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All Posts | Jul 05,2016

SFLC.in’s Comments on the TRAI Pre-Consultation Paper on Net Neutrality

The Telecom Regulatory Authority of India (TRAI) on May 30, 2016 published a Pre-Consultation Paper on Net Neutrality, inviting stakeholder comments on 6 broad questions including the core principles of net neutrality, permissible traffic management techniques that may be adopted by Internet service providers, the ideal regulatory approach to net neutrality, and relevant privacy and national security considerations to be borne in mind while speaking of net neutrality from a regulatory standpoint. The core issues involved were largely similar to those from TRAI’s previous consultation paper on regulation of Over-the-Top service providers. SFLC.in submitted its set of responses to the Pre-Consultation Paper along with a concept not in support of the submission. The full text of our responses can be accessed here, and the concept note can be viewed here.

All Posts | Jul 01,2016

SFLC.in’s Comments on the TRAI Consultation Paper on Free Data

On 19 May, 2016 the Telecom Regulatory Authority of India floated a Consultation Paper on Free Data, inviting stakeholder comments on the need for a Telecom Service Provider agnostic platform to provide free Internet to the under-privileged, the need to regulate such platforms, and whether free data needs to be provided over fixed-line broadband in addition to mobile Internet services. Below is the full text of our comments submitted before TRAI:

Question 1: Is there a need to have TSP agnostic platform to provide free data or suitable reimbursement to users, without violating the principles of Differential Pricing for Data laid down in TRAI Regulation? Please suggest the most suitable model to achieve the objective.

The United Nations Special Rapporteur on the promotion of the right to freedom of opinion and Expression, Frank La Rue in his 2011 report has stated that “Given that the Internet has become an indispensable tool for realizing a range of human rights, combating inequality, and accelerating development and human progress, ensuring universal access to the Internet should be a priority for all States. Each State should thus develop a concrete and effective policy, in consultation with individuals from all sections of society, including the private sector and relevant Government ministries, to make the Internet widely available, accessible and affordable to all segments of population”.1 Thus, we as a nation have to take steps to ensure greater Internet access to the entire population.

Research shows that access to Internet provides individuals and firms a vital resource that facilitates innovation, learning and efficiency, all of which lead to greater productivity and thus, greater economic growth. The positive impacts associated with the Internet are possible because of the neutral nature of the Internet. According to Tim Wu, “the argument for net neutrality must be understood as the concrete expression of a system of belief about innovation, whose adherents view the innovation process as a survival-of-the-fittest competition among developers of new technologies”.2

We believe that improving access is important, however the method adopted for it should be in tune with the principles of Net Neutrality and should make available the entire Open Internet to the users and not a select bouquet of services. So long as the entire Internet is made available and there is no discrimination of services or websites on the basis of content, it does not matter whether the platform used to provide free data services is TSP agnostic or not. In fact, the premise for the idea of a TSP agnostic platform seems to be that such a platform cannot result in greater control for the TSP and will prevent the TSP acting as a gatekeeper. However, the free data models suggested in the paper will result in the bigger players controlling access. In such a scenario, instead of the TSP acting as a gate-keeper, various platforms offering free data will act as gate-keepers.

The Internet is a great leveler and gives options for any service or startup to compete with an established player. However, if the bigger players are allowed to control the access of users and user behaviour by any means, whether through a rewards platform or through a zero rating service this will result in changing the nature of the Internet. Such approaches will destroy the permissionless innovation feature of the Internet that has resulted in startups like Google and Facebook succeeding.

As per Tim Wu, models of development must not vest control in any initial prospect-holder, private or public, who is expected to direct the optimal path of innovation, minimizing the excess of innovative competition.3 This innovation theory is embodied in the end-to-end network design argument, which in essence suggests that networks should be neutral as among applications.4 The design of the Internet Protocol follows this end-to-end principle and this has ensured the success of the Internet.

The Prohibition of Discriminatory Tariffs for Data Services Regulations, 2016 embodies the principles of net neutrality in this context that it “mandates that no service provider shall offer or charge discriminatory tariffs for data services on the basis of content, and also no service provider shall enter into any arrangement, agreement or contract, by whatever name called, with any person, natural or legal, that has the effect of discriminatory tariffs for data services being offered or charged to the consumer on the basis of content.”5

Thus, any model, irrespective of it being TSP agnostic or not, as long as it complies with the above regulation, by not differentiating on the basis of content & providing complete open access to the the full Internet and not parts of it will work in this context. Zero rating models do not contribute much to access. Research done by the Alliance for Affordable Internet shows that “88% of people using zero-rating responded that they had used the Internet before using the zero-rated plan. This means that only 12% of zero-rating users surveyed started using the Internet with their zero-rated service.” The study also reveals that “when asked what condition would be most acceptable to get “free data” or zero-rated data, a majority (82%) of users prefer to have the “free plan” valid for a short time or with a data cap, with no restriction on the websites and applications that can be accessed”.6 Thus, compared to free data plans that give restricted access or benefits for accessing parts of the Internet, a free plan that provides access to the Internet is more beneficial.

For the purpose of answering the question we have done an analysis of the suggested models, if they are compliant with the current regulation, their pros & cons and other alternative models that may be used.

1. Reward based model

The reward based model will result in allowing the bigger players to control user behaviour by rewarding users for accessing their websites and services. This will be used as a method to subvert the restriction preventing discrimination of websites and services enshrined in the Prohibition of Discriminatory Tariffs for Data Services Regulations, 2016. Thus, the harm that the Regulations tried to prevent will manifest in another form. In this model, the users will be forced to use the websites and services that provide them rewards or data recharges. This will be to the detriment of other competing websites and services. In this model, the end result is the content provider paying for the data consumed by the end user. Instead of a direct transfer in the case of a TSP owned platform, the money gets routed to the TSP through another platform.

2. Don’t Charge or Toll-free API Model

This model is a Zero Rating model where the players with deep pockets will make their sites available for free. By adding an entity in between the TSP and the content provider does not change the nature of this tie-up and has the same effect as the content provider entering into a tie-up with the TSP. This is clearly in violation of the Prohibition of Discriminatory Tariffs for Data Services Regulations, 2016. In this model also, the payment gets routed from the content provider to the TSP.

3. Direct Money Transfer

This approach can be used only if the Direct Money transfer is controlled by the Government as a means for providing data to the less privileged sections. However, this should not be an option for private players to reimburse users for accessing their websites. If private players are allowed to reimburse users, then it will again be a case of content based discrimination, where a few sites, mainly the bigger players will get to control user access and user behaviour. Moreover, identifying users for the purpose of direct money transfer will also result in the violation of privacy rights of users.

The illustrations given below shows that the suggested models in the consultation paper are in effect the zero rating model which was sought to be prevented by the Differential Pricing Regulation.

Zero Rating Flow ChartToll Free Flowchart

Reward based FlowchartDBT Flowchart

The above models are a rehash of the "Sender Pays" Principle mooted by the European Telecommunication Network Operators Association (ETNO) which was rejected by even by the European Governments at the World Conference on International Telecommunications held in Dubai in December 2012. Such a proposal was even rejected by the Industry representatives from India. However, these models discussed in the consultation paper will in effect result in the sender paying for the data consumed by the user while accessing the website of the sender.

Suggestions

We believe that any approach for providing free data should make available the entire open Internet to the user and should also not tamper with the principles of net neutrality that allow for competition and prevents discrimination.

FREE PACKS WITH A CAP ON VOLUME OF DATA

This is one of the versions of “equal rating” system rooted by Mozilla Foundation’s chairwoman Mitchell Baker.7 Each user gets a free pack each month for their internet usage, independent & on top of their own existing internet packs that they may or may not have. The free pack has a cap on the volume of data, like 500 MB per month. Similar model8 has already received success, wherein Mozilla has partnered with Orange in African and Middle Eastern countries where users purchasing a $40 (USD) Klif phone (which runs on the Firefox operating system) receive unlimited talk, text, and 500 MB a month for 6 months.

ADVERTISEMENT SUPPORTED DATA PACKS

This is another version of “equal rating” system. This model supports the creation of revenue for the TSPs through advertisements. Users are given certain data credits for watching them while browsing the internet. Mozilla has seen quite a success in Bangladesh wherein “the foundation has been working with Grameenphone (a Telenor-owned company) in Bangladesh where users can receive 20MB of unrestricted data per day after watching a short ad in the phone’s marketplace.”9

FREE PACKS USING 2G NETWORKS

This model provides the entire internet, with no restriction on volume or content, but operates on a 2G network. Thus, effectively this model makes the 2G Network a generic low-speed zero rated mobile network.10 This model is better for ISP bandwidth usage and easy on infrastructural demands.

