In a milestone move that will put the net neutrality debate to rest in the country, the Telecom Regulatory Authority of India (TRAI) has issued the Prohibition of Discriminatory Tariffs for Data Services Regulations, 2016. These regulations disallow service providers from charging for data services in a discriminatory fashion on the basis of the content accessed by a user. An exemption has been made for public emergencies and for accessing emergency services.
This comes as a major blow to Facebook’s Free Basics programme, which was a much publicised campaign focused on providing free basic internet access to people in partnership with telecom operators. It had received severe criticism from supporters of net neutrality as it allowed free access to select websites. The programme has now been discontinued in India. Facebook had partnered with Reliance Communications (RCOM) for the implementation of the programme. However, RCOM put the service on hold in December 2015 following a TRAI directive.
In 2015, Bharti Airtel’s “Zero” marketing platform had attracted significant flak for violating the principles of net neutrality. It allowed users to access certain websites and content at zero rate vis-à-vis other websites/content, thereby encouraging discriminatory and anti-competitive data access and pricing.
In fact, TRAI and the Department of Telecommunications spent the better part of 2015 deliberating on the level of regulatory intervention required on this subject. In December 2015, TRAI sought the views of industry stakeholders on whether service providers should be allowed to charge differential tariffs based on the websites, applications and platforms being accessed on the internet. Its consultation paper, “Differential Pricing for Data Services”, received an overwhelming response, featuring diverse views, all of which were taken into consideration during the formulation of these regulations. With the release of these regulations, India has joined the handful of countries such as Chile and the Netherlands in barring differential pricing and establishing laws that prevent the violation of net neutrality.
However, the Indian telecom industry stands divided on TRAI’s verdict. While some see the regulator’s move as a bold one that sets the record straight regarding discriminatory internet access, others believe that it could slow down digital growth and significantly dent the country’s Digital India ambitions.
Affordable/Free internet access will be a boon for a country like India, where internet penetration continues to be dismal despite the growing mobile subscriber base. It can prove to be an effective tool for drawing in first-time internet users, who can later proceed to paid versions of the internet. However, it is debatable as to whether the initial affordable, subsidised or free usage should be limited to select websites, platforms and content. If the real objective of differential pricing is to bring more people on the internet, a scheme offering free and non discriminatory access to all kinds of content and websites for a limited period should help the cause, a proposal that TRAI has backed in its regulations. To a great extent, the regulations make it clear that TRAI is not in favour of telecom operators playing the role of internet gatekeepers and defining a user’s first internet experience in a manner that favours them.
A look at the potential impact of TRAI’s regulations on the telecom sector and industry stakeholders…
Upholds principles of a neutral internet
Many stakeholders are of the view that TRAI’s regulations are progressive as they promote equal and fair internet for all. Discriminatory pricing is seen as being against the freedom of speech and expression, and alters the openness of the internet as we know it. A service provider should not be allowed to charge differently for content that it does not process alone and which is, in fact, produced by various other entities in the value chain.
Conducive to the innovation and start-up ecosystem
The regulations will provide a big boost to the start-up ecosystem in the country. Differential pricing can create significant entry barriers for smaller companies, while stifling overall innovation in the sector. These companies stand little chance when pitted against big players with deeper pockets. They are likely to lack the resources to participate in schemes like zero rating. The regulations promote innovation as they ensure a level playing field for all companies reaching out to customers through the internet.
Prevents monopolisation of the internet
Banning differential pricing rules out the possibility of operators defining consumer choices in terms of content. Even though zero-rated platforms and schemes like Free Basics can be accessed for free, they offer selective content, which can affect the outlook and knowledge of first-time internet users. In the longer term, even while switching to a paid version of the internet, these users might unintentionally be inclined towards buying content they have already accessed. This could result in the monopoly of certain websites and content.
Dent in operator revenue streams
The industry is currently sitting on a massive pile of debt, which is expected to get bigger with the forthcoming spectrum auction and corresponding network roll-outs. As a result, there are growing instances of operators scouting for alternative revenue streams to deleverage their balance sheets. Most of them are now developing their own content to compete with and counter the impact of over-the-top (OTT) services, which have seen a meteoric rise in the past few years and taken away a significant revenue share of traditional businesses. Operators have been offering in-house apps at lower prices than their OTT counterparts. Bharti Airtel’s Wynk music app and Reliance Jio Infocomm Limited’s Jio Chat Messenger are some examples.
In addition, though operators offering zero-rated platforms provide free but limited access to users, they charge content developers and websites for hosting themselves on their platforms. Such partnerships with internet companies in lieu of fees would have helped operators garner more revenues. In fact, such innovative collaborations have proved to encourage market development in several cases.
Tampering with the intranet loophole
TRAI’s decision to allow differential tariffs for data transmitted over closed electronic communications networks has left an ambiguity for operators to explore and exploit. Although such networks do not allow data to be received or transmitted over the internet, they can be used by telecom operators to create parallel networks to offer applications and services at lower tariffs.
Affects the growth of internet adoption
There is a growing concern that imposing a blanket ban on non-discriminatory differential tariffs for data services can further affect the already sluggish pace of internet penetration in the country. This might be a setback to the Digital India project, which envisages connecting 1 billion unconnected citizens. Price differentiation will allow operators to cater to specific consumer requirements and encourage tariff innovations. This practice is widely adopted across many industries.
While TRAI’s regulations make it clear that discriminatory internet access is not the way forward for bridging the urban-rural digital divide, it does not spell out what should be done to accelerate internet access. One cannot overlook the abysmally low internet subscriber numbers and the urgent need to increase internet connectivity, especially in the hinterland. Investing in infrastructure for common access is crucial for achieving the goal of connecting the unconnected. However, the implementation status of the government’s BharatNet project, for which the deadline has been extended multiple times, paints a grim picture.
There is also a strong need to educate underserved/unserved customers about the difference that the internet can make to their lives. In its regulations, TRAI clearly states that any data plan providing free/subsidised data access to the entire internet for a limited period is not prohibited. The onus of this falls on operators, who do not have a business case in such arrangements. Providing free access to all internet content, even for limited periods of time, will reduce their role to dumb pipes and jeopardise billion-dollar investments in data networks. Expecting them to behave like good samaritans to further the cause of bringing internet connectivity to all of India is wishful thinking, especially in times of low ARPUs, plunging profits and high debt.
On the other hand, the regulations are a major win for supporters of net neutrality. They will play a vital role in protecting the interests of first-time internet users by helping them develop a broader outlook on internet usage and promoting innovation by ensuring a level playing field for start-ups while preventing anti-competitive data pricing practices. However, many believe that the norms finalised by the regulator are more stringent than those followed across the world, and the lifting of the blanket ban on differential pricing can result in increased internet adoption.
The regulations have come into force with immediate effect. This means that operators with tens of thousands of data discount plans on offer will have to prune their offerings within the next six months to ensure they are not in contravention of the rules.