Trai’s socialism kills innovation

By ruling against Facebook’s Free Basics type of innovation, which offers, hitherto undreamed of, free but limited access to data services, Telecom Regulatory Authority of India (Trai) has regressed to a version of “ersatz Nehruvian socialism”, which gave a dominant role to government control over the economy, creating a thin crust of elite Indians but doing little for the poor. Consumer benefit has been sacrificed yet again for ideology.

Remember the car you used to drive in the 1970s Most don’t, because it was an expensive, exclusive asset owned only by the rich. Even today Indian cars remain a rich person’s trophy because of the high cost of owning and using one relative to average income. Only 10 per cent of the 230 million Indian households own a car. Ironically, the Trai order of February 8, 2016, is driven by a similar vision — preserving notional equity and freedom within a small bubble of 250 million well-off, “Internet connected” Indians owning smartphones.

Shunning innovation in the pricing of access to the Net, Trai has decided to protect the existing ecosystem which privileges platform managers, content and app developers by giving them unpaid access to 250 million netizens. But it ignores the need to grow this market to include 700 million Indians who are too poor to access data services other than phone calls and SMS.

That this order should come when the government led by Prime Minister Narendra Modi has vowed to “free” India from the social and economic chains of the past, shows that this government needs to put on its “thinking” cap.

Trai’s decision is perverse and here’s why. It throws out the baby with the bath water. Whilst banning price “discrimination” for content, it also effectively disallows “positive discrimination” or “affirmative action” for access to socially responsible content.

Consider a large Indian company which may want to subsidise a telecom service provider (TSP) for providing free access to educational sites targeted at helping poor or dalit kids crack the JIIT exam. The Trai order disallows this effort.

Similarly, it bars a poor, pregnant woman, say on the outskirts of Patna, from availing free access to check the cost of having her baby in a decent hospital in Mumbai, where her husband works. Sorry, says the Trai order. You must pay the TSP to access the Net.

It is hypocritical to simultaneously support free content-unhindered by state control whilst arguing against “affirmative action” for providing free access to the poor to socially relevant content, developed just for them.

It’s not only about Free Basics. It is the principle of killing innovation that’s the real concern. The Trai order kills innovation in developing socially relevant content for the poor because there is no way now of getting the content to them.

Free Basics is driven by commerce. Free access has to be paid for by someone. Today it is Facebook subsidising access, tomorrow it could be a Tata CSR project. In Africa, Net subscriptions of the poor are subsidised by foreign donors.

More practically, there is money at the bottom of the pyramid. Activists, platform managers, content and app developers are being short sighted in ignoring the role of “free access” in getting them there. Or do they fear that international players with deep pockets may get there first and are using the garb of “Net Neutrality” as a fig leaf for self-preservation Do existing Indian players, TSPs want to keep Facebook out so they can do the same once they become big enough

All IT start-ups attract customers by subsidising prices. Take Uber, Flipkart or any other. The fear that they will start increasing prices once they get bigger is misplaced because there is so much competition and entry is so easy that there can never be a monopoly.

Ironically, whilst making it easy to do business for “start-ups,” we are killing commercial innovation by business biggies. Can an “innovation” friendly eco-system really be sliced and diced, such that it is a “free market” for start-ups but a stiflingly regulated environment once they realise their dreams and become a business biggie, like Facebook

There is a symbiotic relationship between TSPs, content providers and app developers. TSPs, represented by Cellular Operators Association of India (COAI), buy expensive spectrum from the government, install and maintain the telecom network to link-in netizens and ensure that the number of eyeballs grows. If the content available is attractive, netizens spend more time surfing, thereby boosting TSP revenues. They enrich app developers by buying an app off the Net.

To access content on Flipkart, Snapdeal, Amazon, Uber or Myntra there is no additional charge other than the Internet access cost. So are these companies just plain generous No. Like Facebook or Google, they make their money by selling the data they gather from the netizens — demographics and preferences — to market analysts and sometimes to governments; they leverage their eyeball score to increase advertising revenue and get additional private or public equity funding. This is the money they burn to offer fantastic discounts and out-compete brick and mortar pop and mom stores.

So why does National Association of Software and Services Companies, an Indian IT lobbyist, support the Trai order Because it is in the interest of the software developers and content providers they represent to try and hang-on to the freebie they have — the roving eyeballs of netizens for which they pay nothing.

Never mind that the telecom industry, the only success story of privatisation and reform, has grown from being yesterday’s “start-up” to today’s business biggie.

Indian activists are fond of using the United States as an exemplar of non-discriminatory pricing access. This is their Brahmastra to clinch the argument for “Net Neutrality”. This is unsurprising. For most netizens, the US is the mother lode of innovation, which it certainly has been. But they overlook the difference in context.

In the US, the poverty level income is $2,000 per capita per month. Data access costs just 5 per cent of income or $100. In India, the poverty level income is $30 per capita per month. Data access costs $10 or one-third of a poor woman’s income. The cost of Internet access is not an economic barrier in the United States. The US is under no compulsion to abandon “Net Neutrality”, an ideology which sounds noble. For India, Trai’s ideology of “Net Neutrality” means the economic exclusion of 700 million poor people. A sad comment on the state of consumer protection in India.

The writer is adviser, Observer Research Foundation