FREE WI-FI HOTSPOSTS, COMMUNITY CENTRES, IN-TRANSIT MODEL

This method would enable people to access the Internet in public places by creating Wi-Fi hotspots from a single connection. Government, TSPs and Other Companies can jointly collaborate with certain venues like libraries, schools, gram-panchayat offices, railway stations, airports, public transportation systems & cabs to provide Wi-Fi connectivity & free internet to the public. Along with providing free Wi-FI, some of these venues can even act like community centres aimed at being a forum for digital literacy. Companies/TSPs paying for the data can get a 'brought to you by' attribution like the free pack or equal rating model & it can even be counted towards its CSR initiative.

 

Question 2: Whether such platforms need to be regulated by the TRAI or market be allowed to develop these platforms?

We think that a “mixed economy” approach will be better suited for such kind of platforms. Allowing market to develop such platforms can lead to innovative models. However, lack of regulatory oversight and complete reliance on market forces will lead to collapse of such models, lead to anti-competitive effects and will result in violation of the principles of net neutrality. Thus, a mixed economy approach that focuses on both innovation & net neutrality should be the way forward. As mentioned in our answer to the previous question any free data model should provide the entire open internet and should not be limited to a select bouquet of sites.

 

Question 3: Whether free data or suitable reimbursement to users should be limited to mobile data users only or could it be extended through technical means to subscribers of fixed line broadband or leased line?

Broadband is defined, as per Notification No. S.O. No. 4-4/2009-Policy-I dated July 18, 2013 issued by the Department of Telecommunications, as a data connection that is able to support interactive services including Internet access and has the capability of the minimum download speed of 512 kbps to an individual subscriber from the point of presence (POP) of the service provider intending to provide Broadband service.

As indicated by TRAI's Indian Telecom Services Performance Indicators report for the quarter October – December 2015, out of the 331.66 million Internet subscribers in India, 311.69 million subscribe to mobile Internet services, while a mere 19.98 million subscribe to fixed-line Internet services.11 In other words, roughly 94% of Indian Internet users access the Internet through their mobile devices, leaving around 6% as fixed-line Internet users, indicating a clear preference for mobile Internet services over fixed-line amongst Indian Internet users.

Moreover, the access and billing patterns of mobile and fixed-line Internet see wide variance between each other. Whereas the owners of all Internet-capable phones will have on-demand Internet access built into their subscription plans by default, fixed-line Internet requires prospective customers to approach service providers and purchase dedicated data plans along with the requisite customer-premise equipment such as modems and/or routers. In the absence of volume-based data plans, mobile Internet charges are levied on the basis of data consumed in given billing cycles.

Fixed-line Internet subscriptions on the other hand, follow multiple billing systems, where subscribers are able to choose from both data-capped and uncapped plans. Subscribers of the former category are generally allotted monthly quotas of high-speed data, upon the exhaustion of which additional charges are levied according to the subscribers’ data use. Data-uncapped plans allot subscribers fixed quotas of high-speed data, upon whose exhaustion Internet speeds are restricted to baseline broadband levels albeit with no additional costs relative to data consumption. There are substantial costs to be borne by the customer in procuring a fixed-line Internet connection including equipment costs, installation charges, monthly rentals and the data charges themselves. As a result, any customer who is in a position to procure a fixed-line Internet connection to begin with will derive little to no value from free-data and reimbursement initiatives, where the amount of Internet use enabled by such initiatives will inevitably be significantly lesser than their paid counterparts.

For the above reasons, it is our submission that any initiative aimed at bringing Internet access to those unable to afford the relatively high cost of data should focus on the mobile Internet rather than fixed-line Internet services. However, it must also be borne in mind that any future regulation concerning free-data or reimbursement initiatives must make no distinction between Internet access via mobile as opposed to fixed-line services. The Internet is the Internet irrespective of the mode of access, and there must be no differences in its regulatory treatment in this regard. Regulations are necessary for both mobile and fixed-line Internet services to avoid gamesmanship designed to avoid the Regulations against differential pricing promulgated by TRAI, and the regulator must consider if practices that invariably harm the open Internet work similarly on mobile or fixed-line services.

 

Question 4: Any other issue related to the matter of consultation.

In the Prohibition of Discriminatory Tariffs for Data Services Regulations, 2016, the proviso to Section 3(2) exempts data services provided over “closed electronic communications networks” (CECNs) from the general prohibition on differentially priced data services. While the proviso does make it clear that the prohibition would still apply if CECNs are leveraged in such a manner as to circumvent it, some industry players and consortia have been observed attempting to obfuscate this understanding by claiming a lack of clarity as regards the ambit and application of the proviso.

We wish to submit that the Regulations in general and the proviso to Section 3(2) in particular are both well-grounded in reason, and leave no room for ambiguities in their interpretation. As per the Regulations, differentially priced data services offered over the open Internet stand prohibited at all times, whereas such pricing arbitrages in internal CECNs that are separate and distinct from the open Internet will be allowed and will attract no financial disincentives from the regulator. Attempts at circumventing this regulatory premise are easily identifiable as such – offering content from particular content providers at discounted rates over a CECN to the subscriber base of a TSP for instance, is a clear circumvention of the prohibition on differential pricing.

That being said, we submit that it would nevertheless be beneficial in the interest of precluding further efforts at obfuscation and compromise to clearly outline the scope of exemption under Section 3(2) by way of illustrative examples of both permitted and prohibited uses of CECNs as a means of data delivery at differential tariffs.

We reiterate that TRAI is the apposite sectoral regulator for the telecommunications industry, and having already laid down a model Regulation against differentially priced data services, the focus going forward must be on ensuring its sound implementation rather than entertaining unfounded exhortations for its reconsideration.

 

Footnotes

1The report is available at http://www2.ohchr.org/english/bodies/hrcouncil/docs/17session/A.HRC.17.27_en.pdf

2Tim Wu, Network Neutrality, Broadband Discrimination, Journal on Telecom and High Tech Law, available at:

http://www.jthtl.org/content/articles/V2I1/JTHTLv2i1_Wu.PDF

3Ibid.

4J H Saltzer et al., End-to-End Arguments in System Design, available at:

http://web.mit.edu/Saltzer/www/publications/endtoend/endtoend.pdf

5 Regulation 3, Chapter II of The Prohibition of Discriminatory Tariffs for Data Services Regulations, 2016

6 The report is available at http://a4ai.org/is-zero-rating-really-bringing-people-online/

7Mozilla’s Mitchell Baker offers alternatives to zero-rating for Internet services -

http://www.medianama.com/2015/05/223-mozillas-mitchell-baker-offers-alternatives-to-zero-…

8https://blog.mozilla.org/blog/2015/03/01/firefox-os-proves-flexibility-of-web-ecosystem/

9Supra 10

10https://manypossibilities.net/2014/11/a-better-approach-to-zero-rating/

11Telecom Regulatory Authority of India, Indian Telecom Services Performance Indicator Report for the Quarter ended December, 2015, May 18, 2016, p. ii, available at: http://www.trai.gov.in/Content/PerformanceIndicatorsReports/1_1_PerformanceIndicatorsReports.aspx, last accessed on June 30, 2016

All Posts | Jun 07,2016

Comments on draft Geospatial Information Regulation Bill 2016

On May 4, 2016, the Ministry of Home Affairs published the draft Geospatial Information Regulation Bill, 2016, seeking to regulate the acquisition, dissemination, publication and distribution of geospatial information of India that is likely to raise security concerns. Comments on the Bill were invited from stakeholders, in pursuance of which we submitted our own set of responses. Here’s the full text of our submission.

Objective of the bill

The stated objective of the Bill is to regulate the acquisition, dissemination, publication and distribution of geospatial information of India, which is likely to affect the security, sovereignty and integrity of India and for matters connected therewith or incidental thereto. This objective, based on the expansive definition of geospatial data used in the Bill, gives the proposed legislation a wide ambit and could result in misuse as seen in the case of Section 66A of the Information Technology Act, 2000. If the aim of the legislation is limited to protecting the security interests of the country, the objective and provisions of the legislation need to be tailored to suit that aim, ensuring that the freedoms of citizens, including the freedoms of speech and expression and the freedom to practise any profession, or to carry on any occupation, trade or business, are not affected.The Government should hold wider consultations on the need to have such a bill and the boundaries of it as the bill in the current form imposes wide restrictions on businesses as well as users.

