In the middle of the global pandemic certain announcements brought a bit of surprise to many in the country and abroad. Reliance Industries Ltd (RIL) entered into deals with Facebook Inc, Silver Lake and Vista Equity Partners, global tech investing companies, for equity stake of 10 per cent and more than 1 per cent and around 2.32 per cent, respectively, in Jio Platform. ,

Silver Lake has invested in several prominent technology and financial companies including Alibaba, Ant Financial, Airbnb, Verily and Waymo, and played key role in Broadcom and Symantec merger. The focus of Vista is on investment in enterprise software companies. The deal particularly by Facebook, being the largest outside the US, is an active investment and is far more important. The other two deals are more passive. The deals appear to have been worked out carefully to help the companies to get away from some of the regulations of the Competition Commission of India.

Marriage of convenience

In a way, the tie-ups between the companies seem like a marriage of convenience. Jio had been looking for a collaboration for creation of content to sustain the growth of infrastructure and revenue. Facebook had been looking for a reliable telecom infrastructure for delivery of its content and to expand its portfolio of services in India and sustain the digital “ad” revenue. Each partner is bringing something to the table which the other partner has been looking for some time. Besides, the investments are to be seen as bringing relief to RIL on its debt-free plan, particularly when it is in the process of coming out with a rights issue.

RIL/Jio have long-term objectives of three connected elements carriage, content and commerce. The investment will help them to upgrade their mobile network to next generation technology, leverage WhatsApp user base to expand its retail market, and compete with likes of Amazon and Walmart in the commerce arena.

Jio Mart has reportedly tied up with millions of local kirana and grocery stores across the country which will now be brought on the Jio-WhatsApp platforms creating a unique model of e-commerce where Jio, kirana stores and Facebook will all be e-commerce companies. The triad will help in digitising the entire supply chain. At the same time, Jio Payment Bank’s business will get revived whereby small merchants/MSMEs may get short-term loans and other credit facilities.

Facebook, on the other hand, will get a foothold into the high performing pan-India telecom network which it has been trying to enter since 2014. Project ‘Free Basics’ was part of its said plan. Facebook had also made attempts to get into the video business and won a deal from the International Cricket Council to stream digital content like post match recaps for the Indian subcontinent.

Financial services

Facebook faced some issues on retaining data in India in its ‘WhatsApp Pay’ project due to the RBI guidelines of April 2018. Facebook, however, got permission to expand the programme to 10 million users in February 2020. The collaboration will enable FB to leverage 400 million mobile subscribers of Jio to expand their reach of financial services (WhatsApp Pay) across the country. This will help them to offer similar services world over.

The integration of WhatsApp pay with Jio Payments Bank will be a powerful financial services platform. Facebook, by using Jio cloud, would also get away with the RBI regulations relating to data localisation and may emerge as a key digital platform in the overall plan off Jio.

More than all, Facebook, which is running a massive advertising engine, may get fuelled by high volume of data, and that too in different languages, and would monetise a larger set of data to strengthen the three-fold benefits of community, commerce and payments, besides enhancing revenue from the digital advertisement business. It would put them in a unique position vis-a-vis their competitors in the world.

There are several upsides to the tie-ups and time will tell success and benefits to all stakeholders. No doubt RIL/Jio stands to emerge as a strong digital service platform in the country, but can the same be assumed about Facebook? The latter may have risks tying up with a telecom infra company whose interests are also more or less similar platforms. Will the relationship restrict Facebook to stream and offer content through only one telecom company and restrict the choice and options to users. Also, there’s the issue of Net neutrality?

Key issues

Anyway, several strategic, technical and policy issues have emerged. The key among them are as follows:

Efficient services will need built-in and integrated application systems and an app eco-system. Thus the technical challenges will be in integration of platforms, applications, services, retention and sharing of data among partners within the ambit of regulations of the respective countries, more importantly, India.

More integration of interfaces and applications will give rise to issues relating to sharing of data, security, and leakage. Jio has implemented technical protocols like RCS (Rich Communication Service) in its network for providing good quality data services which need appropriate authentication and authorisation of users and services. With many partners, the issues of complexity and integrity in authentication and authorisation may emerge. It may lead to efforts to redefine the concept of privacy.

Reliance so far has been taking a stand of “data sovereignty”. The Data Protection Bill, pending in Parliament, may need a relook to addresses issues of security and privacy of data in scenarios which may emerge in other such tie-ups in the country.

Sharing of telecom infrastructure for providing any other value-added services like AR/VR by Facebook. One wonders if the erstwhile ‘Free Basics’ scheme may come back in a different from. It may possibly create a monopoly and change the way information and services will be perceived and received by the people.

Absence of a structured data monetising framework in the country will give rise to monopolisation and cross-border flow of data.

Indian start-ups are already suffering from commercialisation and cartelisation of data by big companies. The tie-up will heightened the barrier to data for Indian start-ups.

The investment deals will, thus, have the potential to significantly shape and reshape the interface of technology with business/commerce to their advantage in more ways than one, such as behaviour of both consumers and businesses. Also, fundamental shift may take place in business models.

Certainly there will be disruptions in the retail business. It, thus, puts a responsibility on the government and the regulators to create appropriate technology, data and security governance frameworks and, more particularly, a data monetising framework, to address issues which may emerge and safeguard the interests of nation while attracting global tech giants and leveraging their expertise.

Taneja is Associate, Karanjawala & Co., and Rai, a former National Cyber Security coordinator, is Senior Fellow at ORF and Senior Advisor at Dua Associates

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