Ban Facebook! Are you nuts ? Can’t even imagine a world without WhatsApp! How dare you even suggest such an idea! As a libertarian who has decried the “license raj” and believes in small government/minimal regulation, even asking such a question feels heretical. Furthermore, the question is almost silly; after all, for most people in India, WhatsApp is the internet. Can one ban the internet ?
While it sounds preposterous, I believe that the question is legitimate and deserves to be debated at the highest levels of government in India for 4 reasons:
- Data and in particular PII (personally identifiable data) is the new oil. The idea that a foreign company has data about the behaviors of almost every Indian citizen (in real time) is uncomfortable. Should the geo-political environment change, it will be untenable. For example, FaceBook likely has more data about an individual than most intelligence agencies, and can even track the location of 100s of millions of Indians in real time.
- Networks like Facebook and WhatsApp are essentially the largest media companies in the world. The impact of Facebook on the US elections has been significant. WhatsApp is widely considered to be responsible for the spread of rumors and misinformation, that in the extreme, led to the loss of innocent lives.
- While its Indian business accounts for 10–20 % of FaceBook’s market cap, it does not pay any significant taxes in India. Traditional approaches to taxation don’t factor in the unique nature of the digital economy and the global companies that it is spawning.
- Companies like Facebook have an unfair advantage relative to domestic start-ups in terms of access to capital, talent and other resources. The Great Firewall of China has been pivotal to the fact that China has 9 of the top 20 global internet companies.
Given the stakes, there needs to be a discussion around the regulatory framework for Facebook and more broadly for all global internet companies. While banning Facebook/WhatsApp may be too extreme, there are a variety of other policy measures that the Indian government could consider:
- As a start, it could ask that all data that is associated with Indian residents should be physically reside in India AND access to that data should be limited to India based employees.
- As a US company, Facebook is answerable to US laws and is required to cooperate with US agencies. India could require Facebook (and other companies with sensitive data) to set up Indian subsidiaries that are publicly traded on an Indian stock exchange. This will mean that the company will have Indian board members, Indian investors and is more likely to be answerable to India’s concerns. I can already hear people saying that this is crazy and that these are global companies with a global code base, etc. I think all those issues can be resolved and Facebook can continue to be a 51% shareholder in the Indian subsidiary, and hence retain control over IP.
- India could consider a special market cap based tax for global internet companies that operate in India. Again, there are obvious issues of how to set the tax rate, and so on, but these are not unsolvable problems
Today, there are almost 500 million internet users in India. The internet is critical to accelerating economic growth and enabling 100s of millions of Indians to escape poverty. Its easy to write a blogpost with a flippant title like “Should India ban Facebook and WhatsApp”. Its much harder to figure out the policy choices that will enable India to maximize the benefits of the internet while avoiding a repeat of the East India Company (which colonized India in the 1700s). What’s at stake is at least a trillion dollars of value in terms of the impact on the Indian GDP over the next decade, and possibly the very future of the nation.
PS: this is a personal blog post and the opinions expressed here are my own and not necessarily those of my employer (Foundation Capital) or that of any of the companies that I am associated with.