Fraught decision

Ensuring safeguards in differential data pricing a better option

On Monday, the Telecom Regulatory Authority of India (Trai) issued a set of regulations on data services provided by telecom operators. In particular, it outlawed differential pricing for internet services or "zero rating" services, in which some sites or applications are provided free of charge to end-users. The immediate impact is to render Free Basics, Facebook's free bouquet of low-bandwidth websites, illegal in India. This followed a high-volume debate; Facebook bought considerable advertising space insisting that Free Basics was praiseworthy, and online activists - many connected to the start-up ecosystem that feels most threatened by zero-rating - took to social media and opinion pages of newspapers to decry violations of the principle of net neutrality. Trai's "public consultation" on differential pricing of data services became fraught - Trai and Facebook openly sniped at each other about Facebook nudging its users to email the former in support of Free Basics. Clearly, Facebook made major mistakes in how it presented its case to Trai; it sought to present its acts as some sort of philanthropy, when that is both difficult to believe and irrelevant to the regulatory issue at hand. It is to be hoped that the poor nature of Facebook's public-relations campaign did not influence Trai's decision in any way. In any event, one of the limits of "public consultation" by regulators has been shown up in this case. It may not be wise to depend entirely on public consultation for a wide enough set of views, when a significant set of people affected by a regulatory decision - in this case, the large numbers of those unconnected to the digital world - are necessarily going to be unrepresented.

Trai's mandate is to nurture the growth of telecommunications in India. Zero-rated offerings such as Free Basics would unquestionably have aided that aim, and thus Trai's decision to ban them is difficult to explain. There is no compelling evidence for harm to consumers being caused by the availability of free low-bandwidth websites. If there are eventual anti-competitive effects, as some fear, then those should be addressed by the Competition Commission of India as and when they arise - this is specifically mandated by the Trai Act. Trai could have also allowed differential pricing, subject to specific safeguards like ensuring non-discrimination to all consumers and transparency through disclosures of all details of the available schemes. Trai could have made sure that consumers have the choice of accessing other services in the event a differentiated pricing policy of a service provider reduces consumer options.

In general, sector regulators should be extremely sparing in their decisions to restrict consumer choice. Given the size of the unconnected population in India and the poor quality of data connections in much of the country, this particular decision to restrict consumer choice completely is puzzling. A free low-bandwidth option is unquestionably a distant second to the "real", un-truncated internet; but given Indian conditions, it is far better than nothing. Trai recognises these arguments in its explanation of its regulations - but chooses to ignore them, saying simply that it "can prove to be risky in the medium to long term as the knowledge and outlook of those users would be shaped only by the information made available through those select offerings". It is difficult to see the benefits of such apparent paternalism about consumer choice by a regulator. In any case, it would be premature to declare the debate over. It remains possible that Facebook - or some other entity that wishes to provide a zero-rated service - will appeal to the telecom tribunal or to the high court. Hopefully consumer concerns will get a look-in at that point.