The Telecommunications Regulatory Authority of India, the country’s telecom regulator, has effectively banned telecommunications providers’ ability to charge different prices based on the content customers consume, a practice known as differential pricing.
One of the more notable instances of differential pricing was Facebook’s Free Basics, where Facebook and its supporters argued that providing certain content for free would entice Indians to buy data packages to access the Internet. According to the company, 50 percent of Free Basics users purchased a data package with their cellphone provider within thirty days of joining. This is an impressive conversion rate, considering fewer than 20 percent of Indians are online decades after the telcom market was liberalized and despite having among the lowest connectivity prices in the world. Other research showed zero-rated content increased adoption overall, even on WiFi networks.
But for many, this “Free Basics as an on-ramp to the Internet” argument wasn’t enough to mitigate the perceived danger that users (particularly the poor, who have never used the Internet) might think Facebook is the Internet and never venture outside Facebook’s walled garden. It seemed that no amount of evidence could convince them. It turns out that the poor are using the text-only version of Facebook on Free Basics to save money by using it as a substitute for voice and SMS communication, like many African countries, and therefore saving money. Detractors also didn’t seem convinced that merely using Facebook could increase democratic participation as in Myanmar, where whole campaigns were conducted on Facebook, or allow people to exercise their right to freedom of assembly.
This was cast as a battle of good versus evil—millions of concerned netizens of India and net neutrality advocates supporting a ban on differential pricing on one side, and bad telecom companies and Facebook on the other.
Facebook, however, certainly didn’t help its case. Its tone-deaf response to the issue and battle with the regulator in the past few months can also serve as a case study on how not to do public relations. This was also a case of the already-connected (and therefore able to send an email to the regulator) having their say on something that primarily affects the as yet unconnected. For those who care about public participation in policy processes, it was moment to behold.
The Indian telecommunications market is incredibly competitive. Indian providers face low average revenue per user, high competition and lack of spectrum thanks to artificial scarcity created by policymakers. In light of the regulator’s decision, they’ll need to find a way to set themselves apart other than differential pricing. There’s a risk they could turn to network quality and that could lead to a whole host of issues. As Tim Wu and others who have pointed out, Internet service providers have incentives to discriminate on data speeds and other indicators of quality to increase the speed of their own content or to slow the speed of other content. This has the same effect as steering users towards certain content as differential pricing. Although the regulator banned Free Basics-style schemes with the bluntness of a sledgehammer, it left the door wide open for telcos to start throttling traffic to promote their content or that of their partners. As one walled garden comes down, another could easily go up. And there’s no reason to think that a telco-based walled garden will be as open as Facebook’s, which eventually allowed anyone to develop an app for Free Basics given it met certain technical guidelines.
Net neutrality advocates have argued that there are much better ways to give free Internet access to the poor. Of course they are right. For example, watching ads in return for access to the open Internet is being trialed in Bangladesh. No one was stopping these other solutions from competing with Free Basics to connect India’s poor. But with Facebook’s Free Basics essentially out of contention, it is time for others innovative actors to step up. For the sake of India’s unconnected millions, let’s hope these alternate solutions that don’t violate net neutrality principles are successful.