The Saga of Net Neutrality and the Mysterious Position of India

A world without internet is the worst nightmare ever. In the past few decades, the mankind has placed so much reliance upon internet that it is almost on the verge of replacing oxygen as the most important necessity for human race. From buying goods to communicating people, making new friends or reaching out to our prime minister, we restore to the power of internet. But, is it only internet which is enough for us. A comprehensive analysis will tell us that it is not only an internet reception that has become the inevitable requirement for the people, rather it is free and open internet. The freedom to reach out to any website, portal, app or service at any time and from anywhere, without any hindrance, be of protocol or speed, is what the users carve out for.

This has brought us to the much debated and fought issue of recent time i.e. Net Neutrality. In past one year, we have come across several individuals, outfits and associations talking about Net Neutrality. Some are pugnacious for it, some are repudiating it. In this chaos, we wish to know, what exactly is Net Neutrality and why should we suppose or oppose it?

What is Net Neutrality?

The term Net Neutrality accredits its origin to Prof. Tim Wu. Though he coined the term in 1999, the world continued to debate upon a proper debate and various definitions were placed ranging from constitutional point of view to competition point of view. For a general understanding, we may adhere to the definition propounded by the European Commission. As per them, the essence of Net Neutrality and the issues underpinning the debate concern, first and foremost, how best to preserve the openness of this platform and ensure that it can continue to provide high-quality services to all and allow innovation to flourish, while contributing to the enjoyment of and respect for fundamental rights, such as freedom of expression and freedom to conduct business.[1]

Why Net Neutrality?

The hue and cry for Net Neutrality has started due a series of technological advancements which has brought us to the crossroads of direct conflict between the telecommunication service providers (hereinafter Carriers) such as Airtel, Vodafone etc. and the Over the Transmission VoIP services (hereinafter OTT) such as Mobile Apps, websites etc. Earlier, these two services were complimentary to each other, with the Carriers providing the platform and the OTTs providing services other than the one provided by the Carriers. However, with the development of VoIP services, the OTTs started providing services in the field of communications. Consequently, the users started preferring the OTTs over the Carriers for the traditional communication services.

This brought us to a difficult territory. Carriers alleged that the OTTs cash on their bandwidth and affect their revenue in conclusion. Henceforth, they came out with a plan to have a piece of revenue from the usage of such OTTs. Airtel Zero is one such plan where Airtel will provide free internet to its users and instead charge the OTTs for the number it.[2]

The beauty of these OTTs lies in fact there services are free of cost. However, for meeting the cost incurred due to the plans like Airtel Zero, they either have to charge their customers, which will essentially bring them equal to the Carriers, or they have to make other arrangements, which may not be a sustainable option and henceforth it can lead to their departure. It is in light of this speculation, the debate of Net Neutrality started.

How Net Neutrality Works?

A neutral internet provides a fair and equitable playing space for all the competitors present. It is the essence of economics and competition law. Since, the Carriers are at will to have their own pricing mechanism, the threat persisting is that an exclusive agreement of accessing a particular website only through a network or charging the OTTs for their services will drive the competitors out of the market. Net Neutrality proponents claim that providers of internet services have a growing incentive to discriminate against rival content providers by charging relatively high fees (or providing lower quality service) to those rival content providers or even by denying access to rival content providers altogether.[3] In particular, discrimination by a firm with market power against firms in adjacent markets harms competition in adjacent markets only under limited circumstances.[4] Start-ups, which are game changers of internet, are the ones that bring trailblazing ideas that toss the revenues of online giants and triple them. It’s them who are extremely threatened by the potential of biased internet.

The characteristics of OTT services are such that Carriers realise revenues solely from the increased data usage of the internet-connected customers for various applications.[5] The Carriers are left solely to the revenue generated from carriage or bandwidth. On the other hand, OTT providers make use of the Carrier’s infrastructure to reach their customers and offer products/services that not only make money for them but also compete with the traditional services offered by Carriers like phone calls and messaging.[6] This has created anguish amongst Carriers. The loss in the revenue made them think and henceforth, they intended to charge the OTTs for using their bandwidth.

Some supported the Carriers’ action by claiming it a ‘toll-free calls mechanism’[7] or ‘Highway-toll system’[8]. Term it whatever, it appeared that it is not holding ground. A comparison between toll-free calls, where consumers can make free calls to the service providers and the service providers will pay the cost of it to the telecom companies, is not a just comparison. Toll-free calls are supplementary services and the service providers are not supposed to provide the same. Therefore, only a few service providers opt for the toll-free calls service. On the contrary, access to internet is an essential service for all the OTTs without which they are useless. The Pay for customer mechanism will force the OTTs to pay for sleeping customers as well. Such customer doesn’t add to the revenue. Therefore, such pay for customer mechanism will endanger their existence.

