Understanding Net Neutrality – The Pros and Cons

Net neutrality is the principle that Internet service providers and governments should treat all data on the Internet equally, not discriminating or charging differentially by user, content, site, platform, application, type of attached equipment, or mode of communication. In recent times, there has been a major furore on how net neutrality may be breached in India. In this article we explore some of the issues surrounding this. The issues surrounding Net Neutrality has been a source of burning discussion in online platforms. Net neutrality means that users of the web may decide to visit any service they want and which site is being visited is not regulated or monitored. Now, if there is net neutrality, the implications could be that the ISPs start favoring a partner by directing a customer to that website, who has a formal relationship / MoU with the ISP in terms of revenue sharing or a fixed joining fee. Other content sources may be proportionately slower to access and higher priority may be provided to the ones which are part of the network. Now since service provisioning is an important dimension of customer retention in this industry, since the barriers of exit is very low or even nil, this creates a great challenge of user retention without joining such a network led by the ISP. There are so much of concerns surrounding the survival of small players, and how this ecosystem will be affected, I am inclined to share an interesting discussion on the topic among a group of practitioners and academicians.

In a recent trend surrounding this burning issue, one of the ISP has decided to charge websites for the data downloaded by the customers. The announcement of Airtel Zero – an offering from the telecom giant Airtel, where firms can pay Airtel to offer users free data access to their apps – has turned many people off some of the first sign ons. An online retailer was reputedly one of the first partners for Airtel Zero, and the CEO of this e-commerce portal has been one of the few prominent persons to speak out in support of zero-rating plans like Airtel Zero. This opened up the entire Pandora’s Box surrounding net neutrality.

In context of this policy, an interesting question was raised by one of my friends (SM): If a company, say FK, hypothetically ties up with another firm MK, to give free data on every purchase, is it still a violation of #netneutrality principles? This discussion was captured in one of the more popular social media websites.

  • My response (henceforth referred to as AK) to this burning question was as follows:  No it isn’t a violation of net neutrality, but ethical use of info without disclosure (unless it is made) of how the data will be serviced. however FK’s bundling services with data providers will be an instance since higher customer churn from slow loading websites is against smaller e-commerce startups whose pockets may not provision for better service management, thereby moving towards a monopolistic market, where slowly customers are left with lesser options. It affects the industry structure negatively. In the long run, markets do better than hierarchies, and the industry productivity is increased by competition, which is killed indirectly in this case. Actually this is more relevant or interesting for over the telecom OTT industry which may get killed. This ecosystem thrives on smaller entrepreneurs and service providers.
  • Then one of my friends (Henceforth referred to as IR) pointed out that telecom service providers (TSP) and internet service providers (ISP) are not currently not losing any money through the OTT services. To his mind this is posturing and once again their grand plan at customer exploitation.
  • AK: While telecom service providers are not losing money directly, but VAS / ARPU is reducing due to some of such “free” services. However data charges are an additional revenue, though the ARPU is reducing for a specific customer (after adjusting for inflation etc). but any OTT which does not liaison directly with TSP / ISP etc will lose out. Already such requests of differential benefits for registering in their networks may have come to bloggers with a significant networks. Just an example, that is where it will hit after the initial hype subsides. Every partnership has its own requirements later, for e.g. bloggers may need to promote ‘n’ products in their blog for being part of such an ecosystem, though membership is apparently “free”.
  • IR: That bit I agree.. and that is where the neutrality is getting affected. Indirectly or directly. Mind it – one ISP/TSP itself is trying/ eventually try to get a platform similar to what’s app. By discriminating against existing OTT services, the ISP is trying to consolidate the entire market in its favor. This is detrimental for everyone as we will be forced to use the solution that is promoted by the service provider and not go with the best one that you or I might like.
  • IR: FK is certainly not violating net neutrality. Because it is not the service provider for Internet. The (potential) violation is being done by an ISP as it’s promoting a platform that is discriminatory. For instance, an ISP currently says for every MB of data downloaded – the website/ channel has to pay Re1. So you donwload a FK app – FK pays Rs 20 for the 20MB size of the app. Imagine 1000 people downloading such apps daily – Rs 20000 per day FK pays to the ISP. Can a start-up pay that much amount? The platform thus makes it a discriminatory affair – eventually FK becomes the king at the cost of the user.  Still the FK case is trivial. Think of the much more dire sequence of events. Assume a case where information access to us is very important, like data from government websites. Of course governments wouldnt agree to pay for every MB of data that you wish to download from its website. Now on a daily basis tons and tons of people need many MBs of data from government websites. Who will pay for such data? Of course consumers. So the information (from govt sites) that was freely available, you will have to pay for that now – making availability of information discriminatory. Only those with deeper pockets could afford information in this case. I see this as a potentially very very dangerous territory. Remains the issue of the second point. Yes there is a chance of potential bandwidth discrimination too. Already happens – trust me, I work in the Telecom industry So if I am not on your platform – BOOM !! My website loading speed reduces drastically. So youtube loads faster than dailymotion !!
  • IR: Meanwhile, also check out the timing of events – (1) Auction sale – so basically when they got the spectrum for (almost) free they didn’t pass on the benefits to consumers.. But now that they are paying at market rates – consumers are having to suffer. (2) As i pointed out in an earlier comment – consolidation by keeping certain players away. More that one ISP is already trying to do it. One of the recently launched messenger (Hike) is a product owned by an industrialist’s son, where the family business is ISP/TSP. So while What’s app doesnt agree to pay to the ISP, Hike remains an in house affair for them. Eventually the idea is to make Hike messenger a single channel for mobile transactions – including mobile commerce – at least one ISP may want it that way !!
  • AK: Actually this will affect the nature of the industry. Innovation by smaller players in the market will be severely limited, and then potential small players will eventually by bought out. This will also affect customers of the ecosystem adversely since now, the customers will need to be satisfied with whats offered and thus the overall competitive nature of the industry and its innovation productivity will be negatively affected.  I’ll play devil advocate, apparently there are no issues, people will get the same access. But history highlights that often it does not happen. For example, when servicing is required for home circles / network, preference is given to calls initiated and ended in the network/circles. This becomes more visible when you are traveling. There are more calls dropped to external circles/network. So in similar lines, unless policy intervention is made, larger provisioning of service requirements may be made to the partners (which also needs to be done to protect the SLAs/MoUs/etc) when there is higher demand. So other sites, especially the smaller ones, may often see that their pages /apps are not loading. This problem we often see that a redirected page from Google search does not load, but most attribute it to the web hosting rather than the service provisioning.
  • AK: Thing is, there are so many niche players that this entire web ecosystem thrives upon. Many of these contribute through content, apps, etc. Most of these are owned by individuals without a proper company, and yet creates a lot of value.. These guys won’t be able to reach out to the potential target segment, simply due to this policy.. Already search engines like google are introducing policies whereby the rich get richer (panda, penguin), now these policies. So the net effect is to kill all the innovation or micro-service providers and promote the in house offerings over a period of time gradually to the impact is less visible. While one can argue that let everything be professionally managed to deliver uniformity of service and matching of customer expectations from all offerings, the novelty and innovation is the only thing that takes a hit.

So what is your take surrounding the policy around Net Neutrality. How do you perceive its impact will be on the different stakeholders in the ecosystem? Do feel free to share your thoughts on the topic.

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2 thoughts on “Understanding Net Neutrality – The Pros and Cons

  1. Many thanks for the nice article about network neutrality, it is very important information for me.

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