Net neutrality and national interest

The ongoing debate on net neutrality reveals clashes of several public goals and interest groups. Should service providers have the freedom to sell products of their choice to customers of their choice? Do consumers have the right to use Internet services as they have always been used to? Should the open “ethos of the Internet” continue to remain so? Will an Internet with different lanes for different traffic remain the Internet as we know it? Should application and content providers like Facebook, Twitter and WhatsApp enjoy greater profits despite making much smaller investments than telecom service providers?

The issue is complex, and we should resist the temptation to see it as a fight between good guys and bad guys. There is nothing wrong in corporations trying to maximise their profits as long as they conduct business in a legal and ethical manner. It would be wrong to project telecom service providers, who are seeking to improve their profitability, as villains. Similarly, it is rather pointless for them to look at over-the-top (OTT) services like Facebook and begrudge them their profits. Different industries have different risks and different rewards. Consumers, too, cannot claim that things should be as they are and every change is a negative development.

So what should we make of this issue? I would like to answer this question by asking “What is India’s national interest with regard to IT in general and the Internet in particular?” There are three aspects to our national interest:

First, given that less than one in ten Indians has access to broadband, it should be a national priority to increase penetration. There is a correlation between broadband penetration and economic growth rate. India’s development needs our economy to leapfrog into the information age: for this we need reliable, affordable services. So, when thinking about net neutrality at this stage, the government must give the highest priority to ensuring the maximum number of people take up broadband in the shortest duration possible.

This, however, should not come as a result of price regulation. Fixing prices and a government that worships at the altar of “low cost” will result in damage. Low prices should come as a result of market forces and competition.

Second, given that India’s IT industry is an engine for growth and development, we must ensure that it remains globally competitive. The industry is worth more than $100 billion and employs more than 10 million people. There are thousands of start-ups in the country aiming to become the next Infosys and Flipkart. Our IT policy should not create more hurdles for entrepreneurs and ensure that they have the best possible start to build world-class companies. Without net neutrality, the risk that start-ups will face even greater “unfair disadvantages” against established firms is higher.

Third, it is in the public interest for the telecom and mobile service provider industry to be healthy and competitive. In the past decade, the regulators pursued the goal of forcing the telecom providers to lower user tariffs. While India has one of the lowest costs of telecom services in the world, the service quality is patchy. Calls drop frequently. Broadband service often is of lower speed and suffers outages. Billing services and customer service helplines are terrible. All this is because telcos are cutting costs in these areas. There are few lucrative or premium services left where they can increase their profitability. The only protection they enjoy is through licensing — the government limits the competition they face.

When deciding what to do about net neutrality, we must keep all three considerations in mind, and optimise them simultaneously. If the government opens up the telecom service market to greater competition, perhaps by issuing unlimited licences, then there is a case to allow them the freedom to discriminate among customers, as the state-owned carrier, BSNL, can provide a neutral internet. However, if the government does not open the sector to further competition, therefore shielding the telecom service providers from more competition, then mandating net neutrality provides a reasonable approach to promoting the public interest.

The current debate calls for the government to review the entire licensing regime and consider full liberalisation of the telecom industry.

Nitin Pai is co-founder of public policy think tank Takshashila

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