What constitutes digital equality?
India’s national telecoms regulator thinks it knows, its national consultation on differential pricing for mobile data packages concluding that “zero rating” services, or offering them for free, is discriminatory. And over objections that zero rating practices create more opportunity for the 1 billion digitally disconnected, India has banned them.
This follows months of ferocious lobbying on both sides of the debate, focused around Facebook’s Free Basics offering. In India, as it has done in more than 30 other countries, Facebook has offered a curated, stripped-down internet experience called Free Basics consisting of Facebook itself, BBC News, local news and information, a few NGOs, and dozens of other low-bandwidth services.
Critics argued that the Facebook offering is a degraded internet experience specially marketed to the poor –hardly the ticket to digital equality. Telecom Regulatory Authority (TRAI)’s decision is viewed as a victory for open internet advocates who have been trying to get India to adopt US-style net neutrality rules. Dozens of small businesses seeking their own share of the internet audience also filed comments seeking this result.
Yet Facebook had argued that Free Basics would democratize the internet, bringing disconnected Indians online for the first time. And behind the policy debate, there is an internet land grab with big companies on both sides of zero rating vying to stake their claims to the disconnected.
Roslyn Layton, an academic who contributed to the TRAI consultation and has done research on the economic impact of zero rating, feels the decision is a setback for internet adoption and access in India. “This battle is essentially one between Google and Facebook for the future of India’s digital advertising market,” she said. “Facebook launched Free Basics and Google plans Android One, a low-cost smartphone bundled with Google apps. We should allow both models in the marketplace to compete.”
Carriers use zero rating as a loss-leader in the scramble for subscribers, hoping to get users to pay a little now, and more once they’re hooked online. For Facebook, Free Basics drives new users into the Facebook ecosystem. At the same time, the company is able to use the Free Basics platform to lure more third-party content providers onto Facebook’s servers, and so get a share of more ad revenue and user data.
Zero rating opponents, including Google, have their own plans to grab market share in the southern hemisphere, focusing on spreading the Android ecosystem and building wireless capability.
In late December, TRAI ordered Facebook’s telecom partner, Reliance, to shut down Free Basics until the regulator could take comment on the propriety of zero rating. This order followed the rapid mobilization of net neutrality advocates who succeeded in getting more than a million signatures on a petition demanding an end to Free Basics.
The claim is that zero rating is the same thing as net discrimination. India and the US, although not the EU, has banned “paid prioritization” at the network level as discriminatory, meaning that Facebook would be prohibited from paying Reliance for preferred (as in faster or better) network access.
Net neutrality advocates say that zero rating has the same effect as the banned network practices: some services get preferential access to consumers. This is true whether the service pays the carrier to be fee-exempt or whether there is no cash consideration, as in the Free Basics deal.
There are three related strands to this argument. First, consumers will naturally migrate to the free services, making it difficult for competitors and other new and often local entrants not part of the zero-rated bundle to break through.
Second, consumers may become so accustomed to a stripped-down internet – so embedded in a Free Basics ecosystem – that they don’t even go looking beyond the walled garden.
And third, in the absence of sufficient carrier competition, carriers have an incentive to suppress bandwidth supply and increase prices for data packages outside of the zero-rated services.
None of these arguments has landed with quite the power that net neutrality did, in large part because zero rating is very popular with consumers. It’s difficult to tell people that the government must intervene to prevent them from getting free stuff they value because, in the long run, it will be better for them to pay for it.
The consumer appeal of free has steadily blown zero-rated services into dozens of countries over many years, without much debate. The exploding controversy in India raises questions about technological imperialism, innovation and competition, and most profoundly, the nature of online freedom.
Zero rating is unlike network discrimination because it affects only price, leaving the ultimate consumption choice with consumers. Nothing is blocked, nothing degraded. So whether zero rating is discriminatory really depends on whether “free” substantially skews choice and constrains net freedom.
The data seem to show that price differentials do not substantially change consumption patterns or advantage incumbent applications. Moreover, consumers seem to understand the difference between the whole internet and the limited choices made available for free. Indeed, about half of Free Basics users opt to pay up for a general data plan within a month’s time.
If the risks of zero rating have not yet come to pass, the rewards are substantial. Differential pricing policies help non-dominant carriers to differentiate their products and compete more robustly. In the US, the mobile challenger T-Mobile is using zero-rated offerings like Binge On to sign up new customers. As everyone agrees, more carrier competition is ultimately the solution to net discrimination as well.
Zero rating can also help to close the digital divide and bring the poor into the digital conversation. Net freedom is illusory, after all, for the 80% of the Indian population that isn’t online. An insistence on uniform pricing, while internet adoption stalls, has a “let them eat cake” tenor.
If zero rating comes down to a risk-reward calculation, then regulators should require practices that reduce the risk of anticompetitive effects and increase consumer benefits.
One of the reasons TRAI ordered Reliance to suspend Free Basics is that it apparently refused to comply with TRAI’s information requests. That was the right decision. Transparency reduces zero rating risk, and is sorely needed to keep the power of internet platforms like Facebook in check. The public needs to know what, why, and on what terms services are zero-rated.
It’s also important that zero-rating deals be non-exclusive as among content providers in a certain class (music streaming, or social media platforms), and as among carriers, which will reduce the gatekeeping power of a company like Facebook or a carrier.
Is zero rating the best way to increase connectivity? No. It would be better for the poor to have government-subsidized service, or free data that allows them to “zero rate” whatever service they choose.
Fortunately, TRAI’s ruling has left carriers with the option to provide free data if not pegged to specific services. It would be better for there to be no data caps and therefore no value in being fee-exempt in the first place. But these are not options right now.
Under conditions of constraint, something may be better than nothing. The burden should be on those who would ban the something now to show that the nothing will benefit consumers later. And not too much later, because digital exclusion exacts a daily price.
- Ellen P Goodman is a professor at Rutgers Law School and co-director of the Rutgers Institute for Information Policy & Law