As expected from TRAI’s combative tone in the public spat with Facebook, TRAI has ruled to ban differential pricing in internet services. It is clear that TRAI has chosen to follow the crowd on this.
The public pressure on this has been immense. Haves have been able to decide how the Have nots will access the Internet.
On the plus side, policy making with public participation really came of age for the internet generation (This has already been happening in other spaces). That said, a more balanced approach as prescribed by the likes of Centre for Internet & Society (CIS) would have been useful in establishing long term sustainable policy.
What could have been done?
TRAI could have allowed differential pricing with regulatory safeguards. Thereby instituting a framework that enables innovation. This would allow the best of both worlds where services like FreeBasics can exist while preventing dominant players from abusing their market position. Some safeguards could be:
- If it is free for content providers to participate on price differentiated platforms, it should be free for all.
- If there is a pricing scheme on price differentiated platforms, that scheme should be published in advance.
- Pricing schemes basis bandwidth consumed (video vs plain text, heavy usage vs light usage) etc could also be in place.
- Customers must compulsorily be provided the option to be able to subscribe to unsubsidised internet and intimated to the customer.
- Every time a customer starts using a price differentiated service, he should be intimated that this is a limited service and full service is available. This should also be in place, every time a customer jumps from a free section to a paid section or start and end of such services.
- The price of unsubsidised service should be same or lower than the areas where differentially priced service is not available.
Is all lost for proponents of Differential pricing?
Yes and No.
For Freebasics it seems to be the end of the road in the current form.
For Telcos, this line (Chapter II, Section 3(2)) is very pertinent:
…this regulation shall not apply to tariffs for data services over closed electronic communications networks, unless such tariffs are offered or charged by the service provider for the purpose of evading the prohibition in this regulation.
TRAI has effectively banned it in general, but left a loophole that encourages creation of content that is available only on their own network. So a casual reading says Vodafone’s Music app is allowed. As you can’t access it on any other network other than Vodafone. I know that Reliance Jio has a slew of services planned that fall perfectly in this space.
Are walled gardens really that dangerous?
A lot has been said about walled gardens. But is it really a long term threat? It is my contention that, eventually, customers will escape from such gardens. In the interim, customer base will expand far faster than previously believed. Two examples that illustrate this:
- America Online (AOL) which ran a walled garden accounted for 10% of the TOTAL customer base in the WORLD. This was achieved on the backs of aggressive marketing funded by the services available on the network. Ie the services paid to be in the network. AOL sent out millions of access kits to potential customers and provided them a ramp on to the (walled garden) internet. The customers would also pay for this privilege.
- iMode service by DOCOMO in Japan was a walled garden where content providers paid a cut and were subject to significant controls by the operator. In 4 years, it had over 35 million users. The competition created similar managed gardens of their own.
In both the above cases, the open web succeeded, but what those years of competition and walled gardens did was to get people hooked on to data services.
Please keep in mind, even in India, it was closed network walled gardens aka VAS services, selling, pictures, videos, games etc created by Telcos. It was this effort that got a lot more people consuming data (by proxy), than any effective effort by Internet Businesses to get them online. Ie people got hooked to it and then finally moved on to full internet where it was cheaper with greater variety.
What happens next?
Telcos will most likely go to court. On the sidelines of the TRAI Open House (on 21st Jan), I had a chat with some lawyers representing firms in favour of differential pricing. They were very clear about two things
- That the decision against differential pricing is a foregone conclusion
- They will go to court against the regulator
Chirag Patnaik is a technology executive turned entrepreneur bringing offline businesses and online user experiences closer together. He tweets as @chirag and blogs at www.marlinspike.in