Definition

The definition of “geospatial information” in the Bill is too broad and could cover a wide variety of information including photographs taken by a citizen with a mobile camera having location data. The definition needs to be narrowed down to remote sensing data and satellite imagery so that users are not burdened with licensing requirements.

Acquisition of Data

The bill should only be restricted to the acquisition of remote sensing data and satellite imagery and that too for the limited purpose of the security interests of the country with respect to information pertaining to strategic locations. Any broad licensing requirements on acquisition will only affect the Indian industry as mapping data has wide variety of applications ranging from navigation systems to open source mapping.

Distribution of Data

There should not be any restrictions placed on the distribution and use of geospatial data, except may be with respect to data pertaining to locations of strategic importance. As data pertaining to locations are often crowd-sourced, the map providers and distributors downstream do not have much control over this. In such cases, providers should be granted immunity in tune with provisions of Section 79 of the InformationTechnology Act, 2000.

License

By mandating any person who wants to acquire, disseminate, publish or distribute geospatial data to apply for a license will result in unnecessary bottlenecks for industry,especially startups and for Open source projects like OpenStreetMap. OpenStreetMapproject and other mapping solutions are often used by citizens during emergency situations like natural disasters for relief operations. Thus, licensing requirements will sound the death knell for such initiatives.

All Posts | Apr 28,2016

Comments on DIPP Discussion Paper on Standard Essential Patents and Their Availability on FRAND Terms

Following a sudden surge in IPR litigation surrounding Standard Essential Patents (SEPs) in the last year, (around eight suits were filed by Swedish multi-national Ericsson alone, another three by Vringo Infrastructure. Read more here) the Department of Industrial Policy and Promotion (DIPP) recently released a "Discussion Paper on Standard Essential Patents and Their Availability on FRAND Terms". The paper was released on 1st March 2016, with an objective of inviting views and suggestions from the public at large to develop a suitable policy framework to define the obligations of Standard Essential Patent holders and their licensees. Stakeholders' comments are invited until 29th April 2016.

Here's our take on the issue

Standards, particularly in technology-intensive industries, are de facto a supplemental form of international trade regulation, made in substantial measure by patent-holding private corporate actors. These parties devote considerable effort to embedding their patent monopolies in specific standards-recommended technologies. By doing so, they multiply the value of their patent rights by requiring licenses from all implementers of the standard. Even though Government of India now decisively prefers royalty-free and open standard goals for all nationally-developed standards, in many crucial industries, including telecommunications, regional or global standards organizations, such as IEEE and ITU, will impose "standard essential patent" monopolies on the Indian economy.

Recommendations concerning SEPs

  • Because section 3(k) of the Indian Patent Act makes computer programmes "per se" unpatentable, as recognized by the Patent Office in its recent guidelines for examination of computer-related inventions, the Office should formally re-emphasize that computer program source code (software per se) implementing standards-recommended technology can never, as a matter of Indian law, infringe SEP monopolies.

  • Required FRAND (Fair, Reasonable and Non-Discriminatory) license terms for SEPs identified in Indian national or nationally-adopted standards should be set by the Bureau of Indian Standards. Those license terms should establish both royalty rate and required royalty-free (RF) exceptions. Such exceptions should include required RF licensing for educational, experimental and research implementations of SEPs.

  • Required FRAND licensing terms set by BIS should establish royalties based on the Smallest Saleable Patent Practicing Component (SSPPC) measure, rather than as a percentage of the sale price of standards-compliant devices or products. BIS could co-ordinate with sectoral SSOs like Telecom Standards Development Society India;

  • BIS should directly regulate the use of Non-Disclosure Agreements to modify or negate, whether directly or indirectly, the required FRAND licensing terms imposed by SEP-holders on standards-compliant licensees;

  • BIS should be the dispute resolution body of first recourse in case of any infringement dispute related to SEPs and BIS should decide on the FRAND terms for licensing of SEPs;

  • The Government of India has notified the Policy on Open Standards for e-Governance in November 2010 and the policy mandates that the Government shall adopt Single and Royalty-Free (RF) Open Standard progressively for a "specific purpose with in a domain", to meet the laid down objectives of the Policy. Standard Setting Organisations in India should strive to ensure that standards that are adopted are Open and Royalty-free. The Indian SSOs should try to emulate World Wide Web Consortium (W3C), an SSO which works on standards for the web, which mandates its members to license patents that are essential for implementing a standard on a royalty-free basis;

  • The Government could also look at compulsory licensing as an option to ensure that holders of Standard Essential Patents do not abuse their dominant position and to protect public interest.

Full text of our comments submitted to DIPP. [PDF]

All Posts | Jan 14,2016

Counter Comments: TRAI Consultation Paper on Differential Pricing

Based on the comments received by TRAI on the Consultation Paper on Different Pricing for Data Services, SFLC.in has submitted these counter comments as solicited by TRAI. Below is the full text of the counter comments submitted by TRAI.[PDF]

Executive Summary

The Internet creates new problems in policy, but they are not unprecedented. Traditional patterns of anti-competitive conduct recur, but the complexity of the technological details affords rich opportunities for obfuscation and confusion. After reviewing majority of the comments submitted by other parties, we offer our responses to the prominent arguments in an attempt to clear that confusion. The following points are highlighted in our submission:

  • Internet is not cable television.

  • Differential Pricing as applicable in other industries does not necessarily transpose to the Internet.

  • Differential Pricing as proposed by Telecom Service Providers (TSPs) and Internet Service Providers (ISPs) to split the Internet into various slices and to price them separately violates their license agreements to provide Internet access.

  • With TSPs slicing up the Internet, it becomes impossible for the start-ups to reach their customers unless they enter into deals with each ISP to get entry to their islands of access.

  • Any competitive practices such as the ones proposed by TSPs cannot be allowed without proof of extraordinary social benefit and that benefit cannot be unequal access.

  • Internet unlike DTH is not a one -way traffic medium and does not just constitute a medium where content is consumed by users.

  • There are better models than differential pricing to provide wider Internet access.

  • Misleading and incorrect analysis of how differential pricing is being treated in United States and European Union has been presented.1

  • Common Carriage rules must apply in order to prevent anti-competitive collusion.

  • VOIP services compete with traditional telephone services, as they should, because all communications, whether characterized as "telephone calls" or "data packets" are in fact the same.2

  • Regulator's job is not to save old and dying business models but keep anti-competitive and other misbehaviour by players in check.

  • Not allowing differential pricing is the correct modus operandi in contrast to an overtly burdensome, new and expensive infrastructure.

  • Vertical integration in whatever direction would give the intermediary vendors of TSPs and ISPs the whip hand in the key information market of the 21st century, and thereby throughout society.

  • In the European Union the Recommendation CM/Rec (2016) of the Committee of Ministers to member States on protecting and promoting the right to freedom of expression and the right to private life with regard to network neutrality adopted on January 13, 2016 by the Council of Europe, it is recommended that "3.1. Internet service providers should not discriminate against traffic from other providers of content, applications and services which compete with their own products".

  • The Canadian Radio-television and Telecommunications Commission (CRTC) issued a decision on 29 January 20153 directing Bell Mobility to eliminate its unlawful practice of exempting its mobile TV service from data charges. It also held the data exemption of a TV app of Videotron to be unlawful.

  • Proposals to allow price discrimination because data is "time-sensitive" or "more secure," as though HTTPS packets could be priced differently from HTTP packets, are the essence of anti-competitive routing.4

  • If there is no business case for TSPs to offer free data services, why some providers insist that no consideration of any kind is being exchanged in proposals like "Free Basics"?5

  • No telecommunications service provider should be allowed to sell the traffic it carries for its low-income subscribers, in bulk, to a data-mining company for surveillance and analysis, which thereby achieves a competitive advantage in the sale of Internet-based advertising.

  • Important considerations like sale of de-anonymised packets of poor users cannot be overlooked by pleading lack of jurisdiction.

