In­dia doesn’t like Face­book

Jan­uary 18 — Jan­uary 24, 2016 ▶ ▶ In In­dia, Mark Zucker­berg can’t give In­ter­net ac­cess away ▶ ▶ “We see it as a land grab”

Bloomberg Businessweek (North America) - - Contents -

Thanks mostly to its mo­bile-ad prof­its, Face­book has had a great cou­ple of years. Ac­cord­ing to its most re­cent earn­ings re­port, in Novem­ber, the com­pany’s quar­terly ad rev­enue rose 45 per­cent, to $4.3 bil­lion, from the same pe­riod in 2014. It has more than 1.5 bil­lion monthly users, just over half of all the peo­ple on­line any­where. Keep­ing up its rate of user growth— more than 100 mil­lion peo­ple each year—will only get tougher.

A big part of the prob­lem is that a lot of po­ten­tial new eye­balls are in places where In­ter­net ac­cess is patchy at best. Some of Face­book’s grander projects an­tic­i­pated that is­sue: It has satel­lites and gi­ant so­lar-pow­ered planes that beam Wi-fi down to ar­eas that don’t have it. And then there’s Free Ba­sics, the two-year-old pro­ject Chief Ex­ec­u­tive Of­fi­cer Mark Zucker­berg has called an on­line 911. In about three dozen coun­tries so far, Free Ba­sics— also known as In­ter­—in­cludes a stripped-down ver­sion of Face­book and a hand­ful of sites that pro­vide news, weather, nearby health-care op­tions, and other info. One or two car­ri­ers in a given coun­try of­fer the pack­age for free at slow speeds, bet­ting that it will help at­tract new cus­tomers who’ll later upgrade to pricier data plans.

Face­book says Free Ba­sics is meant to make the world more open and con­nected, not to boost the com­pany’s growth. Ei­ther way, on­line ac­cess is an es­pe­cially big deal in In­dia, where there are 130 mil­lion peo­ple us­ing Face­book, 375 mil­lion peo­ple on­line, and an ad­di­tional 800 mil­lion-plus who aren’t. (The so­cial net­work re­mains blocked in China.) That may help ex­plain why Zucker­berg spent part of the first few weeks of his pa­ter­nity leave ap­peal­ing per­son­ally to In­di­ans to lobby for Free Ba­sics. On Dec. 21 the In­dian govern­ment sus­pended the pro­gram, of­fered in the coun­try by car­rier Re­liance Com­mu­ni­ca­tions, while it weighs pub­lic com­ments and ar­gu­ments from In­ter­net free­dom ad­vo­cates who say pref­er­en­tial treat­ment for Face­book’s ser­vices threat­ens to sti­fle com­pe­ti­tion.

Since the govern­ment’s telecom­mu­ni­ca­tions reg­u­la­tor an­nounced the sus­pen­sion, Face­book has bought daily full-page ads in ma­jor news­pa­pers and plas­tered bill­boards with pic­tures of happy farm­ers and school­child­ren it

says would ben­e­fit from Free Ba­sics. Zucker­berg has fre­quently made the case him­self via phone or news­pa­per op- ed, ask­ing that In­di­ans pe­ti­tion the govern­ment to ap­prove his ser­vice. “If we ac­cept that ev­ery­one de­serves ac­cess to the In­ter­net, then we must surely sup­port free ba­sic In­ter­net ser­vices,” the CEO wrote in a col­umn pub­lished in the Times of In­dia, the na­tion’s largest daily pa­per, shortly be­fore the new year. “Who could pos­si­bly be against this?”

Op­po­nents, in­clud­ing some jour­nal­ists and busi­ness­peo­ple, say Free Ba­sics is dan­ger­ous be­cause it fun­da­men­tally changes the on­line econ­omy. If com­pa­nies are al­lowed to buy pref­er­en­tial treat­ment from car­ri­ers, the In­ter­net is no longer a level play­ing field, says Vi­jay Shekhar Sharma, founder of In­dian mo­bile-pay­ment com­pany Paytm. A spokesman for Sharma con­firmed that Zucker­berg called to dis­cuss the mat­ter but de­clined to com­ment fur­ther.

