Tag Archives: Thinking Aloud

08 Jan

What to do about Net Neutrality?

By Mahesh Uppal

The Mobile operator Airtel’s recent decision – hastily withdrawn – to charge more for internet based telephony services goes against the principle of Network Neutrality.

The broad principle of Network Neutrality makes sense. It attempts to impose on internet service providers (ISPs) an obligation similar to the one on other utilities like power, roads, railways, etc.  It requires that a service provider not discriminate between users or the type of usage. So, just like it is unacceptable if a player who runs railways or roads, determines if, when or where you travel, so should an ISP not have a say in your use of the internet.

India, like most countries, does not mandate Network Neutrality explicitly.  However the licences of telecom operators like Airtel, Vodafone, Bharat Sanchar Nigam Limited (BSNL) etc. who provide the bulk of access to the internet require that the holder “shall not in any manner discriminate between subscribers and provide service on the same commercial principle”.

The Network Neutrality debate acquired new energy last November, when US President Obama reiterated his strong support for the principle. He said: “We cannot allow Internet service providers (ISPs) to restrict the best access or to pick winners and losers in the online marketplace for services and ideas.” He opposed attempts at blocking websites selectively, throttling or slowing down some traffic and paid prioritization of traffic. He presumably had in mind companies like Comcast, AT&T and Verizon who own and dominate the underground cable and optical fibre lines that most Americans use to access the internet. The latter have argued that the investment needed to accommodate increasing traffic, especially video, was becoming unsustainable. They want the right to be able to prioritize some types of traffic. Obama, like other supporters of Network Neutrality, sees such prioritization as potential abuse of dominance. He called on Federal Communications Commission (FCC), which regulates telecommunications and broadcasting in the US, to devise Network Neutrality rules.

Are Network Neutrality rules relevant for countries like India? Is abuse of market power by network operators rampant, serious or imminent? Is Network Neutrality relevant in cases where the reach and capacity of networks is limited?  Could the rules be an overkill? Should Network Neutrality be recommended or obligatory? Should we treat it akin to a constitutional right, for example to life, property or free speech?

In my view a doctrinaire or rigid approach to Network Neutrality is illogical and risky. This is especially true for developing countries like India whose data or Internet markets differ qualitatively from those of the US. In India, no company providing internet access has anything close to a monopoly in the market.  Fixed line market is admittedly dominated by BSNL. However, the latter has far fewer subscribers than wireless operators – on whom a majority of users rely for access to the internet.

There is another important difference between the US and India. The predominant mode for access to internet in US is fixed line and in India, wireless.  It is far easier to expand capacity of fixed networks in US than the wireless ones in India. Increasing the capacity of cable and fibre networks depends mainly on availability of funds. However, for wireless networks funds alone are insufficient. It depends on availability of needed spectrum and the willingness of government to release it. In the case of India, operators cannot buy or lease it from current users of spectrum.

Network Neutrality therefore implies different burdens for fixed and wireless players as well for players with and without market power.  So while a government or regulator could require a dominant fixed line player to expand capacity to accommodate increasing levels of traffic it could not realistically require capacity-strapped wireless operators to do so.

In India an added issue in mandating Network Neutrality is the huge regulatory costs – licence fees, spectrum usage charges – charged from network operators amounting to roughly 30% of their revenues.  VOIP and other Over-the-Top (OTT) services pay no such fees despite the fact that phone services like Skype, Viber etc. or messaging services like WhatsApp are functionally similar – in some ways, even more powerful than the corresponding services of mobile operators. This ‘unfair competition’ poses a different type of argument against network neutrality in India.

A key dichotomy in implementing Network Neutrality is that intended beneficiaries could potentially be victims too. While it seeks to assure smaller players of equal access to networks, it provides no guarantee that bigger players, especially social media with its much wider appeal and sophisticated technologies, will not grab bulk of the bandwidth, as many believe, they do currently.  This is especially true for wireless networks.

It is notable that bigger players like Facebook, Google etc., which are strong advocates of Network Neutrality are making exceptions themselves. In many instances, in India and in other developing countries, they have made deals with mobile operators that favour their services over others’. In some cases, for example, access to the services of one player, say Facebook, is free, but not for websites or services of players, without comparable commercial clout to enter into similar arrangements.

In my view, the central issue in public networks is to fair access and not the sanctity of the Network Neutrality principle, per se. Sometimes Network Neutrality might hurt more than it can help. This is an issue in almost all types of networks.  For instance, in case of road networks, big trucks are treated differently during peak traffic hours. There are toll roads for users who want to save time. In India, the “Rajdhani” and other trains exclude passengers from most stations on their route. In electricity, we have differential pricing for low and heavy users. Can we argue that these breaches of Network Neutrality are entirely unreasonable?

However, it would be patently unfair if all roads were toll roads or all trains Rajdhani’s. We cannot divorce Network Neutrality from the larger context of public policy.  ‘Violations’ from Network Neutrality must be the exception and not the rule.

Network Neutrality means ensuring that those who own or control networks behave reasonably. Such players frequently have incentives to favour certain type of users or usage that provide higher returns. Since network businesses have little or no competition, these players have the potential to abuse markets through arbitrary pricing. This can hurt users and sometimes thwart new entry to the markets.

It is these cases that economists call “market failure” where Network Neutrality is most important. It poses much the same questions that regulators face when deciding whether or not intervene in tariff setting or whether licensed operators must be mandated to serve rural areas, even if it is unprofitable to do so.

Network utilities have profound implications for public interest. Obama’s focus on ensuring no one is disadvantaged in their use of broadband networks in the US is no less relevant in India.  However, there is a big difference between the reach of broadband networks in two countries. The priority for India is to deploy the networks while for US it is to improve access to the broadband networks already deployed.  It would be counterproductive if poorly implemented Network Neutrality gave the operators an excuse to make it difficult or expensive to use popular services such as VOIP telephony. India must ensure that no sets of players carry unfair regulatory burdens for providing competing services and users of popular services have unbridled access to technologies that provide powerful and cheaper services.

Airtel’s approach to VOIP tariffs highlights the need for the government and the Telecom Regulatory Authority of India (TRAI) to collaborate on a model of Network Neutrality that is relevant for India.

*Views expressed here are personal

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