Detailed Analysis

  1. All communications, characterized as "telephone calls" or "data packets" are the same: VOIP services compete with traditional telephone services, as they should, because all communications, whether characterized as "telephone calls" or "data packets" are in fact the same. What other commentators call "price arbitrage" by consumers between these services should be called "user efforts to eliminate anti-competitive routing practices," otherwise known as "net neutrality."

  2. Case-by-case approach in the absence of network neutrality rules will be ineffective with no real benefits to the regulator or the public: In contrast to the simplicity and low regulatory cost of a common carrier regime, even the supporters of some differential pricing, such as NASSCOM, concede that this would absolutely require individualized, case-by-case regulatory review before the inception of such pricing schemes. They concede that this would require the creation of new and expensive social infrastructure, the cost of which must be netted out against any hypothetical benefits. No party, no matter how audacious its taste in obfuscation, has ever asserted that vertical integration and price discrimination will never result in serious competitive harm. Instead, the expensive talent and fancy titles are employed to argue that in specific situations a wise regulator might discover occasional reasons why the dangers of such arrangements are absent or can be behaviourally confined. The cost of such a system, however, falls on the society and its regulators: the regulators must be committed to an indefinite series of complex reviews of individual deals, which the regulated parties evolve to make the task of the regulators as difficult and time-consuming as possible. Any acquaintance with the processes of merger approval or rule-making at the Federal Communications Commission in the United States, and the years of additional litigation that usually follow, shows the depths into which such regulators can be dragged. Any failures of regulatory scrutiny are visited on society through the costs in diverse markets of collusion between some market participants and the transportation infrastructure providers.

    The alternative is to prohibit all such arrangements. This deprives society of some value, arguendo, which accrues from the small number of arrangements facially suspect, but which a perfectly vigilant regulator with infinite resources for analysis and deliberation would have discovered to be justified exceptions to the general rule. Despite all the shaded rectangles in all the graphs in all the articles by the best and highest-priced "independent" scholars, there is little reason to believe that game is worth the candle. Blanket prohibition on vertical integration of telecommunications network infrastructure with "layer seven" services, and similarly broad prohibition on discriminatory or differential pricing - that is, the treatment of telecom operators as common carriers - is a better and simpler solution. Some speculative welfare loss from over-regulation can be identified, more easily in theory than in reality. Vast harms otherwise difficult to reverse and productive of significant dangers to democracy, are cheaply and reliably avoided.

  3. If FCC network neutrality Rules are adopted by India and TSPs are treated as Common Carriers, a case-by-case approach may be feasible: Reference to the US FCC's "case by case" approach to zero-rating in the submissions of Facebook is misleading. The FCC's Open Internet Order changed the treatment of ISPs from "data services" to "telecommunications services," which subjected the operators to common carriage principles. In that context, FCC said in two short paragraphs in a landmark order, it would then take a case-by-case or "wait and see" attitude towards possible exceptions. If, indeed, TRAI were going to adopt the FCC's approach and impose "neutrality" in the form of common carriage rules, we would then agree with other commentators that an FCC-style openness to case-by-case exceptions would be feasible.

  4. TV is dying and giving way to streaming, leaving TSPs in a state of panic: The political economy of this inquiry is left indistinct, not surprisingly, by the TSP commentators. In wealthy societies, as smartphones become nearly ubiquitous, broadcast and cable television is dying, replaced by video streaming over wireless networks. Handset manufactures can profitably make smartphones capable of 1080p, in effect pocket HDTVs. The various Internet and transmission architectures, none of them so far fully mature, that are candidates for the still-undetermined technology called "5G" will have to carry these vast volumes of video data packets. TSPs fear that the primary profits in such a post-TV world will belong to content licensors rather than packet transport wholesalers. In India, Aircel already provides free data service at 2G speeds to subscribers everywhere. In the US, T-Mobile is trying to persuade the FCC that it should be allowed to provide zero-rated "Binge On" video service, as long as it is allowed to throttle all video from 1080p to 480p, in effect offering free LDTV service so long as consumers can be prevented from getting HDTV quality instead.

    But from a competition policy point of view, allowing such arrangements to replace broadcast and cable TV is just as deadly as it would have been to permit movie studios to own movie theatres in the mid-20th century, simply with the direction of vertical integration reversed. Around the world, not only in India by any means, highly-paid professionals are busy preparing arguments about how "the Internet should be structured like cable television," that is, broken up into a series of "channels" that can be marketed in bundles. This would give the intermediary vendors of transport services the whip hand in the key information markets of the 21st century, and thereby throughout society. But they are regulated industries, and their grab for power and pre-eminence should be resisted by democracies everywhere.

    The political economy after TV is only one example of the way in which commentators, primarily TSPs, want to ignore or modify the nature of the Internet by distinguishing among packets. Proposals to allow price discrimination because data is "time-sensitive" or "more secure," as though HTTPS packets could be priced differently from HTTP packets, are the essence of anti-competitive routing. If transport intermediaries were allowed to price-discriminate services in this fashion, all innovation in the Internet would cease, except at the whim or with the permission of the carriers.

  5. Differential pricing on the Internet and in other sectors: A common contention raised by TSPs is that differential pricing is prevalent in other industries and that there is nothing wrong in having such a model for data services. However, the differential pricing model advocated by TSPs is quite different from the business models in other sectors. The TSPs are granted a license to provide the service of access to the Internet to consumers as per their license agreements with the Department of Telecommunications. They are free to provide different pricing options based on download speed, download limit, usage time etc. However, what the TSPs are proposing is a permission to split the Internet into various slices and to price them separately. This is in violation of the license to provide access to the Internet and interferes with the basic structure of the Internet. When utilities like water, gas and power are priced differently the basic product or service remains the same. The quality of water remains the same, whether it is consumed by the poor or by the rich. However, the TSPs are proposing a few select services as the Internet for the poor. This creates a digital inequality instead of solving the problem of digital divide. The TSPs cannot be permitted to decide the content that any user can access. The only difference in the offering that can be permitted is difference on the basis of factors like download speed, data limit or access time without affecting the access to the open internet.

  6. Internet is not just about consumption: Internet is different from DTH television where channels are priced differently. Internet unlike DTH is not a one -way traffic medium and does not just constitute a medium where content is consumed by users. It offers endless possibilities of creating content, doing business, communicating and doing a lot more things limited only by the creativity of the user.

  7. Differential pricing and start-ups: Another contention raised is that differential pricing will not affect start-ups and will only encourage them. Some submissions have given the examples of Google and Facebook to show that start-ups can win their battles against established businesses. There cannot be a difference of opinion that start-ups with the right business ideas can overcome the Goliaths in the field. However, Google and Facebook were never denied access to customers by TSPs. But if the new start-ups are denied access to the islands of networks controlled by the TSPs, they cannot combat the established players, however strong their product may be. Of the 4P marketing mix, even if the Product, Price and Promotion are taken care of, the offering cannot succeed if the "Place", i.e. the channel to reach the customer is imperfect. With TSPs slicing up the Internet, it becomes impossible for the start-ups to reach their customers unless they enter into deals with each ISP to get entry to their islands of access.

  8. Differential pricing and forbearance: The TSPs have proposed a policy of forbearance as far as tariffs are concerned. However, the differential pricing models proposed by TSPs results in tinkering with the very nature of the Internet service, with the Internet being sliced into islands of networks. The regulator will have to interfere in such a scenario as it is not a case of pricing alone and involves broader issues of discrimination and competition.

  9. There are better models than differential pricing to provide wider Internet access: As a response to Question 3 in the consultation paper, it has been claimed by many TSPs, ISPs, and telecommunication associations that differential pricing is the most effective business model for providing free Internet access to the consumers. In our submission we have extensively elaborated the detrimental consequences of an ecosystem where differential pricing can be resorted to at the discretion of Internet Service Providers. It is duly considered that affordability is one of the prominent factors for increasing Internet penetration in the country, but the cost of this access should not determine the content that would be made available. Differential Pricing permits the TSPs to zero rate certain services and hence, distort the competition dynamics in the market. Further, it would lead to the service providers performing functions of more than a pipe where they would be capable of providing customized packages for a higher quality, but few services. This would create a regime of paid prioritization by the wealthy wherein start-ups would be discriminated against. Moreover, in this business model, a small bouquet of the world wide web, would be produced in front of the uninitiated, completely disregarding the user's right to choose. The alternatives proposed to counter differential pricing eliminate the problem of affordability, as most of them are 'free' or 'subsidized' methods to provide Internet to the public. If there is no particular content that would be priced differently, the consumer's right to choose would remain intact. Following are a few alternatives that achieve the same objective without giving the reigns to TSPs:

  • Free packs with a cap on volume of data: One of the alternatives suggested by many is that of free packs with a cap on the volume of data, but no restriction on the content that can be accessed, like a cap of 500MB per month. This would achieve TRAI's aim of providing free Internet access to a wider population, without the consequences of an ISP deciding the content.

