Revolt of the free-riding Netizens

The 1857 Indian revolt (aka the Indian Mutiny) was sparked by a perception, circulated widely in an organised, albeit ingenious manner, that the British were secretly trying to subvert the religious beliefs of Hindu and Muslim soldiers. Once the perception took hold, it was the lightning rod which channelled grievances against the British Raj, accumulated over 100 years, into horrendous violence on both sides.

Almost 158 years later, a similar event happened in India last week. Young, upwardly mobile, citizens who live through the Internet revolted online. The cause was a perceived, veiled attack by the Telecom Regulatory Authority of India (Trai) on the principle of “Net Neutrality”, concealed in its consultation paper on regulating over the top (OTT) services.

Like the 1857 revolutionaries, the numbers of the revolting 2015 Netizens are limited. Net penetration is a low 20 per cent in India and broadband access (necessary for the “value-added high-speed services” like movies and chat, made available in the last decade by start-ups) is limited to less than 10 per cent of the population. Unrestricted and universal access to these services for Netizens, without interference by the telcos (the six big ones are Bharti Airtel, Vodafone, Idea Cellular, Reliance Communications, Tata Teleservices and Reliance Jio) managing the connec- tor pipes, was at the heart of the struggle.

The fuss was really around an innovative deal being cooked between Bharti Airtel, India’s largest mobile operator, and Flipkart, the hugely successful e-retailer. The broad idea was that Bharti Airtel would not charge users to access the Flipkart site, thereby reeling more users in, whilst Flipkart would directly pay Bharti Airtel for the traffic to their site. It seemed a “win-win”. What was unclear was whether Bharti Airtel was also committed to either block or slow down access to competing e-retailers, like Snapdeal or Amazon, amongst others.

But Netizens suspected the worst. They feared that this was just the beginning. “Evil”, large telcos, like Bharti Airtel, were conspiring to “carve up” the Net into exclusive-access, paid zones and, thereby, compromise the “free roam across the Net” Netizens are used to — exactly like one can walk through a mall for free, though you pay to park.

The garbled reaction of the government confirmed the Netizens’ worst fears. Telecom minister Ravi Shankar Prasad reiterated that the government was committed to extending the Net to all Indian citizens — a “motherhood statement” that did nothing to salve the agitated Netizens.

Trai’s response was even more ponderous. Trai chairman Rahul Khullar instead of taking the criticism in good spirit, blamed the “Netizen noise” on a war between “a media house and a corporate”. Appearing, thereby, to be trying to undermine the sincerity of the Netizens’ concerns.

Let us unravel the hype from the facts.

First, in the absence of pervasive and effective oversight and supervision of the manner in which telcos manage “connector pipes”, there is a possibility that implicitly or explicitly a telco may discriminate between users accessing the Net for services or between suppliers of these services. The key question is, does the Trai or Do T have systems in place to monitor the manner in which “data packets” are transmitted through telco pipes so that unreasonable and competition retarding discrimination can be identified and penalised?

Second, unlike the electricity sector, the success of telcom has rested on successful liberalisation of the market. User tariffs are no longer set by the Trai since there is sufficient competition in the market. There is little reason to fear that things will change.

Third, consider that 80 per cent of Indians remain unconnected to the Net. The government does not have the resources to fund their ambitious interconnection plans. It levies a five per cent charge on the revenues of telcos to finance the Universal Service Obligation Fund, which will connect all the 675,000 village panchayats with fiber-based broadband, but progress is lagging.

Fourth, Netizens are a conflicted lot. They value technical innovations, like transaction cost reducing apps, but fear strategic business arrangements between telcos and Net service suppliers, which have similar objectives. Innovation thrives in lightly regulated markets, but someone also needs to shut the door on “free riders” who do not pay but get to use the capacity in connector pipes created by telcos.

Fifth, someone has to pay for the additional capacity in connector pipes, required to provide highspeed Net services like movies, music and highresolution digital imaging. This is the conundrum facing the Trai and the government. Netizens have no answers to the question, who should pay for additional connector capacity.

The trade-off is clear. Either user charges must increase or the telcos must have the business flexibility to evolve revenue-enhancing deals with suppliers of Net services. Ending “free riding” is in everyones’ interest. The writer is adviser, Observer Research

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