Net neutrality: shrill voices, zero-rating and revenue envy

BY ANUP KUMAR| IN Digital Media | 22/04/2015
TRAI has muddied the waters by appearing to favour the arguments of the telecom service providers in its consultation paper
ANUP KUMAR argues that rather than an ‘either-or’ option, a third alternative exists. Pix courtesy: netneutrality.in

First let us give credit where credit is due. The Telecom Regulatory Authority of India (TRAI) since its inception has been working in a transparent and a democratic manner. TRAI in its regulatory practices has deftly handled the balancing act of promoting free market competition on the one hand and public interest on the other hand. Under its stewardship India has seen one of the fastest growths in a telecom industry and affordable rates for mobile and Internet services (voice and data).

This is noteworthy, especially when we view TRAI’s performance relative to many similar regulators in other parts of the world. However, after hearing the recent comment about “shrill voices” in the debate over “Net Neutrality” coming from Rahul Khullar, chairperson of TRAI, it seems that this time round the regulatory authority is not happy with the boisterous nature of the democratic debate in the public sphere that treats an expert and a dilettante on the same level.

The TRAI defines Net Neutrality as: “All points in a network should be able to connect to all other points in the network and service providers should be able to deliver traffic from one point to another seamlessly, without any differentiation on speed, access or price. The principle simply means that all internet traffic should be treated equally.”

Although, the folks at the AIB Roast have provided a dummies guide on the complex principle of Net Neutrality, the issue requires taking a step back and tracing the cause behind the controversy and shrill voices by looking closely at the TRAI’s proposal on the Over-The-Top services.   

Following its time-tested, transparent and democratic approach, on March 27, TRAI put out a consultation paper  inviting comments from the public. The term OTT “refers to applications and services which are accessible over the internet and ride on operators’ networks offering internet access services e.g. social networks, search engines, amateur video aggregation sites etc.” It includes OTT services such as Skype, WhatsApp, Facebook, Flipkart, Snapchat, Instagram, Netflix, etc.  

A consultation paper is the first step in the framing of any new regulatory mechanism. The purpose of a paper is to invite all stakeholders, including the aam admi, to file comments and participate in the debate.

The Telecom Service Providers (TSPs), i.e. the cellphone companies, are suggesting that “ideal” Net Neutrality is not viable. They had been complaining to TRAI that OTT services are crowding the bandwidth and also cutting into the revenues that would have otherwise come to TSPs from SMS and voice calls. When a consumer uses OTT such as WhatsApp or Flipkart the TSPs only get paid for the data consumed and the OTT gets the advertising and sales revenue from the value addition brought in by these added services.

Additionally, the TSPs have to continually invest in new licence fees, upgrades in the infrastructure and better security protocols because of the increased traffic and demand from consumers for faster networks. The TSPs want the OTTs to share the cost and one way to do that is to charge a fee for the use of OTT from either the consumer or the OTT providers.

From the TRAI paper, there appears to be a sort of revenue envy going on between the OTT and TSPs. The TSPs who build, operate, upgrade and manage traffic on the Internet seem to feel that they invest upfront in the infrastructure, but the big bucks are being made by the OTTs. It is like a shopping mall builder and operator being envious of the shop-owners raking in big revenues from the customer traffic coming to the mall. The argument seems to be fair and suggests that OTTs are free riders, although it is not that simple.   

The logical endgame of the TRAI proposal seems to be that the OTT companies or consumers should either pay up for the cost escalation in the network or they could be diverted to slower lanes on the information superhighway of the Internet. However, the problem with this argument is that it breaches a foundational principle behind open access of information via the Internet – Net Neutrality – that warrants that all data/traffic flowing on the information superhighway must be treated equally, i.e. no fast or slow lanes.   

Tim Wu, professor of law at Columbia University and author of Who Controls the Internet  and The Master Switch: The Rise and Fall of Information Empires, defined and advocated the legal principle of Net Neutrality in a paper titled “Net Neutrality, Broadband Discrimination” in 2005.  Wu foresaw that the open access of the Internet would be at risk because of disputes over revenue and the cost of investing in broadband networks between content providers and the Internet Service Providers.      

In the United States, the issue of Net Neutrality came to a head with the growing popularity of audio-video streaming websites such as Pandora, Netflix, Hulu, etc. The broadband service providers, wired and wireless, claimed that the streaming services were gobbling up the data carriage capacity of the Internet Service Providers (ISPs) making it imperative to invest in faster and wider bandwidth.

