Recently, the Telecom Regulatory Authority of India (TRAI) has published a consultation paper which poses questions about differential pricing of data services by Telecom Service Providers(TSP). The TSPs are keen on this since FaceBook has been pushing its Free Basics (a renamed internet.org) service which provides some "basic" internet web sites "for free" for TSPs that sign-up with it.1
It is in some ways quite ridiculous that "the internet" has now taken on the meaning "web site" (thereby culling out a host of important services like NTP, DNS, SMTP, SSH etc!). It would be even more ridiculous if there were a further partitioning into web sites that are considered "basic" and the rest (which presumably are not).
However, one cannot give an emotional response such as the one above to queries that ask harder economic and socio-political questions. So here is the response that I sent (the questions below are as framed by TRAI and are quoted).3
Question 1: Should the TSPs be allowed to have differential pricing for data usage for accessing different web sites, applications or platforms?`
The short answer is no.
Telecom Service Providers should not be allowed to introduce differential pricing as this allows them to become private regulatory authorities. They can then override the light-touch that has been the hallmark of TRAI's function.
A comparison has been drawn to the TV-cable model whereby cable companies were required to provide the various Doordarshan and other Free-to-Air channels for all set-top boxes regardless of what package was purchased by the consumer.
There are some major differences between the TV stations and the internet.
- The two-way nature of the internet means that users are not just consumers but providers of information and content.2
- In some respects, all of the internet is like a Free-to-Air Channel.
- The minimum package for TV was determined by the regulatory authority and not the service provider.
Another analogy that has been made is that of a public library. While public libraries may be built and financed by charitable donations, the contents of the library are determined by public institutions constituted by and answerable to elected representatives of the people.
Moreover, books may be taken on loan by one public library from another public library. This makes libraries more like content managers (web sites) than like telecom service providers.
Question 2: If differential pricing for data usage is permitted, what measures should be adopted to ensure that the principles of non-discrimination, transparency, affordable internet access, competition and market entry and innovation are addressed?
As suggested above, differential pricing should not be allowed.
However, assuming that this comes to pass, it should be regulated as follows.
The content that is to be made available for free must determined by a public institution that is constituted by and answerable to elected representatives of the people.
Primarily, the content that is made available for free must be content that is generated and managed by governmental agencies and charitable organisations.
However, if privately generated and managed content is to be made available for free, then all competing private and public agencies that provide similar services should be also made available for free.
Note that this will still be anti-competitive as fledgling private companies that intend to provide improvements over existing services would be faced with a high-price barrier.
Question 3. Are there alternative methods/technologies/business models, other than differentiated tariff plans, available to achieve the objective of providing free internet access to the consumers? If yes, please suggest/describe these methods/technologies/business models. Also, describe the potential benefits and disadvantages associated with such methods/technologies/business models ?
One of the key points made in favour of differential pricing is that this will allow the un-connected to recognise the value of data links. The hope is that they will they be willing to pay suitable sums for such data in future.
Such a growth pattern could also be achieved by providing initial free data of (say 500MB) and following this up with usage-based rate plans. This is similar to what is done with electricity supplies where those who use more are required to pay more not just by scale but also by rate.
Such a proposal would also reduce the pressure on the network created by the spurt in users as most of the new users would initially be using a low amount of bandwidth, thus allowing TSP's to build capacity as the number of users grow. The zero-rating plans also try to do this but by giving a limited view of the internet---which does not fit in with the original vision of the internet.
Question 4: Is there any other issue that should be considered in the present consultation on differential pricing for data services?
Some private organisations (content managers and providers) have spent an enormous amount of money on advertising and promoting differential pricing. Such expenditure should not be considered merely charitable. The motives behind such expenditure should be examined.
Secondly, it is worth noting that other private organisations that are providers of similar services have not joined in the support of differential pricing. Some have explicitly opposed it. If there was a competitive benefit (from differential pricing) to all content managers and providers, would not the others have joined in? This underlines the anti-competitive nature of the differential pricing proposals.
Long ago, I intuitively shied away from creating a FaceBook account. Every action by that company has only served to re-inforce my feeling that my intution is right!↩
This will become even more true as farmers (and other producers) start uploading data about the status of their crops, availability of water etc.↩
The oiginal response has been edited to improve readability.↩