That's what the net neutrality debate boils down to
With data revenues yet to take off, Google, Facebook,WhatsApp and the other digital players look like they are Indian telcos’ best friends … the more users there are for their services, the more the data revenues pick up; it helps that customers pay more for data per month (ARPU in telecom jargon) than they do for voice calls. So, chances are telcos may not put all their might behind TRAI’s latest consultation on whether over-the-top (OTT) services like Facebook and Viber should be charged for using telecom infrastructure. Doing so, in any case, will be wildly unpopular with civil society which believes that, like low-cost newspapers, free internet is its birthright; the political class will almost certainly weigh in on the side of ‘net neutrality’—indeed, in the US, President Obama’s statement is probably what got the FCC to rule 3:2 in favour of it.
Net neutrality means that internet providers cannot discriminate between users—so they can’t, for instance, get those making video calls on the internet to pay more than, say, those looking for a good restaurant review. If the US has ‘net neutrality’, why shouldn’t India?
Telcos who fall into that trap should look at the flak top US telcos like AT&T and Verizon got when, after the iPhone was launched, their networks couldn’t cope with the huge pressure of downloads that the iPhone made easier. And that’s when US telcos spend $70 billion a year upgrading their networks, when they have 4-5 times more spectrum and when, thanks to near full landline penetration, a lot of internet usage takes place on that. India, by contrast, has most internet usage taking place via mobile networks and virtually no money to spend after incurring huge costs for buying spectrum—telcos spent R1.09 lakh crore just last week on this. So when SMS revenues fall—from 8.1% of non-data revenue in Q4FY13 to 5.6% in Q4FY14 for Bharti Airtel—and ISD/STD calls get replaced by WhatsApp voice, where will the money to invest in new data networks come from? Unlike the US which has near-full internet penetration, India needs to build this for 800-850 million more people.
Indian telcos have to build a huge public campaign—nothing short of this will work—to show ‘net neutrality’ helps only the 100-150 million well-heeled who have smartphones to make cheaper SMS/calls but it is going to be at the expense of rolling out data networks for the rest of the population. Unless OTT players pay to help roll out the data networks, or share revenues, as the data networks of Bharti Airtel and Vodafone choke up, and they will quite soon, they will react by (i) hiking tariffs, (ii) lowering data limits offered under the ‘fair usage policy’ and (iii) not rolling out networks in small towns/rural India. Those who are convinced ‘net neutrality’ is a natural obligation of telcos would do well to keep in mind airlines charge differential tariffs within the same aircraft, at different times of the day/year and on different routes. That’s what makes them viable.