The neutral net

A controversial proposal on charging web data

Should telecom service providers (telcos) be allowed to charge differential rates and to distinguish between types of data flowing through their networks? Or should all data be treated neutrally and charged equally, regardless of what they do? The answers lie at the core of "net neutrality". Telcos would like to be allowed to distinguish data by use. Most other businesses would prefer it if all data were treated equally. There is no pertinent regulation in India and the Telecom Regulatory Authority of India, or Trai, must soon formulate policy. That policy will have far-reaching effects on the future of internet access, voice telephony, e-commerce, net-based entrepreneurship and indeed on any business that relies on digital support. The US Federal Communications Commission (FCC) recently decreed that the internet is a public utility (like natural gas, or water where charges aren't distinguished by end-use). However, this FCC ruling in favour of neutrality may face legal challenges.

In India, the telecom regulator has released a 118-page consultation paper. The argument by the telecom industry is that large sums are invested in spectrum and network infrastructure. Meanwhile services such as Viber, WhatsApp, Skype, Facebook Messenger and Twitter Direct Messaging ride "on top" of networks and offer voice over internet protocol (VoIP) services and instant messaging (IM). These over the top technology, or OTT, services drastically reduce revenues from conventional telco voice and short-messaging services (SMSes). Also, usage of video-streaming services like YouTube forces telcos to provision more bandwidth to handle the demand. The companies would like to charge higher rates from OTT services and also have the option to throttle access speeds. Further, Trai is contemplating requiring OTT players offering services in India to obtain a licence. Telcos are also attempting to evolve non-neutral models such as "Airtel Zero". In this, websites pay the telco, while the consumer is offered free surfing at a bouquet of "free" websites. Some well-heeled incumbents, such as Facebook or Flipkart, will benefit; so might certain public access websites like Wikipedia.

Those in favour of net neutrality point out that telcos receive revenues from OTT apps, if indirectly, since surfers pay for data. The elasticity of data usage is well known: demand surges as prices fall. India's mobile and internet industry is illustrative, since usage rose exponentially on tariff cuts. If OTT services did not exist, it is fallacious to suppose that all the traffic would move to conventional voice and SMS. Second, nothing prevented, or indeed prevents, telcos offering services like VoIP themselves and protecting their margins thereby.

Certainly, if OTT services are to be licensed, India's communication environment will become further out of sync with the rest of the world. There would be long, cumbersome processes of Trai classifying OTT services that would have to apply for licences. Viber, WhatsApp, Skype, etc, would no longer be available. Nor would new OTT apps, including conceivably, apps written by Indians. Every small exporter uses some VoIP and instant messaging combination, and about 40 per cent of international voice traffic is on Skype. The wider economy will be denied the full benefits of deploying disruptive technology if net neutrality is not enforced, which will reduce the positive benefits attached to the internet. These dangers should not be ignored.