Opinion

Net neutrality will boost investment

| Updated on: Jul 10, 2015
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Freedom to innovate is the real driver of growth in the internet economy; ensuring this is a public responsibility

Over the past two decades, India has seen phenomenal growth in internet penetration. The number of users may touch half a billion by 2018 from the present 260 million. This impacted economic growth and paved the way for freedom of speech and realisation of true democracy.

Given the central role played by internet in the economic and social life of every individual, ensuring even-handed internet access is a public responsibility. Hence, the internet is a public good, which is why globally there is a move to make digital access as a fundamental right.

Net neutrality as envisioned by Tim Wu, the father of the net neutrality, is all about treating all the bits equally irrespective of their origin and weight. It is about keeping the way the internet works today: an open internet where innovation is allowed and freedom reigns, a win-win situation for all in the internet eco system.

It would keep the internet as the amazing engine of democratic speech and economic opportunity it has been. Thus it keeps the balanced the triangular relationship among all players, i.e. consumers and entrepreneurs on the edge and network providers at the core.

For the past 25 years, the open Internet has been the fundamental enabler of new business and innovation around the world. No other technology has so radically changed how we live and work in such a short amount of time. It is only with the power of the internet that startups and entrepreneurs today are able to generate awareness about their product or service. The internet is acting as a medium through which customers are able to be aware of the variety of choices in the market. Without net neutrality, this is lost.

In the internet ecosystem, businesses and entrepreneurs have built companies that increasingly rely on open and unfettered access. In this environment, we are fortunate to have a rich marketplace of ideas and innovation that allows the best talent and products and services to rise to the top. It is empowering entrepreneurs to experiment with new business models and technologies while giving customers an unprecedented level of transparency and choice.

Denying access It is not illogical to think that the absence of freedom of the internet will create an enormous entry barrier for entrepreneurs and small businesses, which may deter the objective of providing a level playing field to all stake holders.

Any imbalance in this will be a gateway for big players having sufficient financial resources to grab a major market share, with the resultant danger of fresh talent being buried.

On the technical front, startups, small businesses and entrepreneurs will suffer as their content will load slowly or may not even load at the user end. This will discourage entrepreneurship and will result in slowdown in job growth, competition and innovation.

The internet has given digital entrepreneurs an unheard of level of career flexibility, self-determination and opportunity for experimentation. From a digital freelancer with a virtual office to an application for small group of drivers offering their services, these new work styles wouldn’t be possible without an open internet.

The quantum of investment in the telecom networks is heavy compared to other industries and more so in the initial stages for the development of infrastructure. It will show a negative trend later since the requirement is of a incremental nature. The growth of competitive applications will be a driving tool for investment by the network providers, since this will drive consumer demand for more bandwidth, and lead to higher realisations for better quality of service offered by the telecom network providers.

This, in turn, will fuel investment by the edge application providers to capitalise on the availability of high bandwidth and the affordability of the consumers, resulting in a virtuous cycle of investment.

Promoting investments It is simply wrong to suggest that net neutrality, or any other regulation, will automatically deter investment. Investment decisions are driven by a variety of factors, including expectations about demand, supply costs, competition and interest rates. In the telecom sector, regulation plays only a minor role.

Net neutrality may actually encourage modestly higher levels of investment in network infrastructure, because it promotes competition and removes the incentives for companies to defer investment in new capacity in order to profit from artificial scarcity.

But net neutrality will unquestionably encourage higher levels of investment in the applications and content sector, which is the key driver of growth in the Internet access market itself.

Investment is a sine qua non for spread of internet access, which in turn fuels the growth of the Internet economy. If the investment in broadband infrastructure falls, its impact would be felt at the edge in terms of access, speed and quality of services. This would affect the spread of internet and use of the Internet for innovation at the edges of the network.

Innovation and infrastructure There is a symbiotic relationship between expansion of broadband infrastructure through investment and opportunities thrown up by an explosion of innovation in internet content and applications. So, innovation and infrastructure have both to be promoted simultaneously — one cannot grow without the other.

It is true that the internet connectivity in India is a little above 20 percent of the population, leaving the large portion yet to be connected. Thus a major part of society cannot reap all the benefits from these network effects without sufficient further investment (public or private) in the broadband platform, till equilibrium is achieved between stake holders both at the core and edge of the internet ecosystem.

Hence, a regulation with balanced control for healthier competition between network and edge providers to propel growth of innovation and investment in the ecosystem is the need of hour for the growth of economy as a whole.

The writer is a public policy consultant and former civil servant

Published on January 24, 2018

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