T C A Srinivasa-Raghavan: Consumer politics comes to the internet

In purely economic and legal terms, net neutrality is a flawed idea. Its politics is based on user greed

Rahul Khullar, chairman of the Telecom Regulatory Authority of India, is first and foremost an economist, and only then a bureaucrat who has to be mindful of politics. Now, the poor man - thanks to this net neutrality issue - has to choose between the two.

Economics suggests he should reject the idea of net neutrality. Politics suggests he should accept it. Politics will win, even though on purely rational grounds it shouldn't.

The economics and the law are straightforward: once you have granted someone a monopoly over something - as the government has done via its spectrum auctions - you can't question the owner's right to do what he or she wants to with that monopoly. You can temper it, perhaps, but you can't ban it.

The state's monopoly over the use of force is a good example of this but, more prosaically, so is what, say, the owners of multiplexes do. They charge you for entry and then charge you for the food as well. No one objects.

Airlines do the same thing. Indeed, they have refined the art without anyone protesting. It is only a matter of time before they charge you for boarding and disembarking via the ladder and using the toilet. (Watch this hugely funny video: https://www.youtube.com/watch?v=eN9VcCzMSqg).

There are dozens of examples of this sort of an exercise of a monopoly, right? Newspapers do it. TV channels do it. NGOs do it. The BCCI does it. Governments do it. Everyone does it because it is right in both legal and economic terms. Mean perhaps but legal nevertheless.

The answer to the problem lies in not creating such monopolies. But once they have been created, you can only restrain, not forbid.

Meri marzi
Or, where the net is concerned, it is like a public park whose access roads have been privatised - by a 20-year lease via an auction - at a huge cost to the firms that are leasing it. If they now want to charge the vendors who are squatting on it, what's so wrong with that?

It is the exercise of a legitimate right which, it is true, can be exercised whimsically as well. But whimsy is not a consideration for the right that is cosily enshrined in the Constitution in Article 19 (1)(g) which, subject to reasonable restrictions, allows everyone to carry on a trade or business in whatever way he or she likes - including giving things away for free.

As usual, the meaning of 'reasonable' lies in the eye of the beholder. Which brings up the key issue: can others use your property to make a profit without giving you a share of it or even paying rent? Can the state prevent you from claiming your right? If so, was David Ricardo a fool then?

In other words, when he decides which way to jump Dr Khullar needs only to refresh his memory of Ricardian rent. He could also look up contract rent. Both these types of rent come into play whenever scarce resources are involved.

If he feels up to it, he can also brush up on the notion of Ricardian equivalence. It embodies the idea of consumers internalising an external constraint.

Dr K could then see how far it applies here, albeit with a variation on the theme. I am sure he could ascertain if demand for the net will shrink as a result of non-neutrality.

Chances are that it won't.

Users can be greedy too
There is an excellent reason why economics ought not to be jettisoned so lightly, that too under public pressure. There are a host of other monopoly situations such as airports, ports, roads, bridges, museums and so on. It is a long list of monopoly rights where self-serving public pressure can destroy legal rights.

That said, there is trickier issue: what should be done if the exercise of these monopoly rights is harmful to society? This is what the proponents of neutrality are fearful of.

If you ask me, the answer lies in the nature of the harm being caused. If, for example, the fear is that it will restrict access via restrictive practices, there is a forum for that, perhaps the Competition Commission.

What I am saying is this: don't confuse the internet with the access paths to it. The debate is mostly about those paths, not the internet itself. If the greed of those who own those paths must not be permitted, nor should the greed of those who want to use those paths for free. Greed is greed and there is no principle involved.

Thus, when an e-tailing company or a newspaper group or a TV channel or whatever puffs its cheeks out and announces with bulging eyes that it is for net neutrality, don't be fooled. All it is saying is that it likes to get its access free and hates the idea of paying the owner. No great virtue on its part is involved.