Leave the Net Free

In his delightful new book, Dream With Your Eyes Open: An Entrepreneurial Journey, Ronnie Screwvala, serial entrepreneur and most famously, the founder of UTV, makes an astute remark: “If you’re building a business that hopes to last more than three years, and if innovation and disruption aren’t at the heart of the business, then you’ll probably fail.” Some businesses are more fortunate. The telecom industry, for example, has had a great run of about 20 years during which subscribers were reliant on it for communication. Today, the industry is at the receiving end of disruption, thanks to the proliferation of high-speed Internet, from services such as WhatsApp and Skype. But rather than move with the times, it is nagging its regulator, the Telecom Regulatory Authority of India (Trai), to change the rules and disincentivise such competition.

Trai’s recent consultation paper on “A Regulatory Framework for Over the Top (OTT) services — that is, online content providers, or the internet, as we know it — lists the threats from OTTs: mainly competition and loss of revenue for traditional services offered (on calls or messaging through Airtel and Vodafone). The debate should ideally have ended right there. Trai’s mandate under the law includes ensuring competition. And the benefits of competition are universally acknowledged to be lower prices for end-customers.

But the paper (curiously, without offering any hint of the author’s identity), labours to put out 20 questions for public discussion, marking the regulator’s foray into the discussion around Net neutrality — essentially the idea that the Internet is free. That is, nobody can monetise the Internet, which is essentially made up of the information it contains. Telecom service providers such as Airtel and Vodafone in India are permitted to transfer the data to subscribers for a fee through their spectrum, but they are not to have any control over the data.

In layman’s language, it means that a telecom operator like Airtel does not have the right to withhold certain services from or promote others to its subscribers, unless, like child pornography, it is illegal. Globally, the consensus emerging is that the Internet should be left open. US telecom regulator Federal Communications Commission (FCC), in rules published in April, underlines the principle of “no blocking of legal content, no throttling of Internet traffic on the basis of content”, and “no paid prioritisation”, that is, allowing viewing of some sites or apps preferred by telecom companies in exchange for a fee.

In India last December, Airtel tried to do precisely that. The company wanted to separately charge subscribers using Voice over Internet Protocol (VoIP, Skype, for instance). Skype calls are almost free to subscribers who have broadband connections, and these understandably eat into Airtel’s own revenues from international calling. And therein lies the rub. Airtel is using its licence to provide broadband services to protect its diminishing revenues from another of its lucrative business segment — ISD calling. In the backlash that followed, Airtel postponed its decision till the regulator framed guidelines.

Trai’s discussion paper, however, focuses on a regulatory framework for OTT services, which are pretty much the websites we use. It raises serious concerns about their proliferation. It says that most of the apps have little or no risk assessment, 92% of them operate through non-secure communication protocols, that 20% of them have the ability to load applications without explicit consent, as well as other content vulnerabilities.

All of this is true. The question is: Even if OTT services were too serious a threat, is it in Trai’s powers to bring them under control without seriously stunting the Internet? Mihir Parikh, leader of strategic thinking at Nishith Desai Associates, disagrees with the notion that Trai has any mandate over content providers. “Trai’s role ends with the channel that telecom companies provide for the Internet to be accessible,” he says. “And even if it were within its powers to control, regulating the Internet will not be practical, as it has always found a way around censoring.”



The paper reminds us of cab service Uber’s troubles with the Indian authorities last year. Uber fell foul of Reserve Bank of India’s mandatory two-step verification for online payments (Uber tried to implement its global model of automatic debit for payments in India), and later on, after the infamous rape in one of its cabs in Delhi, was found to be flouting the city’s transport rules. None of these had anything to do with it being an OTT service provider.

The risk from Big Data is also raised. Big Data, that is, the analysis of micro-data gathered from people’s online behaviour, is here to stay. It might even need oversight, but it isn’t the telecom regulator’s mandate. Ramesh Vaidyanathan, partner at Mumbai-based Advaya Legal, says the prime responsibility for screening content from a security point of view is that of the law enforcement agencies. “Over the top providers are anyway covered under the Information Technology Act, 2000,” he says.

But what of the telecom companies that have invested huge amounts in buying spectrum as well as the infrastructure through which we are able to make seamless Skype calls or watch YouTube videos? It is a business risk, says Parikh, much like a company that builds a factory only to find that customers have moved to another product. “The telecom industry must come to terms with the fact that its high-growth phase is ending, and that now its profitability will be on par with that of the infrastructure industry,” he reasons.

Jyoti Pawar, head, Telecom, Media and Technology Practice at law firm Economic Laws Practice, feels there is still room for a consensus on how to allow the telecom industry to protect its revenues. At the same time, it must not be forgetten that there is the huge task of bridging the digital divide, for which Internet services cannot become too expensive, she says.

Many suggest that Airtel’s new offering, Airtel Zero, which ostensibly helps by promoting certain apps the usage of which would be not counted towards the data consumption of Airtel subscribers, could be such a solution. The app providers would, in turn, pay Airtel. In a press release, Airtel calls it a win-win situation for customers and marketers, underlining that it is free for consumers. So far, so good.

But, over time, will Airtel discriminate against the apps that don’t participate in Airtel Zero? Let’s say, ICICI Bank is part of such a package. To an HDFC Bank customer, life will be the same as before. But if Airtel slowly throttles the speed for non-paying websites/ apps, then it stops being fair. Or, if the cost of the paid Internet becomes prohibitively expensive, then that surely will affect consumer choice, prompting companies to pay up. That cost will naturally get passed on to the customer, which means it really will not be free. In the US, movie streaming service Netflix saw its speeds reduced till it agreed to pay the carriers.

At the heart of the argument lies the question: What is Airtel, Vodafone or Idea charging its subscribers for? Simplistically, it is the bandwidth they provide, which they acquired from the government through spectrum auctions. Their role should end right there.

Instead, the industry is lobbying for potential competition to be priced out of the market. In the US, the telecom industry has already filed a lawsuit challenging the new FCC rules. This is unwelcome. Not because the industry will not feel the pinch. But tinkering with Net neutrality, and by extension the Internet, can only be dangerous in the long run. You can only do so much to make the elephant dance.

(This story was published in BW | Businessworld Issue Dated 18-05-2015)