In Business Model, Internet Access, Mobile, News

The Telecom Regulatory Authority of India appears ready to outlaw “zero rating” programs such as Free Basics or Airtel Zero, which allow consumers access to use of some apps without requiring either purchase of a data plan, or “usage” against a data plan.

It now appears we are headed for a lengthy period where the ramifications and extent of network neutrality rules get tested in a wider range of settings, with a wide range of interpretations. In some countries, zero rating might be rather routine; in others it will be banned. 

To be sure, network neutrality never has been easy to understand, but interpretations of what it covers have expanded in recent days. Initially, the concept was rather technical: Internet service providers should not be able to prioritize bit delivery for commercial reasons. In other words, “best effort” delivery was to be the only level of service for consumer Internet access. 

But the interpretation as kept expanding. Now some argue the key concept is “equal treatment of bits,” an arguably different concept. Precisely what that means in practice is contested. Some believe the concept means consumers cannot receive some apps at no charge, or for no extra charge. Others would say that is an unwise evolution of the concept.

For some, who favor a narrower understanding, network neutrality means that no lawful application can be blocked or slowed by the government or an Internet service provider for commercial reasons, though the difficulty has been that sometimes network management might have that effect. 

The immediate problem is that some governments block some apps, or classes of apps, as a routine matter of policy. Whether that is blocking voice over Internet Protocol traffic, streaming video or politically-sensitive apps, that sort of activity illustrates why “network neutrality” always was going to be a difficult concept. There are political issues as well as narrow technology issues, disputes about power within an ecosystem and equal treatment as well as industrial policy considerations.

Many would say it is simply prudent network management to take measures to preserve access to network resources at times of peak load, for example.

Supporters will say the move protects consumers and app providers from potential access provider exercise of market power. Under the possible new rules, no Internet access provider could favor its own apps over third party apps, some will argue.

Others will argue the potential new rules stifle innovation and investment, outlawing one way retailers can provide value to consumers and create differentiated offers in the market. In that view, zero rating is no different than any other sampling or discounting mechanism commonly used in the retailing of any product.

Ignoring legitimate disagreements over the concept and application of network neutrality rules, the move also would provide a not-uncommon instance of how difficult it is to craft regulatory policies that spur innovation and investment while also providing high consumer welfare benefits.

It also appears we are headed for an extended period where narrow technical rules to preserve app access increasingly are caught up in broader political questions of industrial policy. Laudable though many policies might be, in narrow technical terms, broader forces are at work.

Forces in government and the economy worldwide are trying to tilt the playing field in favor of domestic firms, and against firms from other countries. That often takes the form of regulatory, legal, taxation or other action that, among other things, is viewed as a means of protecting or promoting internal economic interests, and limiting the influence or success of “outside” firms.

No longer are issues about Internet or Internet app regulation simply about equal treatment of  bits or consumer access to all lawful apps. Unfortunately, those issues now are ensnared in broader policy issues related to perceived economic advantage on a wider scale.

That virtually assures a longish period of policy divergence, and wider differences, rather than harmonized understandings. Rates of innovation and volumes of investment now are perceived to be at stake. Some mistakes are inevitable.

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