The internet.org debate in India has it all wrong

As thousands of Indians changed their display picture to support the Digital India, there was a furor around Internet.org violating net neutrality. The link between an innocuous act of changing a profile picture and net neutrality warriors was not really clear. Nevertheless, we had a lot of people asking their friends to rally against internet.org. This particular post by Mahesh Murthy was shared widely. While I am a fierce proponent of net neutrality, I have a completely different view on this specific topic. Here is why…

Net neutrality primer

The fundamental principle of net neutrality states that all data has to be treated equally by the service provider. They need to provide access to all content irrespective of source or publisher. Internet service providers cannot charge different rates for different types of data. e.g. Comcast cannot charge data consumed on Youtube at a different rate than the data consumed on Netflix.

Industry structure- ISPs and publishers

The internet infrastructure can broadly be divided into two categories:

  1. Internet service providers- those who lay the pipes or the towers to give you access to internet e.g. Comcast in US, Airtel in India
  2. Publishers- those who have any form of content on the internet e.g. Google, Facebook, Times of India

The net neutrality principle primarily applies to ISPs since they are the ones who can potentially control what content you can see.

Market structure matters

Given consumers value unrestricted access to the internet, they are bound to punish providers who restrict their access. The way the US market has evolved has led to very few ISPs. As a result, there is a realistic probability of collusion for their benefit. We see the same example in US telecom. Indian telecom industry has a lot more providers and hence a much larger choice of which provider to go with. So, theoretically, the best way to ensure net neutrality is to keep the ISP market competitive. If it ends up being a monopoly, it is a real cause for concern. Can the ISP market be a monopoly?

The ISP market is naturally not winner take all. The high fixed costs and lack of network effects make it so. It is not a monopoly business. Are there examples where other infrastructure (or pipe) businesses are monopolies? Yes, airports in India for example are monopoly businesses. However, the reason for the lack of competition is that airport permits aare given by the Government. It is regulated.

So, the best chance of ensuring unrestricted access is by ensuring fair competition among ISPs and regulators not creating monopolies. If that is so, why is there such a hue and cry about adding an ISP (in this case internet.org) to the mix?

The concept of tying

The worry in this case is because the ISP (internet.org) is closely related to a large internet publisher (Facebook). This in internet jargon is called tying. They are really screaming against tying. Tying implies that you are using one popular service from a company to push an unrelated service using its market power. Here are some examples:

a) Apple sells mobile hardware (iPhone) and also controls the apps you can install (App Store)

b) Flipkart is an e-commerce marketplace but is also a seller (WS Retail)

c) Telcos in India own some tower infrastructure and also run the consumer facing business

d) Telcos in India ran their voice and SMS business at cost and made money off data/broadband. Their broadband connections come with free minutes.

In short, you can pick any business and you will find some concept of tying. Why is it that we don’t scream at all these instances? Are we wrong at not shouting at all these examples? No. There is reason to worry only if the underlying service used to push a product is a monopoly or close to one. We would scream if an airport only allowed one airline (owned by the same people) to be operated in Delhi.

As we had earlier seen, the internet infrastructure business is not a monopoly business. So, why are we screaming at this? Are we being hypocritical? Yes.

The hypocrisy behind the online ruckus

The main reasoning for the opposition here is that restricted, free internet does not deserve to exist. However, the argument is unfair for the following reasons:

  1. Most people who are ranting against tying are gleefully choosing free products and making tradeoffs but are against giving that choice to others. Every one of my friends with an opinion against this uses Facebook and Linkedin. These are platforms which obviously use tying. Facebook controls the content you see. You can’t make LinkedIn posts (a separate product that competes with Medium) without a LinkedIn account. So, they seem to be making the tradeoff of using these free products because they derive a greater value from using it.
  2. Almost everyone opposing it is spending $10–200 per month for internet access. India’s per capita GDP per month is ~$120. Telecom ARPUs are below $3. The only way for more people to get access is by reducing the costs of internet access dramatically. That requires a highly competitive ISP market (just like what happened with telecom in India). The self righteous champions of free internet are able to afford the internet because they have the means to do so. They have no right to make the choice for someone who does not have the means. Every option (restricted or unrestricted internet) needs to be available to all consumers. If there are people who would pick it, we cannot have a small set of rabble rousers preventing it.
  3. If there are people who believe that others can wait till they can afford unrestricted internet, they need to put their money where their mouth is. I request them to get off the internet for a while and only get on when it becomes affordable to all. I also have another suggestion. They can sponsor paid internet for ten people around them to compete against free internet. How many of them are willing to make this tradeoff? Can Mahesh Murthy get off the internet till everyone in India is connected to it in the way he wants it? Why is he choosing for the ‘poor kid in Chattisgarh’?
  4. In essence, by restricting only non-publishers to become ISPs, they are actually achieving the exact opposite of what they want. They are creating a high cost system where only telcos can lay the pipe. We don’t need to look any further than the US to understand how the industry lacks competition when that happens. What we should be rooting for is for anyone and everyone to come and solve the internet access problem in India. Let them give it out for free if they are willing to cross-subsidize it. Let consumers have the choice of which ISP to pick and have very low switching costs to switch from one ISP to another. ISP competition is the only way to ensure net neutrality. For example, Airtel just cannot restrict your calls to only Airtel phones because you would switch your phone then.

Overall, I am strong believer that you should let a consumer pick what he/she wants. It is not the right of a small coterie of rich, elite people to do it for others. Where do you stand?

Disclaimer: The views in this post are purely personal. It is not connected to any institution or organization I am or have been involved with.