The US court of appeals for the District of Columbia circuit has strongly supported net neutrality recently in its ruling to treat highspeed internet service as a ‘utility’ much like electricity. However, the position in India is still unclear. The most recent consultation paper from the Telecom Regulatory Authority of India (TRAI) on free data is linked to its “Prohibition of discriminatory tariffs for data services regulation” notified in February 2016.

This principle of net neutrality was seriously challenged by the concept of zero rating, whereby a TSP could provide access to a portfolio provided by a set of content and application providers (CAPs) free of any bandwidth charge to the end-user, while access to other content and applications would be charged differently. Evidently, the TSP’s cost of providing services within the free portfolio would be subsidised by the CAPs. The possibility of such differential pricing would enable a CAP with deep pockets to get preferential access to the TSP’s subscribers, violating the principle of net neutrality. The CAPs espousing the principle of zero rating invoked the objective of universal access to the internet to support their case. Though this has been accepted in some countries, TRAI disallowed such schemes.

Closed networks

However, in this regulatory notification, while TSPs are prohibited from offering different tariffs based on the content, service, application or other data that a user is accessing or transmitting on the internet, data transmitted over closed electronic communications networks (CECN) may be provided without any bandwidth charge. Does this conform to the principle of net neutrality?

Under CECN, a TSP can price the bandwidth for content or application provided exclusively to its subscribers differently, even at zero price, as long as this content and/or application is not available on the public internet. The CECN option will not be used by large CAPs who would avoid being restricted to a single TSP’s network. It will be typically opted for by small CAPs because of the competitive market.

It is not clear from the notification whether any CAP can multi-home into many TSPs and still not make its content available on the internet in order to avail itself of exclusion. In order to understand the reality of CECN, it is instructive to look at what happened to the value added service (VAS) providers who were associated on an exclusive basis with a single TSP. The VAS provider had little bargaining power over the TSP with the later pocketing almost 70 to 80 per cent of the VAS revenue.

The difference between CECN and zero rating is that the latter is a way in which CAPs with deep pockets could lock in subscribers with free access, while in CECN, the TSPs can lock in small CAPs with difficult commercial terms.

Shrinking space

Will TSPs actively pursue CECN? Probably not, since the app economy is increasingly driven by the mobile phone and is closely connected to the eco system of device manufacturers and operating system platforms. Hence the possibility that a TSP could gain a competitive advantage with its own suite of applications offered through CECN is indeed minimal, especially in a competitive TSP market such as in India.

The issue remains that with increasing amounts of power being wielded by giants such as Amazon, Google, Facebook, and Apple, the space for internet startups, in some sectors,  is shrinking rapidly.

Think of a company attempting to come up with a new mapping software in a world where all Android phones come bundled with Google maps. The issue of reducing barriers to access, the core principle behind net neutrality, remains relevant in an increasingly vertically integrated world. CECN is an unnecessary distraction. On the other hand, the importance of resilience and capacity of the internet infrastructure, especially the last mile access provided by TSPs, needs more attention. All the over the top (OTT) applications provided by the CAPs depend on this infrastructure. WhatsApp requires a robust internet infrastructure for call completions. 

If the internet service is to be treated like a utility, then we need to give it ‘infrastructure’ status with all applicable provisions, including reducing the regulatory overheads and providing attractive financial options especially for acquiring radio spectrum, making it easier to obtain right of way for cable and towers, so that the ‘plumbing’ of the internet is adequate to power the Digital India mission.

Then the regulator and the policymaker can put in stringent quality of service norms for telcos to adhere to, failing which severe penalties can be enforced. With a broken internet pipe as it exists today, the endless debate on net neutrality is inconsequential.

Sridhar and Prasad are professors at IIIT-B and MDI Gurgaon respectively


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