  • Free packs provided at low speeds using 2G networks: This model provides the entire internet, with no restriction on volume or content, but operates on a 2G network. This model would be better for an ISPs bandwidth usage and easy on the infrastructural demands, along with satisfying the requirements laid down by TRAI and providing an unrestricted access.

  • Free Wi-Fi Hotspots and community centres: This method would enable people to access the Internet in public places by creating Wi-Fi hotspots from a single connection. This could be utilized in a community centre that could be a forum for digital literacy along with providing free Internet. This model would be effective in cutting down the cost and be a social force by bringing people together to learn about and access the Internet.

  • Data coupons that can be redeemed for data: Data coupons having an expiry date and valid for a specific volume of data could be sold, or given for free (depending on the extent of access a particular population has), which could be redeemed as per the need and usage of the person.

  • Direct Benefit Transfer for data packs: This is inspired from the Indian Government's DBT scheme on LPG subsidy wherein money would be transferred directly to the bank account. the Government could use this approach for internet data packs as well, by transferring an annual data cap in a SIM and breaking down the monthly limit for free usage.6 Unlike what is being claimed by some North American data miners- we believe that food security is also economically unsustainable or operationally challenging but does not prevent us from providing that.

  • Internet data subsidy from watching advertisements: In this alternative, the end user could be compensated in monetary terms that are transferred directly in his account for watching advertisements that generate revenue for the TSPs. This could act as an incentive to make Internet services affordable for the population.7

  • Advertisement supported data packs: This model supports the creation of revenue for the TSPs through advertisements, along with giving the users certain data credits for watching them while browsing the Internet. This model would be beneficial for both, the TSPs and the users where simultaneously they can earn revenue and extra data respectively.

  • Data bundling with new devices: TSPs can offer schemes where with every new connection, a certain volume of data is given for free, valid for a particular period of time.

  • Using USO funds to fund access to disadvantaged sections: The Government can fulfil its aim in the Digital India initiative by subsidizing access for certain sections of the society by using funds from the Universal Service Obligation Fund.

  • On Venue & In Transit Model: TSPs can collaborate with certain venues like libraries, schools, railway stations, airports to provide Wi-Fi connectivity to the public. This idea can also be utilized in public transportation systems and cabs.

  • As a part of Corporate Social Responsibility: Providing Internet access through a particular model could be made as a component of the mandatory CSR of companies.

    The practice of Differential Pricing defeats the purpose of an open internet by creating a walled garden of a few hand-picked services. These not only restrict the right of choice of a user, but hamper the innovation and growth of emerging and present start-ups and smaller services. The above alternatives are more effective than differential pricing because these methods keep in mind the interests of businesses, along with fulfilling the criteria of a free and open internet.

  1. Jurisdictional Analysis:Below are brief analyses of the net neutrality and zero rating regimes in a few external jurisdictions, namely the US, Canada and the EU, where zero rating, though not prohibited as such, is seen as a potential harm to the open Internet and therefore permitted only on case-by-case basis.

    1. United States of America: In the US, the earliest instance of policy recognition to the principle of net neutrality came in 2010, the FCC in February 2015 reclassified ISPs as common carriers under Title II of the Communications Act, thereby making Section 706 of the Telecommunications Act 1996 applicable to ISPs.8 Pursuant to this, the FCC also released a fresh Open Internet Rules and Order in March 2015, which introduced the following "Bright Line Rules" applicable to providers of both fixed and mobile broadband services:

      • No Blocking: broadband providers may not block access to legal content, applications, services, or non-harmful devices.

      • No Throttling: broadband providers may not impair or degrade lawful Internet traffic on the basis of content, applications, services, or non-harmful devices.

      • No Paid Prioritization: broadband providers may not favour some lawful Internet traffic over other lawful traffic in exchange for consideration of any kind - in other words, no "fast lanes." This rule also bans ISPs from prioritizing content and services of their affiliates.

      However, the Rules do not include an outright ban of the practice of zero rating. Instead, the FCC will investigate alleged abuses of zero rating on a case-by-case basis, under a "no unreasonable interference/disadvantage standard", where services that unreasonably interfere with or disadvantage the ability of users to access Internet content will be disallowed. While this is not nearly as good as a ban, it nevertheless reserves authority for the FCC to prohibit such abusive practices. The move also leaves the door open for users to petition the agency to stop these practices.

    2. Canada: The Canadian Radio-television and Telecommunications Commission (CRTC) issued a decision on 29 January 20159 directing Bell Mobility to eliminate its unlawful practice of exempting its mobile TV service from data charges. It also held the data exemption of a TV app of Videotron to be unlawful. It found that Bell Mobility and Videotron, in providing the data connectivity and transport required for consumers to access the mobile TV services at substantially lower costs to those consumers relative to other audiovisual content services, have conferred upon consumers of their services, as well as upon their services, an undue and unreasonable preference. Thus, the Canadian regulator has made its stand very clear on the aspect of differential pricing of data services.

    3. European Union: Regulation (EU) No. 2015/2120 is the first EU-wide regulation that addresses net neutrality and zero rating, albeit without explicit references to the terms as such. Adopted on November 25, 2015 and bearing a compliance date of April 30, 2016, the new Regulation aims to establish common rules to safeguard equal and non-discriminatory treatment of traffic in the provision of internet access services and related end-users’ rights. However, the Regulation has been criticized on counts of undermining its own net neutrality laws, as it is accused of containing several loopholes that "open the door to an end to net neutrality".10

      Regulation 2015/2120 provides that all agreements and commercial practices that deal with attributes of Internet access such as price, data volumes or speed are permitted so long as they do not limit certain end-user rights, namely the rights to access and distribute information and content, use and provide applications and services, and use terminal equipment of one's choice. Such agreements and practices would naturally include zero rating, which means the Regulation does not expressly prohibit zero rating.

      While the Regulation does not prohibit the practice of zero rating, the European Commission in a press release11 date 30th June, 2015 clarified that commercial agreements and practices, including zero rating, must necessarily comply with the other provisions of the Regulation, in particular with those on non-discriminatory traffic management. The fact sheet also acknowledged that zero-rating could in some circumstances have harmful effects on competition or access to the market by new innovative services and lead to situations where end-users' choice is materially reduced in practice. National authorities are entrusted with monitoring market developments, and will have both the powers and the obligation to assess such practices and agreements, and to intervene if necessary to stop and to sanction unfair or abusive commercial agreements and practices that may hinder the development of new technologies and of new and innovative services or applications.

      Finally, the fact sheet expressly provided that certain Member States' existing national rules do not need to change if these can be interpreted by regulators and courts consistently with the Regulation, including to protect end-users from commercial practices that are shown to circumvent the rules and materially reduce users' freedom of choice in the specific national circumstances.

      The national rules of Netherlands and Slovenia are of particular interest in this context, as these constitute two European jurisdictions that have explicitly prohibited zero-rated services in the past. Following widespread reports in 2011 that a handful Dutch ISPs had been engaging in discriminatory blocking of services such as VoIP and instant messaging, Article 7.4a was added to Netherlands' Telecommunications Act, whereby ISPs were prohibited from hindering or slowing down services or applications on the Internet. It also stipulated that ISPs may not impose differential charges on end-users for the use of different Internet content, applications and services, serving as an effective prohibition of zero rated services in the country. In December 2012, Article 203 was added to Slovenia's Electronic Communications Act, under which the Slovenian Parliament reiterated the nation's commitment to the open and neutral character of the Internet and forbade network operators and ISPs from restricting, delaying or slowing down Internet traffic at the level of individual services or applications and from implementing measures for their devaluation. Article 203 also says that the services of network operators and ISPs must not be based on the services or applications that are provided or are used over the Internet. In other words, ISPs are prevented from charging subscribers differently on the basis on the services provided over the Internet, constituting another national prohibition on zero-rated services.

