Upholding principles of network neutrality
Replacing India's thriving commercial foundation with short-sighted opportunism masked as economic justice could spell disaster
Five years ago, India enshrined the principle of “Network Neutrality” in groundbreaking government rules. Today, this principle is back in the spotlight. The telecom regulator’s recent consultations on regulating app-layer services have reignited the debate. These services—spanning areas like streaming, networking, shopping, and gaming—are the lifeblood of India’s digital entrepreneurship. However, private telcos and other internet providers are now suggesting that these apps should pay a “fair share” for accessing their infrastructure, challenging the core tenet of net neutrality.
Net neutrality ensures that internet infrastructure companies can’t monopolise consumer access. With it in place, anyone can launch an app and distribute it over the internet and consumers can freely access these apps from anywhere. The true essence of the internet is its global nature. Introducing varying commercial rules for network access disrupts this global unity. Despite their dominance, private telcos, the backbone of India’s internet infrastructure, are pushing to alter the economic status quo. They aim to double-charge app businesses — once for network access and again for the demand these apps generate. This move underscores the importance of competition principles like net neutrality. Without them, infrastructure businesses might act like rentiers.
Telcos and other internet providers craft various arguments to justify their desire to double-charge. They know consumer welfare is intertwined with net neutrality, so they pivot to an amorphous notion of “economic justice”. Their logic? Big app companies earn significant profits and consume vast internet bandwidth, so they should fund telco-driven internet expansion and upgrades.
However, telcos overlook that app companies have poured about a trillion dollars into global internet infrastructure over the past decade. Without apps, telcos offer little to consumers. Point-to-point communication is commoditised; hence, telcos now bundle apps with their services. They’re also acquiring app-layer businesses at a rapid pace. It’s worth noting that telcos purchase expensive spectrum out of self-interest.
Let’s explore two market-based scenarios that might justify additional charges, keeping in mind that net neutrality is fundamentally an economic debate. In the first scenario, app service “A” pays telco “B” for increased internet bandwidth. This assumes a bandwidth scarcity in the 5G era, which many argue against since it has increased throughput by a factor up to 100, relative to 4G. In any case, if A can keep paying B for more networks, A can technically do so till it forecloses competition in its own market. That is, it can pay for a large share of supposedly finite internet bandwidth until a threshold beyond which it is not possible for its app-layer peers to compete without burning capital.
The ability to pay for finite bandwidth not only breaches net neutrality but also skews the concept of economic justice. The internet would no longer be an even playing field for digital entrepreneurs and innovators. Conversely, if internet bandwidth is not scarce, which many contend is the case in 5G networks at current levels of usage, no economic logic suggests that A should pay B any more than anyone else who pays B.
In the second scenario, app business “A” pays telco “B” for superior service quality. This directly contravenes net neutrality. There’s no way “B” can offer “A” better service without discriminating against other data packets. However, the concept of network slicing — which allows a 5G network to be virtually divided into multiple sub-networks or slices, each tailored to a specific application’s requirements — is an essential nuance to add to the second scenario. This raises a potential contradiction. How can we reconcile the principles of neutrality, a cornerstone of the internet, with slicing, a fundamental aspect of 5G?
Some institutions such as the Body of European Regulator for Electronic Communications suggest defining “specialised services” that might be exempt from neutrality constraints. But the definition of such services remains ambiguous. Given the transformative potential of network slicing, especially for critical sectors like health care, the Indian government could consider providing clear guidelines on its implementation. Such clarity would ensure that the core principles of net neutrality remain uncompromised.
India boasts a vibrant, market-driven internet ecosystem unparalleled in the developing world. It’s a dynamic space where newcomers regularly challenge established players. Replacing this thriving commercial foundation with short-sighted opportunism masked as economic justice could spell disaster.
Vivan Sharan is a partner at Koan Advisory, and consults with a wide range of digital economy businesses. The views expressed are personal