Free Basics: Regulatory principles versus Ideology

Should Facebook’s Free Basics initiative be stopped immediately? A response to this question cannot depend on claims, either of its promoter – Facebook – or its critics. And, the issue is not whether Facebook’s goal is to expand internet access to the poor or to further its business. It is whether there is any evidence that Free Basics violates any existing rule, harms consumers or other players in the market. An economic regulator, such as Telecom Regulatory Authority of India (TRAI) will need to settle this, using data and well established tests, not petitions that support or oppose Free Basics. Yet, several liberals, and even lawyers, want TRAI to do just this. They have pre-judged Free Basics and want it banned simply on suspicion of possible future mischief. They offer no evidence of harm to users or market-players – in India or in any other country where Free Basics is on offer. [caption id=“attachment_2588704” align=“alignleft” width=“380”]  Representational image. Image courtesy: Free Basics website[/caption] However, critics’ misgivings and allegations deserve a response. It is alleged that Facebook’s initiative will split the internet since Free Basics users will have little reason to explore beyond the few Facebook controlled free content. There are several reasons why this is far-fetched. The content on Free Basics is simply too small and unrepresentative. Free Basics – even if it expands 10 times – would be a negligible part of roughly billion websites on the Internet. Further, Free Basics offers no video, which is around 60 percent of internet traffic today, and expected to rise to over 80 percent in about 3 years. (Its technical guidelines explicitly discourage “high overhead” content that consumes too much bandwidth and may not work on low cost handsets.) To suggest that users will be satisfied with “unpopular” or “vanilla” internet content simply because it is free, is absurd. More so, since the other content, even if it is priced, is a proverbial click away. Critics suggest that the partnering mobile operator gets to play a monopoly or “gatekeeper” role by making it impossible or expensive to access content not included in the Free Basics package. This too defies reason when applied to India’s telecom markets, where there is more competition than almost any country. While data speeds are admittedly, low in India, there are multiple ways to access the web – through private and government owned fixed and mobile operators, cable operators and other standalone ISPs. As for content on Free Basics, it is available with or without subscription to it. Far from being a restrictive gatekeeper, the operator offering Free Basics is one of the many doors to the internet. Any player with delusions of being a gatekeeper, risks losing business. Some critics find it difficult to accept that the mobile operator offering Free Basics receives no money to do it. According to them, such an operator would have no commercial incentive to offer free services. They ignore that given the relatively small size of data markets,the operator, especially one without sufficient revenues from data services may see it differently. It might see Free Basics as a way, eventually, to bring its subscribers to popular content, for which data charges do apply. It is suggested that Free Basics violates the concept of net neutrality which requires all players to treat all content at par. One can look at this in several ways. For a start, India currently has no such rule or legislation. Secondly, a country like US, which does have such a provision, still does not see free access to selected websites (“zero rating”) as necessarily a violation. A separate issue is the relevance to India of an inflexible net neutrality legislation. Less than 20 countries have it. Several developed and developing countries, including India, currently permit some differential pricing for web content and have not incurred noticeable damage. Also, virtually no country has an internet market like India’s. Almost all have extensive fixed line networks and little competition for access. India relies predominantly on wireless and is therefore constrained for network capacity. And, it has abysmally low (20 percent) level of internet penetration. The critics have offered no serious evidence that consumers in countries with net neutrality regulation are doing better or that those without it, are doing worse. Therefore, even if Net Neutrality – no blocking, no throttling or paid prioritisation of internet traffic – is a sound principle the case for copycat rules is hardly clear cut. Several critics have raised concerns related to privacy and security. It would be naïve to dispute the importance of these issues. However, they are generic to almost all popular internet content, cloud services, mobile apps, etc. Several critics feel Free Basics is unlikely to work in expanding internet access to the poor. They believe offering a free data package without restrictions is a better idea. They may well turn out to be right and Facebook wrong. However, this is hardly reason for a market regulator to bar any alternate approach. This is not to suggest that mischief by market players is an impossibility or that consumers may never be at risk in future. TRAI cannot afford to ignore market developments. However, TRAI’s responsibility is not to pick winners- or ease out players on suspicion! – but to protect consumers by ensuring that markets work effectively. It is obliged to act proportionately after determining the nature, size and likelihood of possible harm to consumers or markets. Stopping Free Basics, without any data or subsequent analysis, is simply bad regulation. Mahesh Uppal is consultant specialising in regulatory aspects of telecom and internet markets and has advised diverse players in the sector. He can be reached on mahesh.uppal@gmail.com