      In the Recommendation CM/Rec(2016) of the Committee of Ministers to member States on protecting and promoting the right to freedom of expression and the right to private life with regard to network neutrality adopted on January 13, 2016 by the Council of Europe12, it is recommended that "3.1. Internet service providers should not discriminate against traffic from other providers of content, applications and services which compete with their own products. This requires that traffic management decisions be strictly dissociated from content-related decision-making processes of the operator in the spirit of the 2007 Committee of Ministers’ Declaration on protecting the role of the media in democracy in the context of media concentration".

Footnotes:

1 Facebook's comments on the Consultation Paper, p. 6, available at: http://trai.gov.in/Comments_Data/Organisation/Facebook.pdf, last accessed on January 14, 2016

2 Bharti Airtel's comments on the Consultation Paper, available at: http://trai.gov.in/Comments_Data/SP/Bharti_Airtel.pdf, last accessed on January 14, 2016

3 Canadian Radio-Television and Telecommunications Commission, Broadcasting and Telecom Decision CRTC 2015-26, 29th January 2015, available at: http://www.crtc.gc.ca/eng/archive/2015/2015-26.pdf, last accessed on January 14, 2016

4 Videocon's comments on the Consultation Paper, p. 1, available at: http://trai.gov.in/Comments_Data/SP/Videocon.pdf, last accessed on January 14, 2016

5 Idea Cellular's comments on the Consultation Paper, available at: http://trai.gov.in/Comments_Data/SP/Idea.pdf, last accessed on January 14, 2016

6 Nanan Nilekani & Viral Shah, Free basics is a walled garden: Here’s a much better scheme — Direct Benefit Transfer for internet data packs, 1st January 2016, available at: http://blogs.timesofindia.indiatimes.com/toi-editorials/free-basics-is-a-walled-garden-heres-a-much-better-scheme-direct-benefit-transfer-for-internet-data-packs/, last accessed on January 14, 2016

7 See https://medium.com/@inw/internet-access-alternatives-to-internet-org-for-the-digitally-excluded-don-t-let-access-providers-7aa481c03569#.7vbxo62e2, last accessed on January 14, 2016

8 Section 706 requires the Federal and State Communications Commissions to encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans by utilizing, in a manner consistent with the public interest, convenience, and necessity, price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.

9 Supra. 3

10 Alex Hern, EU net neutrality laws fatally undermined by loopholes, critics say, The Guardian, 27th October 2015, available at: http://www.theguardian.com/technology/2015/oct/27/eu-net-neutrality-laws-fatally-undermined-by-loopholes-critics-say, last accessed on December 13, 2016

11 European Commission, Roaming charges and open internet: questions and answers, 30th June 2015, available at: http://europa.eu/rapid/press-release_MEMO-15-5275_en.htm, last accessed on December 13, 2016

12 Council of Europe: Committee of Ministers, Recommendation CM/Rec(2016)1 of the Committee of Ministers to Member States on the European Prison Rules, 13 January 2016, CM/Rec(2016)1, available at: https://wcd.coe.int/ViewDoc.jsp?Ref=CM/Rec%282016%291&Language=lanEnglish&Ver=original&BackColorInternet=C3C3C3&BackColorIntranet=EDB021&BackColorLogged=F5D383, last accessed on January 14, 2016.

All Posts | Jan 08,2016

Comments on TRAI Consultation Paper on Differential Pricing for Data Services

Telecom Regulatory Authority of India (TRAI) had published a consultation paper on 9 December 2015, seeking opinions from stakeholders on "Differential Pricing of Data Services".

Update: In response to the comments published on TRAI's website, we have also submitted our counter-comments.

Below is the full text of our comments submitted to TRAI. [PDF]

Introduction:

We thank TRAI for initiating the consultation process on differential pricing for data services. However, as the earlier consultation process on Regulatory Framework for Over-the-top (OTT) services had questions related to differential pricing, we hope that the responses submitted for that consultation will also be considered while analysing this issue.

Differential pricing involves treating of a class of websites, application or services differently by a Telecom Service Provider(TSP) by offering discounted rates for accessing these. Essentially, TSPs, and in some cases content providers, as in the case of Facebook controlling the access through their FreeBasics programme, act as gate-keepers restricting access of consumers to the Internet.

One of the basic legal protections for the freedom of the market embedded in the common law is the non-discriminatory principle of public carriage. If firms providing transport services to the public are able to discriminate among shippers or receivers of goods, they can profit hugely, at the expense of other market participants generally, their own cartel allies excepted. So from ferrymen in medieval England to railroad and trucking companies in the 20th century, prohibiting anti-competitive discrimination in transport services for the public is basic to the fair working of the market.

Telecommunications services are not different in this respect from other forms of transport. Regulators in the 20th century dealt with telephone and other such services on a common-carriage basis, in order to prevent anti-competitive collusion. One aspect of the group of ideas sometimes misleadingly called, all together, "network neutrality," is the principle of prohibiting anti-competitive routing practices. As the recent experience of the US Federal Communications Commission has shown, management of a fair Internet is now as fundamental to the free market as the prohibition by other regulators of anti-competitive practices in other forms of transport. The FCC's imposition of common-carriage rules for Internet service providers is a victory for the public interest after of a decade of attempts by industry to capture the regulators, to prevent this very outcome. This consultation process initiated by TRAI is also very important to protect the interests of Indian Internet users as well as startups. Any effort to present a ‘walled garden’ of the Internet to India’s less well-off majority on the false ground that this is ‘all they can afford’ is in fundamental conflict with any rational policy of social development through innovation. What citizens should resent, government should also prohibit as an obstacle to social development. The Internet is not a basket of media websites we ‘consume’ any more than a highway is a collection of stores along the side of the road we could shop at. The Internet is the possibility of unlimited interconnection, a social condition in which we can all be connected to everyone else everywhere, with rich technical connections that can allow us to produce services for one another.

The integrity of the network — that it provides one indivisible opportunity for everyone connected to it — is its most important feature. As a tool of social development, the Internet allows people with little capital equipment but plenty of ingenuity to build effective businesses from zero. But only if other people can ‘find’ them on the Internet and receive the services they are offering.

A collusion between one or more local telecommunications oligopolists and a big service platform incumbent to price a small basket of websites at zero, and to deliver network integrity only to those who will pay more for it, destroys this immense value of the Internet in realising human potential. If most people cannot see the ‘real’ Internet, startup businesses will become invisible, and the colluding platform companies will be protected against any developing competition, at the expense of wiping out hundreds of thousands of potential businesses representing India’s economic future. Such collusion is, therefore, directly antithetical to any Digital India worthy of the name. There is no cost savings whatever in providing access only to some addresses on the Internet. The telecom provider is connected to the larger world by the same universal technical protocols — developed and maintained by consensus among all users as equals — through which all computers on the Internet can locate and exchange services with one another.

The provider doesn’t increase its costs by providing the same integrity of universal interconnection to all users further downstream. On the contrary, it incurs costs by artificially restricting the normal interconnection between parties downstream and the Net as a whole. It profits wildly from those investments, by selling at a high additional price what it could, at no additional cost, have provided to everyone in the first place.

Everything in a digital network, whether part of a phone conversation or data moving according to Internet protocols, is broken into ‘packets’, short bursts of data in a standard envelope. Your smartphone sends and receives millions of packets a day. Whether a packet is ‘voice’ or ‘data’ — and if it is data whether it’s being exchanged with a website in California or Mumbai — the cost of moving it on the local telecom network is the same.

Everywhere in India where a device is connected to the telecommunications carriers’ network, it can profitably be served at current rates for ‘phone calls’ or ‘data’. Everything else charged is mere economic rent to the telecom company. This is the sort of pricing behaviour that telecom regulators exist to prevent.

Question 1. Should the TSPs be allowed to have differential pricing for data usage for accessing different websites, applications or platforms?

