Net Neutrality debate: Are telcos hurting consumer interest?

Vodafone India's P Balaji and MP Rajeev Chandrasekhar debate on Net Neutrality.

(Picture for representation purpose only. Source: Reuters) (Picture for representation purpose only. Source: Reuters)


P. Balaji, Director of Regulatory and External Affairs at Vodafone India
P. Balaji
Director of Regulatory and External Affairs at Vodafone India

The mobile industry, one of the biggest success stories in India, has completely transformed the way people communicate, socialise or do business. This industry has, over the last two decades, empowered the Indian consumer to communicate anytime from anywhere at the most affordable rates that are the lowest in the world.

The government has set a worthy vision for Digital India. Over 90 per cent of the web users have their first experience of the Internet through their mobile phones. With the proliferation of smartphones, large investments in network and affordable data rates from operators, the journey of digital inclusion has begun, with nearly 200 million Internet users in the country. However, much more infrastructure and investments are needed to get to a billion users.

The debate on Net neutrality raises several concerns regarding the mobile operators' attempt to control the consumers' access to the Internet. We support Net neutrality and Net equality. We support open Internet and believe that consumers should decide what to do online. Our job is to enable the consumers to benefit from that freedom. We offer choice and do not block or throttle any services. We are committed to safeguarding the principle of the best efforts public Internet, accessible to all. The consumers have always been central to the success of the mobile industry and will continue to be at the heart of all strategy and innovation [developed] by the operators.

There is a discussion on price and or product differentiation. Across industries - from transport to banking - innovation and differentiation has helped provide choices to customers. As long as they are not anticompetitive, they are welcomed globally. In the Indian context, with hypercompetition and ease of switching between operators, consumers benefit from differentiated products. More importantly, there are strong institutional safeguards in place - regulatory authority, consumer courts, the Competition Commission of India, government, media and civil society.

Net neutrality is a complex matter being debated in many countries, and administrations are looking for the right solution to ensure the continued growth of the Internet while managing the unique challenges of a mobile environment, where capacity is finite [due to limited availability of spectrum] and huge investments are required to sustain the growth of Internet traffic.

In India, this challenge is even more acute as mobile operators have a severe capacity constraint due to the severe spectrum scarcity [less than 20 per cent of the spectrum allocated in developed countries], coupled with the highest usage and number of subscribers. Further, huge investments are still required in the rural areas to deliver on the broadband and Digital India vision.

TRAI has just started an exercise where it has tabled all these complex issues and challenges and initiated a public consultation. It has attracted unprecedented interest. It has led to a media frenzy, with netizens expressing concern that the Internet is going to be controlled by the service providers or that they will be charged for every site they visit.

This concern is completely misplaced. The service providers have an equal, if not higher, interest and stake in making sure that the Internet is open and available for all consumers. The TRAI consultation will lead to an emergence of a balanced view that is a winwin for all stakeholders.

The data and broadband revolution will take place by and through consumers. The vision of Digital India is to transform India into a digitally empowered society and knowledge economy with high-speed Internet as a core utility for every citizen. Open access to the Internet is central to this vision.


Rajeev Chandrasekhar, Member of Parliament and a technology entrepreneur
Rajeev Chandrasekhar
Member of Parliament and a technology entrepreneur

The telecom sector has witnessed a new phenomenon in recent days - a loud and visible consumer movement! In a country where consumer interest has been paid short-shrift all this while, this has caught policymakers and investors off guard. This is a clear sign of what the future holds for the sector. Consumer activism is growing and that has become evident in this debate on Net neutrality. The move to have additional access charges for apps like WhatsApp and Skype was foolish. Telecom companies and regulators have performed poorly in this debate and their actions are only reinforcing the perception of bias against consumers and innovation.

There are many reasons being put forth by the well-funded telecom lobby. The main ones are: First, their viability and investments will be hit by this unfettered run of innovation and apps on the Internet; and second, these apps run free on the bandwidth provided by access providers like telcos and Internet Service Providers (ISPs). The latter is wrong since all access providers are charging consumers for data. And, as is the DNA of the Internet, all IP packets are same, so there really can't be an argument for charging differentially for Internet packets. The reverse is true - the more the apps, the more the carrier's revenues! It's the first argument that needs to be focused on to understand the changes underway in the technology sector.

The telecom sector is fast becoming the Internet sector. The conventional business model is being transformed into an IP-centric data network model. Telcos are being forced to become ISPs where even voice is being carried as data. This is posing a big challenge to them. India's three largest telecom operators are very profitable with strong revenue growth, driven by an increase in data use and growth in smartphone sales and apps. TRAI, in its Net neutrality consultation paper, also says that data usage is increasing and that mobile operators are benefitting from the popularity of over-the-top (OTT) services. This means telecom operators prima-facie have no reason to complain about viability. A PwC paper published this year corroborates this. It says the share of data revenue in telcos' total revenue increased to 12 to 13 per cent in 2014 from five to six per cent in 2013.

No doubt telecom operators have a motivation to manage their networks in a way that maximises their business interests. At the same time, innovation and disruptive technologies are the new normal. What is expected of these telecom operators is to change their models. The move to seek regulatory protection is not going to find a lot of support, least of all among consumers. Instead, the government must look at incentivising investments, but not at the cost of an open, fair Internet.

Tom Wheeler, Chairman of the Federal Communications Commission (FCC), in a compelling opinion piece this year, made the case that it is possible to assure a neutral Internet while encouraging investment in broadband networks. To enable this, the FCC has proposed tax reforms. This is a possible solution to India's concerns as well. Telecom operators contribute five per cent of their revenues each year for the Universal Service Obligation, which is used to fund rural broadband, in addition to around 28 per cent of their revenues by way of licence fees, spectrum charges and service tax. There may be some scope for the government to examine the taxation structure and design a formula that allows them to net higher profits, without compromising on the rights of the end user.

Indian consumers have made their views abundantly clear. The Internet must be accessible, fair and open. The focus shall now shift from the regulator to the government, and I hope it does the right thing!