Subsequently, the highway toll system argument is flawed as well. The Indian Supreme Court has very interestingly noted that ‘[O]nce the position is accepted that a member of the public is entitled to ply motor vehicles on the public road as an incident of his right of passage over a highway, the question is really immaterial whether he plies a vehicle for pleasure or pastime or for the purpose of trade and business’.[9] Therefore, once the user has paid for the internet, the Carriers have no right to levy a charge on the manner in which the service shall be used. Further, charges can be levied on the OTTs only if the service used by the OTTs is a private service, owned by the Carriers. It is the spectrum through which the Carriers are providing the service to the OTTs and such spectrum, being a natural resource is owned by the Government[10] and therefore, due to lack of ownership, the Carriers can’t levy any such charges on the OTTs. It is henceforth, the OTTs are demanding a law for Net Neutrality which ensures that the Carriers can’t foreclose or discriminate in providing the service of internet. But, is the demand a just one? Can the Carriers be outcaste from having different pricing or plan mechanism?

What is Net Diversity?

Contrary to the position of Net Neutrality, a less debated term is Net Diversity. As Christopher Yoo puts it, ‘network neutrality mandate would prohibit network owners from discriminating against particular applications and content providers, [but] on the contrary, competition and innovation might be better served if policymakers embraced a “network diversity” principle that would allow different network owners to pursue different approaches to routing traffic’.[11] His theory of Network Diversity permits network providers to experiment with a variety of different forms of network management unless and until the evidence indicates that those practices are harming consumers or competition.[12] Network Diversity adopts a humbler stance towards policymakers’ ability to determine the competitive impact of particular practices and to anticipate technological change.[13]

The paradox about Net Neutrality is that the proponents of it want a free and open internet and for the same they required regulations. If the internet is free and open to all, then it should include the Carriers as well, therefore, they should be allowed to have differential pricing and differential plan.

The argument is simple. Internet is a place where the source, be it a journalist, manufacturer, service provider, trader or a common person, can reach out to the public without discrimination or any barrier. For these reasons, Internet Darwinians argue that their
innovation theory is embodied in the “end-to-end” design argument, which in essence suggests that networks should be neutral as among applications.[14] In the words of Jerome Saltzer, ‘don’t force any service, feature, or restriction on the customer; his application knows best what features it needs, and whether or not to provide those features itself’.[15]

It is pertinent to note that price differentiation is not barred by law. Price discrimination is widespread and need not result in harm to competition – that is, harm to the competitive process that deprives or impedes consumers’ access to alternative suppliers, resulting in higher prices.[16] A service provider can have its own pricing mechanism and such mechanism is generally non-questionable. Price discrimination that raises a firm’s profits may create incentives for broadband access providers to invest in expanding or upgrading their networks.[17] However, an act or omission which results in denial of market is certainly unacceptable.

What is the Position in India?

With strong and robust Net Neutrality laws in Chile, Netherland and Brazil, the demand of similar laws in other jurisdiction started rising, while the United States also drafted similar rules. However, the U.S. Supreme Court struck down the Federal Communication Commission’s (hereinafter FCC) ‘open internet rules’ promulgated in 2010. Interestingly, the rule was struck down on the ground of absence of jurisdiction rather than on merits. As a retort, the FCC amended the Communication Act and appended Net Neutrality rules under Title II. On 12 March 2015, the FCC released the specific details of its new net neutrality rule.[18] And on 13 April 2015, the FCC published the final rule on its new regulations.[19] The rule took effect on June 12, 2015.[20]

Pursuant to the hue and cry across the globe, Telecom Regulatory Authority of India (hereinafter TRAI), which bears the responsibility to provide fair and transparent environment that promotes level playing field in the market, is not dealing with the issue of net neutrality in totality as it clear from the statement given by TRAI chairman RS Sharma who stated that the consultation papers released does not concerns net neutrality as such, these are specific issues related to over the top application and differential pricing which may be a part of net neutrality.[21] However, the final report of the OTT paper suggested that TRAI is in the favor of crystallizing net neutrality principles but it sought regulation of similar service providers.

In the second consultation on differential pricing, TRAI addresses the idea of non-discriminatory zero-rating services in detail and questions why OTT should be allowed to operate without a license and on a non-level playing field with mobile licensees.

