to oppose without sounding un-socialist.

NN is essentially for allowing competition viz access, not necessarily pricing or speed. Let’s allow speed to be part of the NN debate in the Indian context since it is a hot button topic! In contrast in the USA the issue is about content cos (Netflix, YouTube, Disney) paying the ISP’s (classified as ‘information service providers’ as opposed to ‘common carrier’) to allow their content to move faster down the pipes to their customers!

In India whilst one must allow unhindered access for all without prejudice and at comparable speed and downloads based on ones data plan & caps. At the same time, recognizing that, spectrum being a natural resource, is scarce and unlimited bandwidth for all while desirable is not practical.

I am putting down some principles on the context of such an enabling architecture;

The provider can allow for sponsored plans, without any prioritization, as long as non sponsored or paid content plans thereafter, comes at a better price point. So, the social welfare curve shifts out as monthly costs for customer /MB come down. Assuming there is elasticity, total revenue will go up. Hence, there is more revenue to Telco’s and they cover costs.  Ramsey’s principle will apply here in that the price markup should be inverse to the price elasticity of demand: the more elastic demand for the product, the smaller the price markup.

  • Two examples, (1) Indian Banks offer differentiated interest rates on Fixed Deposits above 15 lakhs (market discovery), as also, for all savings accounts above 1 lakh. Two similar products, but differentiated prices based on relative elasticity of demand without any significant service upside.
  • There should be no speeding up/slowing down of the ‘paid’ or ‘sponsored’ bits.
  • There should be no prioritizing for either viz, equal carriageway for all. No discrimination.
  • However, the idea that one should pay more for greater bandwidth – differential pricing – makes sense.  The flip side is, having a convincing argument that the ‘Aam Aadmi ‘ user does not get shortchanged in the process.  One way to ensure this is, to have virtually unlimited bandwidth else the provider would have to splice to allocate. But, unlimited bandwidth scenario for all practical purposes is not possible. In the UK Professor Andrew Ellis, Professor of Optical Communications, Aston University, has recently proposed (May 2015) ‘rationing’ the internet, because the internet consumes 8% of UK energy production (equivalent to 3 nuclear power stations!), and the current internet infrastructure can’t support unlimited usage without further capex. The way to get around this is allowing for differential pricing, heavy users requiring higher bandwidth may have to pay a higher price. So, tiered pricing could be moot. Nothing is wrong with that. The acceptable analogy is; different vehicles pay different rates on an expressway. Whilst, they all zip down it unhindered.
  • Therefore, tiered and differential pricing is the key. Sponsored data does help in keeping the tiers and pricing honest. I think, in stage 1, it allows access to everything at equal speed, paid or free, with no speed traps or boosts. In stage 2 as the user and market matures, you may have to allow for some segments to enjoy quicker speeds at some premium. India has not matured to that stage as yet. We are confusing access for speed now.

Here is an analogy to mull. Doordarshan has introduced its DTH platform ‘Free Dish’ – a free to air channel platform, which is reported to be popular in 77 million rural homes.

Private channels are clamoring to join Free Dish as it gets them huge eye balls. Several have bid significant amounts in 24 auctions till date to get onto Free Dish. The result? Private channels are paying to join Free Dish as it gets them huge eye balls and good TRP’s.

One could argue that DD is acting as a walled garden by only allowing content owners who pay to be part of their bouquet, and for being mercantilist in auctioning slots on its platform to the highest bidder!  Since Facebook is not even doing any of this (on the face of it), can it really be accused of harboring a monopolistic or commercial agenda? Sure, Facebook seems to want to add millions of new users in India and elsewhere (don’t Google Loons in Sri Lanka and Free Wi-Fi at 100 Indian stations, and Twitter?), and is willing to hopefully carry others on its platform who meet its basic technical criteria (iStore, Android’s Playstore and almost all app stores have similar conditions!) without acting as a gatekeeper. Unfortunately, Facebook’s problem is it has been hurt by its confusing and some over the top marketing communication.

But as we have seen from some of the above examples what is sauce for the goose is sauce for the gander!

Probir-roy

 

 

 

 

 

 

 

By Probir Roy, Co-Founder, PayMate

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