TSPs should not be allowed to have differential pricing for data services. A traditional economist may point to markets where when differential pricing is possible it can have benefits and costs. However, internet economy is a peculiar species to which simplistic application of such a principle ain't possible. The reasons for this view are enumerated below:

a. Competition distortion

Differential pricing distorts competition by discriminating between various websites and services. This creates an entry barrier for new websites and services as they have to negotiate with TSPs and in some cases content providers who act as gate-keepers to gain access. TSPs could zero-rate their applications or services or those of their partners. This results in other services and applications that are not part of the zero rating package at a disadvantageous position. Such a practice violates Section 3 (prohibition of anti-competitive agreements) and Section 4 (prohibition of abuse of dominance) of the Competition Act, 2002. There are many instances in other countries that show that differential pricing of data affects users. A few of those are listed below:

Instances

 

  • In 2013, Deutche Telekom, a German TSP announced plans to set volume caps for data, but exempted or zero-rated its video service. The German regulator held that the practice of Deutche Telekom of not counting Spotify toward the volume limit constitutes discrimination since a specific application is treated differently than the other applications1

  • In OECD markets where TSPs launched their video services, they have over-priced data bytes while zero-rating their video services2

  • Youtube recently complained about T-Mobile's efforts at throttling its video service although it is not part of the Binge-on program offered by T-Mobile, in which the videos of partner services are offered at a low speed and do not count towards data consumption.3

    Differential pricing in internet access will be implemented through opaque arrangements between the telecommunication service providers and platform companies designed to trap buyers. Many of these offerings may be "bait and switch" types to attract unwary users and then up-selling them other online services.

     

b. Differential Pricing incentivises degradation of quality

In the transport economy in the United States, early railroad operators4 in an attempt to increase profits by price discriminating between rich and poor consumers decided to offer roofless third-class carriages in order to contrast the quality and price between the third class and the first class ticket. Internet was developed on an end-to-end principle that treated the network mostly as a dumb pipe making it extremely difficult for internet service providers to engage in any kind of differential pricing. If allowed the telecommunications service providers will degrade the service of the regular internet connection or disable a few features, thereby creating a high and low end version of the internet.

As broadband in wireless and traditional wired connections, mobile internet spreads, the archaic business models of telecommunications service providers is threatened as technology is reducing costs of the core of running these services. Whereas once voice or text were big revenue generators, today they are fast becoming just one of many services delivered through broadband. In such an environment, open networks that can provide general connectivity must emerge as winners as they can generate more revenue from users instead of slicing up the internet and offering it as bunches of television channels and turn the internet into cable television.

c. Users denied choice

The subscriber is denied a choice and the TSP or the content provider who acts as the gate-keeper decides the websites she can access. This limits the understanding of the new user about the Internet and only helps to further the commercial interests of a select few corporates included in the zero-rated bouquet of services. A survey on communications use in Africa showed that the number of people who had responded saying they used Facebook was much higher than those who said they used the Internet. A more recent survey conducted by Quartz in Indonesia and Nigeria shows that at least a few millions of Facebook's 1.4 billion users suffer from the same misconceptions.5 The survey observes that in both countries more than half of those who don't know they're using the Internet say they "never" follow links out of Facebook, compared with a quarter or less of respondents who say they use Facebook and the Internet. If people stay on one service, it follows that content, advertisers, and associated services also will flow to that service, possible to the exclusion of other venues.6 Yet another study that looked at how newer, low-income users were responding to mobile internet, and in particular, to data plans that provide restricted access, showed that many low-income users between ages 18 and 35, who had no access to Wi-Fi and had only recently started using mobile internet, expressed a strong preference for unrestricted all-access internet plans, even when limited plans were more affordable. It was concluded that the next generation of internet users are mostly young, and curious about the ability of the internet to materially benefit their lives. Limited access curtailed this ability. Some users also expressed fear of being unexpectedly charged for leaving the "free zone", by, for example, clicking on links on Facebook. They felt more comfortable with the standard flat-fee data plans.7

d. Violation of license conditions

TSPs provide Internet services based on the license agreements entered into with the Department of Telecommunications. Condition 2.2 of the Internet Service License8 states that "Internet access means use of any device/technology/methodology to provide access to internet including IPTV and all content available without access restriction on Internet including web hosting, web colocation but it does not include service provider’s configured Closed User Group Services (VPN)". Condition 2.1 of Chapter IX of the Unified License9 states "The Licensee may provide Internet access including IPTV. The subscriber shall have unrestricted access to all the content available on Internet except for such content which is restricted by the Licensor/designated authority under Law"

When the TSP provides the subscriber access to the Internet, it should be to the entire Open Internet except content blocked under the provisions of the information Technology Act, 2000. Restricted access to select bouquet of services cannot be permitted.

e. Privacy/ Security concerns

Restricted Internet Services provided by TSPs in association with content providers as in the case of FreeBasics by Facebook, require subscribers to access Internet through their servers which are often located outside India. Such services by design, track all the web interactions of all users, receive and store data on navigation information. Often, encryption is broken at the end of the proxy server of the gate-keeper and this affects the privacy and security of the communication. As proposed these kind of services break the authentication function of HTTPS, partially break the basic security of the content exchanged by first decrypting it all at their servers and then re-encrypting it for onward transmission to the intended recipient. Thus, restricted Internet services by its very nature result in loss of privacy and affects security.

f. Big Data

With the advent of sophisticated techniques of analytics and availability of big data have created new ways for businesses to collect data about their customers that can be used to offer a gradation of prices based on various factors. Now its possible to collect information about location, search history, travel history, device history, likes, dislikes, more so on mobile applications that require users to create accounts to log into. Such information linked with information gathered from other sources creates user profile that allows for price discrimination at a scale unprecedented in history of capitalism. Given sufficient data combined with sophisticated analytical tools give the telecommunications service provider an ability to predict consumer behaviour and change its services accordingly. This can result in discrimination against some specific groups.

g. Harms user interests

If TSPs can charge Over The Top(OTT) services to be zero-rated, they would have an incentive to lower monthly bandwidth caps or increase the per-byte price for unrestricted Internet use in order to make it more attractive for applications providers to pay for zero-rating.

In many OECD countries, operators have reduced data caps to promote their video services which are zero rated.10 However, in sharp contrast, when the Dutch regulator prohibited zero-rating practices followed by ISPs , KPN, a TSP, doubled its monthly bandwidth cap for mobile Internet access from 5 to 10 GB as it could not proceed with the zero-rating plan for its mobile service and without higher data caps, users would not find its video service attractive. Thus, enforcing net neutrality would benefit consumers.11

h. Breaks the open, decentralised nature of the Internet

The Internet or the Network of Networks was designed to be open with anyone on the network being able to reach anyone else on the network. However, with differential pricing the Internet is broken into parts with users access restricted to parts of the Internet. This leads to two kinds of Internet, where the users of a service like FreeBasics are given access to only select services with the vast resources on the Internet being denied to them.

Experience of other countries:

Chile, Netherlands and Slovenia are a few of the countries that have strong Net Neutrality laws that prevent zero rating. In Netherlands, the regulator imposed fines on KPN and Vodafone for violation of net neutrality.12 A fine of EUR 250,000 was imposed on KPN for blocking various services including several Internet calling services. A fine of EUR 200,000 was imposed upon Vodafone for zero-rating HBO's video service. In 2014, the Chilean Telecommunications Regulator banned zero rating of social networking apps like Facebook and Twitter.13 Frode Sørensen, Senior Advisor at the Norwegian Post and Telecommunications Authority has clarified that "The Norwegian guidelines on net neutrality state quite clearly that 'Internet users are entitled to an Internet connection that is free of discrimination with regard to type of application, service or content or based on sender or receiver address.' This means that in the Norwegian market zero-rating would constitute a violation of the guidelines."14

India should opt for a regulatory framework that protect the interests of its Internet users. With the Government striving hard to promote startups, regulations that are introduced should permit and promote innovation and should ensure that there are no entry barriers to startups for reaching out to users.

Question 2: If differential pricing for data usage is permitted, what measures should be adopted to ensure that the principles of non- discrimination, transparency, affordable internet access, competition and market entry and innovation are addressed?

Differential pricing of data services affects consumers as well as startups as explained in the answer to the first question. Thus, it is in nobody's interest to permit differential pricing.

Question 3: Are there alternative methods/technologies/business models, other than differentiated tariff plans, available to achieve the objective of providing free internet access to the consumers? If yes, please suggest/describe these methods/technologies/business models. Also, describe the potential benefits and disadvantages associated with such methods/technologies/business models?

Differentiated tariff plan, although marketed as a method to provide free/discounted access is often a tactic to get more users for the free/discounted bouquet of services. The real issues of digital literacy and providing access to the poor and people in villages remain un-addressed in this debate on zero rating.