Conclusion

Net Neutrality is not the only solution to the creeping problem of internet monopolisation as Christopher Yoo has suggested that the principles of Net Neutrality has the potential to harm the internet by hindering innovation. Possibly, this was the reason behind TRAI tilting towards allowing the Carriers to have differential pricing provided it is just and fair. However, nothing concrete has come out of the whole process.

India, currently, has not taken a certain stand on the point of net neutrality. However, the second consultation paper has given some hope to the organisation working in the favour of net neutrality.  It is an observant suggestion that India needs to speed up its sloppy regulatory process and take a definitive stand on the point of net neutrality as corporations such Facebook and Google, Reliance and Airtel, have already initiated the process of devising schemes through which India gets access to the internet. Hence, a final consultation paper on this issue will be crucial in deciding the fate of internet in India.

[1] European Commission, The Open Internet And Net Neutrality In Europe 3 COM (2011) 222 final (April 19, 2011).

[2] Anupam Saxena, Airtel Zero: Another Blow to Net Neutrality, The Times of India (Apr. 16, 2015) available at http://timesofindia.indiatimes.com/tech/tech-news/Airtel-Zero-Another-blow-to-net-neutrality/articleshow/46823419.cms (last accessed on January 29th, 2016).

[3] Gary S. Becker et Al, Net Neutrality and Consumer Welfare 6 J. Comp. L. & Econ. 497, 501 (2010).

[4] Dennis W Carlton & Michael Waldman, The Strategic Use of Tying to Preserve and Create Market Power in Evolving Industries, 33 Rand J. Econ. 194 (2002).

[5] Telecom Regulatory Authority of India, Consultation Paper on Regulatory Framework for Over the Top (OTT) Services 5 (March 27, 2015).

[6] Id.

[7] Vikas SN, Why Airtel Zero is not a Toll-free Data Platform, ET Tech (April 14 2015 06:10 A.M.) available at http://tech.economictimes.indiatimes.com/news/internet/airtel-zero-not-a-toll-free-data-platform/46921122 (last visited on May 20, 2015).

[8] Gautam Bhatia, Net Neutrality and Public Highways, Indian Constitutional Law and Philosophy Blog (March 31, 2015 6:11 P.M.) available at https://indconlawphil.wordpress.com/2015/03/31/net-neutrality-and-public-highways/ (last visited on May 20, 2015).

[9] Saghir Ahmad v. State of Uttar Pradesh, AIR 1954 SC 728.

[10] Centre for Public Litigation v. Union of India,

[11] Tim Wu & Christopher Yoo, Keeping the Internet Neutral?: Tim Wu and Christopher Yoo Debate 59 Fed. Comm. L. J. 575, 575-576 (2007).

[12] Christopher Yoo, Network Neutrality and the Need for a Technological Turn in Internet Scholarship Public Law and Legal Theory Research Paper Series Research Paper No. 12-35, 27 (2010).

[13] Christopher Yoo, Beyond Network Neutrality 19(1) Harv. J. L. & Tech. 1, 76 (2005).

[14] J.H. Saltzer et al., End-to-End Arguments in System Design, 2 Acm Transactions Computer Sys. 277 (1984).

[15] Id.

[16] Gary S. Becker et Al, Supra note 2.

[17] Id.

[18] Federal Communications Commission, Protecting and Promoting the Open Internet, GN Docket No. 14-28 (March 12, 2015) available at http://transition.fcc.gov/Daily_Releases/Daily_Business/2015/db0312/FCC-15-24A1.pdf (last accessed on January 26th, 2016).

[19] Federal Communications Commission, Protecting and Promoting the Open Internet, 80(70) Fed. Reg. 19738 (April 13th 2015) available at https://www.gpo.gov/fdsys/pkg/FR-2015-04-13/pdf/2015-07841.pdf (last accessed on January 26th, 2015).

[20] Brian Fung, Net Neutrality takes effect Today. Here’s how it affects you, The Washington Post (June 12, 2015) available at https://www.washingtonpost.com/news/the-switch/wp/2015/06/12/net-neutrality-takes-effect-today-heres-how-it-affects-you/ (last accessed on January 27th, 2016).

[21] Consultation Paper on Regulatory Framework for Over-the-Top (OTT) Services, TRAI (March 27, 2015) available at http://www.trai.gov.in/WriteReaddata/ConsultationPaper/Document/OTT-CP-27032015.pdf (last accessed on January 31, 2016); See also Consultation Paper on Differential Pricing for Data Services, TRAI (December 9, 2015), available at http://www.trai.gov.in/Content/ConDis/20761_0.aspx (last accessed on January 31, 2016).


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