The ISPs wanted to back the new investments in the network with a revenue model that would be based on creating fast and slow lanes on the network.

The Federal Communication Commission (FCC), the telecom regulator in the U.S., stopped the telecom companies from breaching the principle of Net Neutrality by issuing the Open Internet Order that put in place guidelines on transparency of data traffic management, no blocking of content and no unreasonable discrimination of websites. 

The telecom companies challenged the order, but after a protracted legal battle between telecom companies and the FCC, the issue was decided in favour of the principle of Net Neutrality by placing the Internet under the category of common carriers, thus bringing them under the PICON (public interest, convenience and necessity) regulatory framework.  

Some observers in the U.S. have argued that the issue is not settled yet. The telecom companies will challenge the order by lobbying with the pro-corporate voices in the political parties and highlighting the investment freeze in broadband and the cost escalation that is associated with upgrading the networks.  Closer observers of the issue in the U.S. think it will not be that easy.

Wu argues that “The theory of the wisdom of crowds suggests that the markets have noticed something: the broadband industry hates net neutrality, but its existence has always had a huge and unnoticed upside. Selling broadband is a great business …” 

However, the TRAI Consultation Paper argues that the U.S. case is different and in India we need regulations that address the Indian context. The main thrust of the TRAI paper is that it would not be such a bad thing to cut corners around the principle of Net Neutrality. The paper cites examples from other countries such as the United Kingdom, France and South Korea to show that Net Neutrality is not such a no-go-area for regulators, especially when it means bringing in investment for better and faster networks.

Moreover, the TRAI paper has muddied the waters by quoting The Economist on how Net Neutrality is a “slippery concept” and “difficult to sustain” in view of TSPs’ mandate to ensure efficient traffic management of the flow of data on the Internet.

The TRAI paper suggests that to sort out the issue of the seeming revenue envy and traffic management, some sort of mechanism is required for advertising revenue to be shared between the OTT content and service providers and the TSPs.

One such mechanism is Airtel Zero. Bharati Airtel has proposed to give its subscribers free access to the websites of a selection of content and service providers with whom Airtel would have some revenue sharing arrangement. The other mechanism is the one proposed by Reliance Communication that hinges on a zero rate web portal created by Facebook (internet.org). At its heart this proposal is also about revenue sharing between OTTs and TSPs, but with a non-profit agency, i.e. internet.org, at the front end.  

Consumers can get free access, i.e. they will not pay for the data usage if they use the internet.org portal, to visit a selection websites that have made prior arrangements with internet.org.

Supporters of Airtel Zero and internet.org have argued that this will bring access to millions of poor and low income populations all across India who either cannot afford to pay for data usage or do not have access because the TSPs are unwilling to invest in broadband in under-served regions.

For these supporters, the criticism of the TRAI proposals is elitist, and to them it is a win-win solution as it will solve the massive problem of the digital divide in India and boost access to the Internet for the 80 per cent of the population who have been left behind and will also be a win for both the OTTs and TSPs who will share costs and revenue for upgrading and managing traffic in the flow of data over the Internet.

In his blog post, Facebook founder Mark Zuckerberg wrote, “We fully support net neutrality. We want to keep the internet open. Net neutrality ensures network operators don’t discriminate by limiting access to services you want to use. It’s an essential part of the open internet, and we are fully committed to it. But net neutrality is not in conflict with working to get more people connected. These two principles - universal connectivity and net neutrality - can and must coexist.”

Expanding Internet access to the poor around the world and in villages in India is a worthy goal, but let us be frank here. The TSPs such as Reliance and Airtel and the OTTs such as Facebook are not doing this for purely altruistic purposes. We will be fooling ourselves if we accept that there is a free lunch in a free market. For accessing zero-rating services the users will have to allow companies such as Facebook to show them advertisements and collect usage data. As in the case of free email and social networking services, this is a déjà vu moment and a slippery slope on issues of transparency, open access, privacy and the free press.

There are other existing government subsidy models that can address the issue of the economic costs of Internet access to the poor and the growing digital divide between urban and rural India. When it comes to providing a free service, it is better for a public entity to take up that responsibility. This way it can be transparent and accountable to public opinion. How about providing a government subsidy to TSPs for expanding access in the villages and other under-served areas at affordable rates?       

    

Anup Kumar is associate professor in the School of Communication in Cleveland State University.

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