Free Basics: Nandan Nilekani’s formula is wrong; the state must stay clear of offering internet sops

By Arihant Panagariya In all the hoopla over Free Basics, the consumer’s wish-list has already been pre-ordained by self-proclaimed saviours of the internet. Why? Because, currently, about a quarter of India’s population is estimated to have access to internet and the number is set to grow by leaps and bounds in the coming years and decades. Everyone, of course, wants a share of the pie and has huge stakes involved. Thankfully, much has changed since April last year. Then, it was more or less a one-sided debate on net neutrality with Flipkart and Airtel forced to abort their zero-rating plans. This time, Facebook is at least putting up a fight. It has published advertisements, asked people to give missed calls, send in letters to TRAI informing it of their opinion. Zuckerberg himself has reached out by penning a piece for an influential daily. True, those clamouring for Zuckerberg’s head may have legitimate concerns and fears. What was the need to change the name from Internet.Org to Free Basics? Why did Facebook change its privacy terms now and not then? Why is Facebook not giving free data instead? Why does it still have the option to reject websites and apps to be available on its platform unless they meet its terms and conditions? What is in it for Facebook to become altruistic and provide access to internet to millions? Why does Facebook not want to explore other alternatives? There may be much to be cynical about Facebook and its ambition, but then it is a corporation whose sole motive, in all probability, is profit making. But then what do we expect from the current discourse? That such a complex issue has been broken down for the majority by a bunch of comedians and musicians is nothing but ridiculous. That most of us are sharing these videos is even more comical. That policymakers in Delhi could be influenced by such means is dangerous and worrying. That such an important debate remained one-sided for so long says more about us than about those who are preaching us morality and teaching us economics. In their own language, all of us just got roasted. It is hardly surprising then, that someone as respected as Nandan Nilekani has proposed an alternative to the Free Basics plan in the form of a government-backed Direct Benefits Transfer (DBT) scheme for consumers. He feels the government should offer a free data pack of 120MB annually by linking people’s SIM cards to their Aadhaar numbers. While it is true that the government may be able to afford the scheme, the larger question is why involve the government at all when private entrepreneurs are willing to do it themselves? Someone needs to urgently remind Nilekani of the telecom revolution in India, which was brought about by private companies and not by the government. The fact that about 800 million people in India own a mobile phone with one of the lowest calling rates in the world is a testimony to what entrepreneurs can do, provided the government provides a competitive, balanced and a stable ecosystem. Of course, issues such as call drops or internet speeds do bother us on a daily basis. And these problems exist primarily because of the limited spectrum that the government offers up for auction and the fact that we haven’t further opened up the sector to greater competition. Our demands should revolve around this and not on more government intervention. Nilekani accuses Free Basics of “going against the spirit of openness of Internet in the guise of being pro-poor”. Free Basics, first, is an option and not a compulsion on any consumer. Second, there is no threat, at least for now, that it will block, throttle or create fast/slow lanes. If and when there are competition issues, any individual or a company is free to approach the Competition Commission. Nilekani is, in fact, undermining the role of CCI, which has full authority to decide on any anti-trust issues. But, to not allow any legitimate business model to operate just because we fear consumer interests “might” be harmed, is doing a great disservice to the consumer himself. Nilekani further asks the government to enact laws protecting Net Neutrality. Fortunately, he stops short of pushing for a Constitutional amendment to include the Right to Internet as a Fundamental Right. Nilekani is behaving like a true soldier of the Congress. In all seriousness, the Internet is dynamic and constantly changing. Nobody, least of all the regulators, can foresee what business models or circumstances might come up in the future, and such laws may only end up harming those it seeks to protect, namely, the consumers. History is a decent source of information where restrictions and regulations have only been detrimental to the industry at large. Nilekani, himself an immensely successful entrepreneur and now one of the top angel investors in start-ups, should allow the market to play its role. There are choices that consumers may make that can surprise each and everyone. And consumers will have more choices at their disposal through the market and not through the government. This objective of “equal and open” Internet should be replaced by a policy whose sole aim is consumer welfare. And such zero-rating or differentiated pricing plans, as long as they are not anti-competitive, deserve a chance. But we have been bought out and brought down by so much fear that it has become fashionable, noble and even patriotic to stand up against Facebook. Of course Zuckerberg is no saint, and is behaving just as any pragmatic businessman would. He is doing it for his own company and not for his love of India. As long as its competitive and legally contractual, Facebook will only help connect low-income consumers to internet, even if it does end up making substantial money. But we have bowed down to online activism, which has allowed us to overestimate what Facebook can do, and underestimate what our own domestic start-ups/companies can do. That Facebook will be able to capture the entire market without any stiff competition is undermining our own entrepreneurial capabilities and strength. So, in essence, you do not trust the private industry because you feel they will divide and fragment the Internet only for their pursuit of profit. You do not trust credible institutions (CCI) because you feel it may not be able to prevent the creation of a monopoly on Internet services. You do not trust the consumer because you feel he/she may be duped by various commercial interests. You do not trust domestic entrepreneurs or start ups because how can you compete with a global giant? Your only hope is the government which may come out with another set of restrictive rules that limits competition and retards innovation. This is nothing but populism at its worst. But then, in a country where majority of its politicians, administrators and even voters are either on the left or the right of Mao, it is exactly the kind of direction our debates around policies would take. And in that respect, it is not difficult to pick who the winner will be in this debate.