Many Panchayaths15 and municipal corporations16 are taking the lead in providing free Internet access to the public. The need of the hour is to support and promote such initiatives at the grass root level than banking on marketing gimmicks pushed as philanthropic ventures.

Other suggestions which have been advanced to improve access include:

  • Free packs of with a data cap like 500 MB/month

  • Free access provided at low speeds using 2G networks

  • Free Wi-Fi Hotspots and community centres.

  • Data coupons that can be redeemed for data.

  • Direct Money transfer for data packs

  • Websites/Apps transferring money earned from advertisement to the user's accounts as Internet data subsidy17

  • Ad supported data packs, i.e watching advertisements for data credit.

  • Data bundling with new devices

  • Using USO funds to fund access schemes for the disadvantaged sections

Question 4: Is there any other issue that should be considered in the present consultation on differential pricing for data services?

The earlier consultation on Regulatory Framework for Over-the-top (OTT) services overlaps with the current consultation process. Hence, it is important to have a definite road map and to have a time-bound plan to finalise the process. The comments and counter-comments provided on the issue of zero-rating in the earlier consultation process will have to be considered while analysing the issue of differential pricing.

To conclude, we repeat the suggestion given in our comments to the earlier consultation paper. There are several ways to enforce the principle of Net Neutrality, including the following:

In exercise of its powers under Sections 11(1)(b)(v) and 36 of the TRAI Act, TRAI could issue a set of legally binding regulations that embody and thereby enforce the principles of net-neutrality, and the DOT could amend the license terms under which TSPs operate, mandating strict observance of said TRAI regulations.

Based on responses received to the consultation paper, TRAI could [in exercise of its powers under Section 11(1)(a) of the TRAI Act] make recommendations to the DOT concerning the incorporation of net-neutrality respecting obligations into TSPs' service licenses. Giving effect to the recommendations and incorporating relevant terms into service licenses would cement the TSPs' obligation to respect the principles of net-neutrality in their conduct.

In exercise of its powers under Section 11(1)(a) and based on the responses to the consultation paper, TRAI could make recommendations before the Central Government to enact a new central legislation or amend an existing legislation such as the Indian Telegraph Act in order to mandate strict adherence by TSPs to the principles of net-neutrality. Giving effect to these recommendations would again oblige TSPs to respect the principles of net-neutrality at all times.

1 The unofficial translation of the Report of the Bundesnetzagentur of 14 June 2013 is available at http://www.bundesnetzagentur.de/SharedDocs/Downloads/EN/BNetzA/Areas/Telecommunications/TelecomRegulation/NetNeutrality/Report_BNetzA_NN.pdf?__blob=publicationFile&v=1

2 http://www.dfmonitor.eu/downloads/Neelie_Kroes_Specialized_Services_are_a_giant_net_neutrality_loophole_HIGHLIGHTS.pdf

3 http://fortune.com/2015/12/23/youtube-t-mobile-video-throttling/

4 https://www.whitehouse.gov/sites/default/files/whitehouse_files/docs/Big_Data_Report_Nonembargo_v2.pdf

5 http://www.theatlantic.com/technology/archive/2015/02/facebook-is-bigger-than-the-internet-whoa/385350/

6 http://qz.com/333313/milliions-of-facebook-users-have-no-idea-theyre-using-the-internet/

7 http://www.savetheinternet.in/files/amba-kak-thesis.pdf

8 http://cca.ap.nic.in/i_agreement.pdf

9 http://dot.gov.in/sites/default/files/Unified%20Licence_0.pdf

10 http://www.dfmonitor.eu/downloads/Neelie_Kroes_Specialized_Services_are_a_giant_net_neutrality_loophole_HIGHLIGHTS.pdf

11Network Neutrality and Zero-rating, Barbara van Schewick, February 19, 2014 available at http://apps.fcc.gov/ecfs/document/view?id=60001031582

12 https://www.acm.nl/en/publications/publication/13765/Fines-imposed-on-Dutch-telecom-companies-KPN-and-Vodafone-for-violation-of-net-neutrality-regulations/

13 https://gigaom.com/2014/05/28/in-chile-mobile-carriers-can-no-longer-offer-free-twitter-facebook-and-whatsapp/ The machine translation of the order is available at https://translate.google.com/translate?sl=es&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.subtel.gob.cl%2Fnoticias%2F138-neutralidad-red%2F5311-ley-de-neutralidad-y-redes-sociales-gratis&edit-text=&act=url

14 http://eng.nkom.no/topical-issues/news/net-neutrality-and-charging-models

15 http://www.thehindu.com/news/national/kerala/free-wifi-for-all-at-eraviperoor/article7707446.ece

16 http://www.thehindu.com/news/national/kerala/malappuram-to-log-on-to-free-wifi/article7483969.ece

17 https://medium.com/@inw/internet-access-alternatives-to-internet-org-for-the-digitally-excluded-don-t-let-access-providers-7aa481c03569#.fq8altwfd

All Posts | Dec 11,2015

On the TRAI Consultation Paper on Differential Pricing on Data Services

The Telecom regulatory Authority of India has issued a Consultation Paper on Differential Pricing for Data Services on November 9, 2015 and invited public comments to be sent by December 30, 2015. The paper discusses issues related to differential tariff plans of the Telecom Service providers (TSPs) who offer zero or discounted tariffs to content of certain websites/ applications/platforms.

The questions raised in the consultation paper are:

Question 1: Should the TSPs be allowed to have differential pricing for data usage for accessing different websites, applications or platforms? Question 2: If differential pricing for data usage is permitted, what measures should be adopted to ensure that the principles of non-discrimination, transparency, affordable Internet access, competition and market entry and innovation are addressed? Question 3: Are there alternative methods/technologies/business models, other than differentiated tariff plans, available to achieve the objective of providing free Internet access to the consumers? If yes, please suggest/describe these methods/technologies/business models. Also, describe the potential benefits and disadvantages associated with such methods/technologies/business models? Question 4: Is there any other issue that should be considered in the present consultation on differential pricing for data services?

But, weren't these issues already covered by the earlier consultation paper on regulation of OTT services? The Consultation Paper on Regulatory Framework for Over-the-top (OTT) services was published by TRAI on March 27, 2015 and it received over a million responses from Indian citizens, TSPs and civil society organizations. Question 14 of that paper was "Is there a justification for allowing differential pricing for data access and OTT communication services? If so, what changes need to be brought about in the present tariff and regulatory framework for telecommunication services in the country? Please comment with justifications". We still do not know the current status of the consultation process after TRAI had received comments as well as counter-comments from the public.

The earlier consultation paper led to widespread debates and saw Facebook's Internet.org (now renamed as Free Basics) and the COAI unleashing massive PR exercises to counter the public support received by the Save the Internet campaign.

SFLC.in submitted detailed comments and counter-comments to TRAI covering the issue of differential pricing and more specifically zero-rated services. We have explained in detail that zero-rating distorts competition, harms start-ups and innovations and harms consumers. We also listed alternate mechanisms that could be used to improve Internet access without violating the net neutrality principles.

The TRAI consultation paper was followed by the setting up of a Committee by the Department of Telecommunications to look into issues around Net Neutrality. The 110-page outcome report of the Committee’s inquiry was made public on July 16, 2015. The Parliamentary Committee on Information Technology also held detailed hearings on the issue, but the report is awaited.

The Department of Telecommunications Committee in its report on Net Neutrality has stated that it is "of the firm opinion that content and application providers cannot be permitted to act as gatekeepers and use network operations to extract value, even if it is for an ostensible public purpose. Collaborations between TSPs and content providers that enable such gate-keeping role to be played by any entity should be actively discouraged. If need be, Government and the regulator may step in to restore balance to ensure that the Internet continues to remain an open and neutral platform for expression and innovation with no TSP/ISP, or for that matter any content or application provider, having the potential or exercising the ability to determine user choice, distort consumer markets or significantly controlling preferences based on either market dominance or gate-keeping roles."

It would be useful to understand the motivation behind the initiation of this new consultation mid-way through the earlier consultation process. Is this a separate consultation or will this process be adding on to the earlier consultation? Was this necessitated because TRAI needed more inputs specifically on the issue of differential pricing? SFLC.in will be sending in our comments to TRAI, but we are unsure as to the need for two separate consultation processes.

Image Credit: Mlaurenti on en.wikipedia available under CC-BY-SA 3.0.