Net Neutrality: Save or stifle the internet
By : Flytxt
The net neutrality debate seems to continue for the foreseeable future, in the form of zero rating, free basics, tiered access, sponsored content, differential pricing and so on, with much at stake socially, commercially and politically. Prima-facie the arguments favouring net neutrality appear to be intuitive, convincing and definitive enough. However the practical implications on emerging business-models and consumer-access are far from being universally clear.
Internet evolution at crossroads: The trinity collides
The future of internet can best be described by borrowing the concept of “The impossible trinity” from international economics. Three fundamental forces: Consumers quest for freedom, enterprise drive for profits and regulators need for control are at play in shaping the future of internet. Three primary scenarios result from the interplay of these powerful forces.
Internet evolution at crossroads
- Darwinian Evolution: Enterprise drive for profit is the dominant force while consumers’ freedom acts as a key market force to make the natural selection resulting into the survival of best business models. Uber’s aggressive yet customer-centric business model has led to the Darwinian evolutionary course for transportation industry.
- Egalitarian Destiny: Consumers freedom overwhelms the other two forces and independent and individual choices take priority over regulation and drives enterprise business models. The accelerated surge of social media epitomises the benefits of consumers being in charge.
- Forbearance Prevails: When regulators significantly alter the course of evolution of an industry through significant oversight resulting into policies which hinders some of the business models being undertaken by enterprises. Telecom industry has historically been subjected to strict regulations and the trend seems to continue with the net neutrality laws being enforced only on the network providers and not on any other players in the digital ecosystem.
Net Neutrality rules: Upholding digital ethics in digital economy
The three big rules of upholding net neutrality are no blocking, no throttling, and no favouritism based on content, websites, applications or platforms. These rules are based on the premise that tampering with user’s uninhibited access to the internet will pose a threat to healthy competition and prevent new businesses from getting a fair chance of survival in the market. The other argument touts that a non-neutral internet will restrain people’s freedom on what they want to view or have access to, within the country’s legal boundaries.
The future state: Breathing life into scenarios
While these arguments are perfectly valid, we tend to overlook the impact these net neutrality rules may have on the future state of the internet. These scenarios have existed and will continue to exist even if net neutrality, in its true sense, gets enforced universally.
The act of sponsoring specific content, providing free but selected content, allowing certain services or content a faster access is, in effect, an attempt at promoting certain brands while undermining others which is increasingly moving to the digital space. A closer look at few other industries reveals that such practices are rampant all across. The app-based cab-aggregator services and the rapidly mushrooming e-commerce players offer heavy discounts to acquire customers. There are toll free numbers that gives consumers a free but limited access to use selected services. Free samples are given out by players to induce trials and buying a particular product results into cashbacks. These are nothing but sponsorships in guise.
Partner-driven business models: Sustaining and leveraging digital leadership
The device and software industry presents another case in point. Microsoft extends the reach of Skype, and sky drive, by bundling it with its OS; Apple does the same for iCloud when it bundles it with Apple devices; all android based mobile OS come with pre-installed Google Map app and more. The practice of bundling and promoting another offering with a popular product has, in fact, been perfected by Microsoft, Apple and Google. Bundling is not just limited to a company’s own products either; Google partners with device manufacturers for using android as OS, which has resulted in android dominance in the mobile device market; Google and Apple control which apps will be available through their OS by mandating payment through app stores; Google constantly gets into law suits with companies who suffer lower ranking due to change in search algorithms and the list just goes on. Samsung Galaxy tabs open door to the exciting world of free eBooks with partnership with Amazon and offers Kindle as the default application for reading eBooks on all Samsung Galaxy Tab models.
Case for sponsored access: Connect business value and consumer value
It becomes very clear from these examples that players with deep pockets and better reach will always have an upper-hand, with or without net neutrality. Having said that the one with the right innovation and customer-centricity will win the race.
Services like zero rating, free-basics or sponsored content are just innovative marketing techniques. The ‘service’ in this context refers to the units of data or bits that a person consumes for internet access. The value per bit for different services accessed through internet is inherently different for consumers, service providers and network providers. The flexibility to be able to differentially price data services in partnership with service providers will also enable telcos to launch affordable customer-centric data packs as suited to the requirements of different categories of users and hence foster growth in the usage of internet services.
It’s possible that certain segment of consumers may not afford using mobile internet in general but would love to use utility apps like cab booking. If a cab-aggregator player is willing to sponsor mobile data along with their app, it only stands to benefit these consumers. This is analogous to the practice of delivering a product to customers’ doorstep instead of asking them to go to the market at their own expense for purchase. Forcing a one-size-fits-all solution on the internet stifles innovation by blocking enterprises to experiment and turn new ideas or business models into successful products.
