The Pros and Cons of Net Neutrality

Sameer Mathur, Consulting Editor, PCQuest

Most of the readers would now be aware of the raging debate on Net neutrality, but let’s anyway do a quick memory refresh. The principle of free, unrestricted access to any data on the Net is referred to as net neutrality. An ISP does not control the traffic that passes through its servers. When a user connects to a website or web service, the user is promised exactly the same experience. There is no discrimination on using data whether one is using YouTube or WhatsApp or Facebook. Theoretically users can access any legal website or web service without any interference from an ISP. Additionally, since majority of the Telecom Service Operators (TSP) are also Internet Service Providers (ISP), there was no perceived discrimination on the usage of data. From the time Internet has kicked off in the early 1980’s, there has not been any fixed rule on this.
The principle of Net Neutrality calls for equal treatment to be accorded to all internet traffic, without discrimination or priority for any person, entity or company. Most ISPs follow this principle of unrestricted access because that is how it has always been.

So what is the change now? Why all the noise and shrill condemnation of Telcos in the last few weeks?

All telcom companies, be it Bharti Airtel, Reliance, Vodafone, Idea etc have endorsed and supported the idea and have openly come out in favor of being Net Neutral. The confusion started with Bharti Airtel launching a program called Airtel Zero.

So what exactly is Airtel Zero and in what way will it affect, if at all, the average user of the mobile internet?

Simply put and I quote a senior Airtel Executive, “Airtel Zero is a technology platform that connects application providers to their customers for free. The platform allows any content or application provider to enroll on it so that their customers can visit these sites for free. Instead of charging customers, we charge the providers who choose to get on to the platform. Airtel Zero as a platform is open to all application developers, content providers and internet sites on an equal basis. The same rate card is offered to all these providers on a totally non-discriminatory basis.”
Similarly Facebook has also been running an initiative called internet.org that has Reliance Communications (RCom) as a partner in India. This initiative, launched in February, seeks to work with technology leaders and telecom companies to offer free internet access to the underprivileged. Under internet.org, users of Reliance Communications (RCom) have free access to Facebook and some other useful websites like OLX, with Facebook paying RCom for the data so consumed on the latter’s network.

Both Facebook and Airtel claim that their platforms do not violate the Net Neutrality principle and they are actually aimed at expanding Internet access in India. Apart from Airtel and RCom, most other Indian TSPs including Idea Cellular, Uninor and Tata Teleservices also have plans offering Facebook, WhatsApp or Wikipedia at nominal charges, if not for free. These plans are quite similar to other Zero rating plans but has not quite caught the attention of the Netizens.

What’s happening globally on net neutrality?

“There are different practices in different jurisdictions. UK and parts of Europe do not practice strict net-neutrality. Even in the US, zero rating plans are permissible,” said Mr. Khullar, Chairman of the Telecom watchdog TRAI, while replying to a question on whether India was in a position to align with the global net-neutrality principles.
According to the telecom industry, zero rating is just one of the options for customers and no customer is disenfranchised, compromised or discriminated against.

Majority of the research being published on the concept of Net Neutrality versus Zero rating plans favor the latter and claim neutrality will actually act as a deterrent for the growth of internet.
To quote the Jena Economic Research Paper, on Net Neutrality,

“In this paper, we analyze the problem of congestion and quality loss of data transmission through the Internet from an economic perspective. We show that due to the congestion problem, quality sensitive services are likely to be crowded out by high volume but less quality sensitive applications in a strict ‘neutral’ system. This crowding out reduces the availability of services and the development and diffusion of innovative and high value services. Not least, the congestion problem causes welfare loss. As we discuss in this paper, the differentiation of data packets according to their quality sensitivity could remedy the congestion problem. Appropriate business models that incorporate quality of service concepts could be very efficient in preventing the crowding out of high value quality sensitive services without affecting other applications and would be very convenient for Internet users at the same time. We show that any ex-ante regulation in the sense of strict Net neutrality could seriously harm the development of innovative business models and discourage innovation and investment.”

Another leading research by the University of Florida and Notre Dame titled -The Debate on Net Neutrality: A Policy Perspective assert the following:

The status quo of prohibiting broadband service providers from charging websites for preferential access to their customers - the bedrock principle of net neutrality, is under fierce debate. We develop a game-theoretic model to address two critical issues of net neutrality: (1) Who are gainers and losers of abandoning net neutrality; and (2) Will broadband service providers have greater incentive to expand their capacity without net neutrality? We find that if the principle of net neutrality is abolished, the broadband service provider stands to gain from the arrangement, as a result of extracting the preferential access fees from content providers. We find that the incentive to expand infrastructure capacity for the broadband service provider and its optimal capacity choice under net neutrality are higher than those under the no net neutrality regime except in some specific cases.
It has also been conclusively proven by some studies that Net Neutrality would actually hamper the growth of the broadband business in the country. Another research by a US university concludes that Net Neutrality would cost US thousands of jobs and billions in cost.

Airtel strongly refutes that its product violates net neutrality principles. “Airtel Zero provides consumers with more choices (including one where their access is paid for by the app developer), and provides internet companies with marketing options that are much more efficient than the traditional channel they have used,” the Telco said in a statement, adding it backs a free internet.

Many observers and industry professionals feel that the concept of Neutrality generally lacks economic viability. With investments of billions of dollars in buying spectrum and creating and maintaining the telecom infrastructure, TSPs are very much within their rights to look at reasonable return on their investments. Most of the Telcos are deeply in debt to financial institutions. How can they be bundled with a regulatory mechanism that restricts their model of earning revenue?

Hemant Joshi, partner at consultancy firm Deloitte Haskins & Sells says differential pricing is not just in telecom alone. For example, airlines charge differently for the space usage for first class, business and economy class and provide priority check-in and specialized service according to the class. The hospitality industry charges differently for the size and quality of rooms. The amount of the highway toll varies by vehicle type, weight or number of axles, with freight trucks often charged higher rates than cars.

“On this basis, telcos have a rationale to charge different applications according to the data traffic generated and the type of connectivity parameters (high availability, reliability, secure, etc),” says Joshi.
Industry experts also bemoan the fact that the concept of Net Neutrality is being blatantly confused with the Zero rating plan. We need to legally define the concept of neutrality. Lack of clear understanding is creating an unreasonable confusion in the minds of netizens.

Throughout the world only very few countries strictly follow the concept of Net Neutrality. Most of the developed countries have a very clear definition and differentiation of both the terms.
The net neutrality debate is still being discussed and contested worldwide, as it should be in India.