In­dia’s In­ter­net base will grow with or with­out Face­book’s help, says Nikhil Pahwa, a tech blog­ger and co-founder of the Save the In­ter­net coali­tion, which op­poses Free Ba­sics. “We don’t see Free Ba­sics as phi­lan­thropy. We see it as a land grab,” says Pahwa. When deal­ing with the fa­mously pro­tec­tion­ist In­dian govern­ment, that’s a pretty good ar­gu­ment. An April at­tempt by In­dia’s top mo­bile car­rier to un­der­write data costs for cer­tain apps drew heavy crit­i­cism, and the car­rier, Bharti Air­tel, has put the pro­gram on hold.

None of that means Face­book can’t help get more In­di­ans on­line, says Neha Dharia, an an­a­lyst at con­sult­ing firm Ovum. “An emerg­ing coun­try like In­dia needs to pro­vide the con­sumer with in­cen­tives to get onto the In­ter­net,” she says. “What Face­book Free Ba­sics is do­ing is a bit ex­treme, but what you do need is a bit of a middle path.”

In­ter­net sam­pler pack­ages such as Free Ba­sics can also help car­ri­ers like Re­liance, the fourth-largest in In­dia, upgrade their of­ten-strug­gling net­works, Dharia says. That’s a sym­bi­otic process, be­cause cus­tomers may quickly grow frus­trated with the bare­bones ser­vice and de­mand more. Free Ba­sics doesn’t have Gmail, Youtube, Vimeo, Twit­ter, or Bol­ly­wood mu­sic stream­ing. (Video will ac­count for 64 per­cent of In­dia’s data traf­fic by March 2017, con­sult­ing firm Deloitte es­ti­mates.) It’s meant to be a step­ping­stone. Face­book says about 40 per­cent of Free Ba­sics users start pay­ing for data plans within a month.

But again, if Free Ba­sics catches on in In­dia, peo­ple may just keep pay­ing for data to use more Face­book and for­get about some of those other ser­vices, says Dharia. “Face­book is the In­ter­net” to a lot of peo­ple in In­dia, she says. Google, whose ser­vices are most con­spic­u­ously ab­sent from the Free Ba­sics ros­ter, de­clined to com­ment.

In­dia’s telecom­mu­ni­ca­tions reg­u­la­tor says Face­book’s ad­vo­cates and op­po­nents have un­til Jan. 14 to file pub­lic com­ments; it’s re­ceived about 2.4 mil­lion re­sponses so far, most of them form let­ters sup­port­ing Free Ba­sics. The govern­ment’s de­ci­sion could also rip­ple be­yond In­dia, says Pranesh Prakash, a Free Ba­sics op­po­nent and the pol­icy di­rec­tor at the non­profit Cen­tre for In­ter­net & So­ci­ety in Ben­galuru. In the weeks since In­dia sus­pended Free Ba­sics, Egypt, which had done the same back in Oc­to­ber, once again shut down the Face­book plan, though the govern­ment wouldn’t say why. The In­dia fight “will be a rep­u­ta­tional chal­lenge for Face­book,” says Prakash. “It will set the tone for Free Ba­sics de­bate in other coun­tries.” �Adi Narayan and Bhuma Shri­vas­tava

$210b “An emerg­ing coun­try like In­dia needs to pro­vide the con­sumer with in­cen­tives to get onto the In­ter­net.” �Neha Dharia, an an­a­lyst at con­sult­ing firm Ovum Es­ti­mated value of pay­ments through phone taps at U.S. check­out coun­ters in 2019, ac­cord­ing to

Emar­keter The bot­tom line Face­book’s free data plan in In­dia faces strong op­po­si­tion from lo­cal busi­nesses and In­ter­net free­dom ad­vo­cates.

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