On Net Neutrality And Airtel Zero and Flipkart
When I first read about Flipkart’s deal with Airtel Zero, I was disappointed as I have always thought of Flipkart as a progressive new-age hep company, and this seemed to be a Net Neutrality violation 101.
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Airtel on Monday launched a service called Airtel Zero. On the face of it, this looks like just a regular value added service from a telecom operator. It is meant for app developers and web service providers. The plan, as Airtel explains, is to allow app developers or web service providers to pay money to Airtel so that these apps and services can be accessed by Airtel users for free.
This means if an app pays money to Airtel, consumers on Airtel network will be able to use it without paying any data charges. For example, consumers who have Flipkart installed — Flipkart is rumoured to be a company paying Airtel money to be part of the Zero plan — will be able to access the app without paying data charge
Net neutrality, for those of you who don’t know and I am assuming that’s none of you, is the principle by which internet service providers cannot discriminate on the basis of origin or type of traffic when it comes to delivery to end-users (i.e. to you and me who pay for internet access). In other words, a service provider like Airel cannot discriminate, in terms of price or speed, between traffic from website A and website B. By discriminating between traffic to Flipkart/any of the business entities that sign onto their Airtel Zero platform and those that do not, Airtel is most definitely violating the principle of net neutrality.
But is that really a horrible thing? As I thought about this, I was no longer as sure as I was when I first read the news.
Let’s first look at what’s definitely unethical about net-partiality—making customers pay twice for the same thing. For instance, service providers charging customers a further surcharge to use Whatsapp or Skype, because they have been losing revenue on voice-calls that people would make over their voice network which they can now make over their data, are engaging in douchebaggery of the highest order. Once I pay for 1 GB of data it is my to use it as I deem fit, and the service providers have no right to ask me to pay again for something I already own (namely the bandwidth). This is like my water utility company charging me a surcharge for water I use to clean my ass with, claiming hardship, or my electricity company charging me extra for using an unit to power for my electric-shaver, claiming hardship again.
A year ago, in the US, cable companies were trying to do something similar. Their logic was that streaming video providers like Hulu, Netflix, Youtube consume too much of their resources. Unlike Indian service providers, they were not brazen enough to directly charge their customers a surcharge. So what they did, and this was similar to Airtel Zero, was that they offered a service to video-streamers which came down to “If you pay x amount to us the cable company, the video packets you send will be delivered more efficiently to your customers, improving their experience”, which could reasonably be parsed as “Unless you pay us, we will put your video packets in such slow lanes that they will never reach your customers”. This was effectively a surcharge on the customers of the internet service providers because Netflix/Hulu would simply pass on the costs to their customers, and now you would be back to the same situation—paying again for something you already bought.
This is however where Airtel Zero is different, at least based on my understanding of what they are proposing.
I don’t see any double-charging.
Rather than you paying for the data packets from your bandwidth allocation, a business like Flipkart will pay for it, in principle, being no different from toll-free numbers, where the business absorbs the cost for client-initiated telephone calls. Now Flipkart may pass on the cost to you, but even then you still would not have paid double. In the particular case of Flipkart, which is not a service like Netflix that you pay a monthly subscription price for, the only way it can pass the cost to you is to increase the price of their products. Once it does, its competitors would gain an advantage. Of course, this is all zero-sum—as a customer, would you pay more for a Flipkart product and have your access to their site free or would you pay less for a competitor’s product and have your access charged?
In this context, I simply do not understand the logic of those in opposition to a platform like Airtel Zero. I hear this word “anti-competitive” a lot. How? Did toll-free numbers skew the industry in those days when long-distance phone calls cost an arm and a leg? I read someone saying “Oh but then how will competitors to Flipkart play in this domain? They can’t afford to sign up to Airtel One, and so consumers will all go to Flipkart, this is so unfair”. By that logic any shop offering a steep discount on their products is anti-competitive. If Flipkart is subsidizing your access charges and keeping their prices same (i.e. not passing on the cost to you for competitive reasons), then it is indeed giving you a further discount and I have no idea how discounts became unethical in the world of business.
If your think that B2B services like Airtel Zero would just increase the cost of doing business, because customers will expect their access to merchant sites to be free, then well C’est la vie, it’s the same for everyone. That Flipkart, being a behemoth, will be able to better absorb that than a small start-up, is true but then a “free market” does not mean that one will not leverage market or capital advantage. For instance a Microsoft or an Amazon strategically sells products at a loss for greater market share now so that they can cash out later and no one calls that anti-competitive. That’s capitalism.
So on the Net neutrality debate, we need to perhaps weaken the definition of Net neutrality to more precisely isolate what exactly we do not want, as consumers of the Net, to happen. We should *never* be forced to pay twice for the same thing. We should demand regulatory protection from predatory service providers who would create “slow” and “fast” lanes on the Net because we have already paid for a certain speed on those lanes. At the same time, we should not cling onto an absolutist notion of “net neutrality” just for the sake of it, without carefully considering the specifics and implications of business models that violate it.
[Disclaimer: The author of this piece is not knowledgeable on telecom policies.]