A balanced approach can be taken to quickly enable access to first-time internet users without violating the differential pricing laws by offering customers tariff differentiation that are entirely independent of content. This can be achieved by providing sponsored access to data that enables a user to access the entire internet in return to using an App or watching an advertisement.
Widening digital divide: Elope with the internet
When it comes to end consumers, the idea of having free access to everything on the web does have considerable surface appeal but, rhetorically unappealing as it may be, this debate is not entirely black and white. We forget that the voices defending this cause are people who already have the privilege of access to internet. In other words, they can afford to pay the basic cost of availing an internet connection. In emerging countries, where a vast majority of the population lives in rural hinterland with minimal or no access to education infrastructure, mobile internet penetration has the potential to bring positive change in people’s lives and bridge the digital divide. In addition there’s a growing disparity between the bandwidth needs of casual users for basic Internet use (Web browsing, Social media, IM apps) and the bandwidth needs of advanced users for advanced usage (such as video content, large file downloads, file sharing and application streaming).
Unlike in western countries where telcos are able to charge exorbitant prices for voice and data telcos in emerging markets are not able to invest enough in maintaining Quality of Service. The advent of OTT services are shrinking the margins for these telcos even further in emerging markets. In this situation, strict Net Neutrality will force telcos to raise the cost of data, which will restrict digital access only to a segment of consumers who can afford it. This will ultimately result in further widening of digital divide. A tiered-lane access may, in practice, be an innovative solution to this problem. One lane could be allotted for existing and potential customers who would like to get neutral access to content on the web by paying for it. The other lane could be sponsored or zero rated, selective access lane that allows non- consumers to become consumers. This will enable a world where those who can’t afford internet have access to information like Wikipedia, education sites, medical services, agricultural information, and weather forecasts and potentially all relevant internet services.
Maintaining a level playing field: 90% of iceberg is underwater
As far as free and fair competition is concerned, the existing system is actually skewed against telcos who have to comply with a series of regulations and pay taxes while many OTT players undercut their business, evade all such obligations and reap huge profits. Under the current regulatory framework OTT players are completely unregulated, unmonitored and inadequately taxed. Telcos, on the other hand, pay spectrum charges, licensing fee, interception charges and have many other obligations related to cost sharing and maintenance of proper records, security, legal intercepts, and emergency services and so on. The OTT players and internet companies are completely exempt from such scrutiny owing to their digital nature and sometimes due to the lack of physical presence in the country. A case in point is Netflix, the proponent of Net Neutrality, admitted to sending lower quality video to mobile subscribers on AT&T and Verizon’s networks, albeit in the name of maintaining data cap restrictions of the network providers.
In most cases OTT players are not even subject to consumer protection laws. Often, the internet companies start off by offering free services and when consumers are hooked-on they start charging the customers without double confirmation which telcos are subjected to. In past Italy has been investigating such cases against Google, Apple, Amazon and a game company named Gameloft.
A universal net-neutrality framework that over-regulates some players in the market while others are left completely untouched goes against the whole argument of maintaining a level-playing field for all players which the net neutrality strives for. Also the option for all players, irrespective of size and reach, to sponsor the bandwidth at the same rate will herald the level playing field in true sense. A hyper local start-up, just trying to get adoption among targeted local-residents, can take advantage of this to promote services bundled with sponsored data access to induce trials.
Let Darwinian evolution take course: Hands off the net
Many of the key questions in the context of net-neutrality lack right or wrong answers but rather call for difficult trade-offs. As long as the antitrust laws are in place and consumers have the flexibility to choose among methods and providers for Internet access, consumers can pick winners and losers in the digital economy. The table below summarises some of the contrarian views and alternatives available to keep the net neutral without launching the net-neutrality laws in current form.
Moreover there is a need to ensure that mobile internet or services available on internet does not remain a privilege of certain classes and widens the digital divide by alienating the under-served. The proposal by Nanadan Nilekani to offer free internet in India through Direct Benefit Transfer scheme has great potential in achieving this goal. Though, if this initiative fails to take off immediately, private players should be allowed to participate in expanding the digital reach even if it is guided to some extent by their own interests. Users who learn of the benefits of the internet would then advance to the paid version of the “full” internet. The government, however, can ensure that all players get equal opportunity to participate by routing them through Telcos, who are already adequately regulated. Also if consumers really want the Net to remain Neutral, I believe it will always be available like today.
The approach to straightaway block the innovative business models that allow sponsored internet access in the name of saving internet with an all-encompassing Net neutrality law may inadvertently stifle the course of digital evolution. Unleashing more investment and competition, not writing more regulation, is the best way to keep the Internet open, innovative and free.