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Suppose you want to purchase a flight ticket through the internet. There are multiple websites which provide this service. These include, makemytrip.com, cleartrip.com, travelguru.com and so on. But assume your internet provider charges, say Rs 2 per minute, for accessing all the other sites whereas it is free for one particular site.
Which site are you more likely to log into? The latter, most probably, due to lower charges and the lure of free internet. Similarly, today, most companies are pushing online insurance schemes. However, if one insurance company ties up with a telecom provider and the customer is unable to compare premiums of other companies due to lower or costlier access to other websites, it could have a telling effect on his finances.
In simple words, the telecom provider is in the position to make one site more attractive by attaching an additional cost for accessing others. Experts fear worse - more aggressive telecom companies might even block competing sites or reduce the internet speed when these are accessed.
The entire debate about net neutrality rests on this. It is simple: The customer is paying the telecom company for a data plan. Within that plan, he can choose to access any site. So, why should he get some free and pay more for others?
The Telecom Regulatory Authority of India (Trai)'s discussion paper - Regulatory Framework for Over-the-top (OTT) Services - has opened a Pandora's Box. The OTT covers practically every app a person uses, from e-commerce (Flipkart and Amazon), social networks (Facebook and Twitter), search engines (Google and Bing), to video aggregation (YouTube and Vimeo) and messaging apps (WhatsApp and Skype). The document raises questions on whether telecom operators should be allowed to make money from these apps by charging either developers and/or consumers who use these.
Activists feel the Trai document is slightly biased on this issue. "In the past, the regulator has supported net neutrality. The document on OTT shows it has developed distrust towards the internet and wants it to be regulated." says Raman Chima, a lawyer and Asia consultant for Access Now, a human rights organisation that fights internet censorship.
Limited choice for customers
The biggest loss for a consumer will be the freedom to choose if telcos have their way. For example, telecos can block Skype and Viber unless these pay money for using their network. If a little-known service provider offers the fee, consumers will have no choice but to use the less popular option. "Companies with deep pockets can manipulate the system to block competitors. Start-ups like ours can get deeply affected by such moves," said Rishabh Gupta, chief operating officer at Housing.com.
There can also be network discrimination. Say a video-calling app ties up with a telecom provider. To promote its partner, the cellular operator can slow down the speed of its partner's competitors, diverting users to the app that pays.
The Trai document also states another technique, called toll boothing. In this, different services offered to the users are priced differently. This can happen though the customer has purchased a regular internet pack. Say you have a 3G plan, active on mobile, and you want to make video calls using an app. The telecom operator can charge you extra to offer fast and clear video services on the desired app. If you don't pay, the internet speed could become slow and erratic.
Then, there's a zero-rating technique similar to the proposed tie-up between Flipkart and Airtel or Facebook's internet.org partnership with Reliance Communications. In this, the telecom operator provides preferential access to certain defined sites. Advocates of open internet and net neutrality feel this will force end-users to choose only from those services or websites the telco pushes.
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THE RAGING DEBATE The Trai discussion paper, at many instances, lists the benefits of telecom operators tying-up with app owners. It also says all stakeholders can benefit if principles of net neutrality are diluted. Here are some points listed in the document in favour of cellular operators and the response of activists to each of these |
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Trai document (TD): Consumers/end-users will see improvement in service quality if net neutrality is diluted |
TD: Net neutrality will force operators to raise internet charges
NNS: Healthy competition will keep prices in check
TD: Apps use telcos’ infrastructure and make money, without them benefiting
NNS: The user pays for downloads and usage of the apps
TD: Some apps need better bandwidth and should tie up with telcos
NNS: Those with deep pockets will dominate and smaller players will lose
TD: Tie-ups can improve bandwidth management
NNS: Users will be forced to use services from only a few players
TD: Differential pricing for apps will help innovators beat network congestion
NNS: It will destroy the level playing field if one app gets preference over the others
TD: Apps are eating into telcos’ traditional revenue streams
NNS: Revenues from data are growing exponentially
TD: Zero-rating is like a toll-free number
NNS: It discriminates against other players
TD: App developers need regulation, as they pose security threats
NNS: They are covered under Information Technology laws
Cheaper internet?
One argument some telecom companies have put forth is that charging content providers which want their material promoted will lead to additional revenue streams for them. This, in turn, would help bring down internet costs for consumers. Mark Zuckerberg, chief executive, Facebook, defended its Internet.org with: "Internet.org offers free access in local languages to basic internet services in areas like jobs, health, education and messaging. Internet.org lowers the cost of accessing the internet and raises the awareness of the internet's value. It helps include everyone in the world's opportunities." Internet.org has lost partners Cleartrip, Newshunt and NDTV during the past week to the net neutrality controversy.
Zuckerberg, in his blog post on Facebook, said about 800 million people in nine countries can now access free basic services through Internet.org. In India, it has already rolled out free basic services on the Reliance network to millions in Tamil Nadu, Maharashtra, Andhra Pradesh, Gujarat, Kerala and Telangana.
However, experts believe there still isn't a clear case on these benefits. Also, whatever benefits one might get from the internet services will be negated if one is unable to compare and choose between, say, the cheapest travel fares or even music apps.
"Getting free services when a user didn't even have access to internet doesn't mean that the company believes in net neutrality. Such tie-ups (Reliance Communications with internet.org or Wikipedia Zero) shouldn't be allowed unless they can show that the partnership does not arise from anti-competitive practices and does not harm effective competition," says Pranesh Prakash, policy director at the Centre for Internet and Society.
Captive customers, higher prices
Once the choice is limited by telecom companies, another big offshoot that can happen is that partner companies can use the opportunity to charge customers more, fear experts. For example, if a company is paying a higher sum for accessing the telecom company's user base, it might use the opportunity to raise its prices. "There is a high chance that an offshoot of this would be that web firms, forced to pay a higher amount to telecom companies to access their users, will be forced to pass on the costs to the consumers. This is especially likely in cases where competitors are being slowed down," adds Chima.
Why are telcos pushing for it? They buy spectrum in auctions, paying huge sums. Then, regularly invest to keep pace with the changing technology. The app companies are using their infrastructure, taking away their voice and messaging customer and flourishing into billion-dollar enterprises. Telecom firms think it's unfair and they, too, need to benefit out of this.
Analysts, however, differ. "That is the changing business environment. Disruption is shaking things up everywhere, including in the telecom sector. These companies should look at monetising other parts of the business. They are still making money on the bandwidth used to make Skype and Whatsapp calls and messages," said Hansa Iyengar, analyst-IT Services, Ovum, a research and consulting firm headquartered in London.
Deepak Shenoy, founder of Capital Mind, a website offering financial analytics, says there is no loss to telcos on account of WhatsApp or Skype increased usage, or for that matter, any application. Data is in fact driving their revenues up, far more than anything else. The drop in SMS and call volumes is significant because of regulatory changes in anti-spam regulations, according to him.
