How Net Neu­tral­ity Should Work in In­dia?

Voice&Data - - CONTENT - Pro­bir Roy (The au­thor Pro­bir Roy is co founder Pay­Mate) [email protected]­berme­

As I write this, Egypt’s Free Ba­sics ini­tia­tive has been shut down for its 3 mil­lion cus­tomers avail­ing Eti­salat’s in­ter­net ser­vice free of cost. Here in In­dia, a lot of grist for the me­dia mill has been at work with sev­eral well­known folks weigh­ing in on the de­bate, with ar­gu­ments get­ting a lit­tle emo­tive rather than ob­jec­tive.

Net Neu­tral­ity (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 com­pa­nies (Netflix, Youtube, Dis­ney) pay­ing ISPs (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 one’s data plan and 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 comes down. As­sum­ing there is elas­tic­ity, to­tal rev­enue will go up. Hence, there is more rev­enue to tel­cos 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, In­dian Banks of­fer dif­fer­en­ti­ated in­ter­est rates on Fixed De­posits

above 15 lakh (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. Do­or­dar- shan has in­tro­duced its DTH plat­form ‘FreeD­ish’ - a free to air chan­nel plat­form, which is re­ported to be pop­u­lar in 77 mil­lion ru­ral homes.

Pri­vate chan­nels are clam­our­ing to join FreeD­ish as it gets them huge eye­balls. Sev­eral have bid sig­nif­i­cant amounts in 24 auc­tions till date to get onto FreeD­ish. The re­sult? Pri­vate chan­nels are pay­ing to join FreeD­ish as it gets them huge eye­balls and good TRPs.

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 har­bour­ing a mo­nop­o­lis­tic or com­mer­cial agenda? Sure, Face­book seems to want to add mil­lions of new users in In­dia and else­where (don’t Google and Twit­ter?), and is will­ing to carry oth­ers on its plat­form who meet its ba­sic tech­ni­cal cri­te­ria (iS­tore, An­droid’s Plays­tore and al­most all app stores have sim­i­lar con­di­tions!). 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!

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