Facebook Denial Just Start of India Net Neutrality War

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Feb. 25 – If you thought India's sharp rejection of Facebook Inc.'s content bundling in exchange for free data had put an end to battles over net neutrality in the country, observers tell Bloomberg BNA that things are only heating up there.

The debate over net neutrality in India will continue to evolve leading up to 2018 when a recently imposed ban on zero rating—the practice of waiving data charges for favored content providers—will be reviewed, observers said.

The outcome will impact the way companies attract new Internet users in the world's second-most populous country, where more than half the population isn't yet online.

The Telecom Regulatory Authority of India (TRAI) issued Feb. 8 an order saying “No service provider shall offer or charge discriminatory tariffs for data services on the basis of content,” putting an end to Facebook's Free Basics campaign .With this order, TRAI put in place a strict net neutrality regime. As opposed to banning only anti-competitive or discriminatory forms of differential mobile data pricing, TRAI chose to bar all forms of differential pricing.

But in doing so, TRAI provided for an unusually short two-year review period for the regulation. This will give service providers a chance to study changing Internet practices, Nikhil Narendran, counsel with Trilegal in Bangalore said.

“The telecom service providers will most likely arm themselves with data, which was missing in the current debate, on how the Internet landscape has changed with streaming becoming more prevalent, resulting in increasing infrastructure investment,” Narendran said. “So these arguments are going to come up in the next few years once the telecom user landscape also slowly evolves.”

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Indian flag

An absence of legislation means that the issue won't disappear in the meantime, telecom expert Shruti Dhapola who writes for the Indian Express newspaper, said.

“As more and more Internet users come online in India, especially via their mobile phones, the fight for their screen space, between telecom companies and content providers, will continue,” she said.

Can Service Providers Exploit Loopholes?

The only exceptions to the TRAI order banning differential pricing are tariff reductions for accessing or providing emergency services, and data services offered over closed electronic communication networks (CECNs).

The CECN exception could create a loophole because the nature of the Internet and devices on the Internet is going to evolve quickly with machine-to-machine (M2M) communication and the Internet of Things, some experts said.

M2M communication happens over private closed networks on the Internet or exclusive virtual private networks (VPNs). VPNs provide the extra security needed when building infrastructure. Narendam said telecom companies will have a strong argument that these critical networks aren't permitted under the new rules.

“The TRAI order currently excludes private closed networks in which data is not transferred over the Internet,” Narendran said. “While it may have been the intention of the TRAI to exclude VPNs from the ambit of regulations, a loosely worded definition of ‘Internet’ results in any network including VPN being hit by the TRAI order.”

The Cellular Operators Association of India (COAI) is already seeking clarification from TRAI on closed networks and other aspects of the order, according to COAI Director General Rajan S. Mathews. Confusion over VPNs is just one reason the TRAI's order may have been premature, Matthews said.

“We feel TRAI should have defined the concept of net neutrality before clamping down on the issue of differential pricing,” Matthews said. “Not doing so has caused a lot of confusion, and we have asked for clarification on several issues.”

The COAI asked TRAI in a Feb. 17 letter to clarify as well that differential pricing on apps or services provided through CECNs are acceptable under the regulation, and that operators may make deals with content providers to offer their subscribers exclusive content.

A representative of Save the Internet, a group opposing differential pricing, said it is concerned about the possible loophole offered by private closed networks.

“Service providers can consider this a minuscule addition to the cost of doing business in one of the world's most lucrative markets and go right ahead with differential pricing and super cheap data packs.”Rohas Nagpal, Co-FounderAsian School of Cyber Laws

“The regulator's decision to bar discriminatory pricing of data services does not cover products offered on closed communication networks, leading to fears that companies such as Bharti Airtel and Reliance Jio Infocomm could offer their own apps through intranets at a lower cost or even free, defeating the purpose of the new rule,” said Save the Internet volunteer and New Delhi-based lawyer Apar Gupta.

Increasing data costs could change the policy considerations behind the zero rating ban and lead to a policy change after the two-year review, Narendran said.

“The next opportunity it has, there may be even a differentiation between the Internet as an information consuming medium for humans and the Internet for M2M,” Narendran said. “Most likely, the Internet for M2M may be opened up for differential pricing with a view to promote innovation.”

Penalty Too Small To Be Deterrent?

Telecom providers could also choose to ignore the rules and pay modest fines. The fine for violating the TRAI order is 50,000 rupees ($727) per day, subject to a maximum of five million rupees ($72,716). If a service provider and a social media website decided to partner to ignore the regulation for a two-year period, they would be liable for a total fine of 6,849 rupees ($100) a day.

If the companies combined for 10 million customers in a country of over 1 billion people, that fine would be less than 0.0007 rupees per customer per day, Rohas Nagpal, co-founder of the Asian School of Cyber Laws in Baner, Maharashtra said.

“Service providers can consider this a minuscule addition to the cost of doing business in one of the world's most lucrative markets and go right ahead with differential pricing and super cheap data packs,” Nagpal said.

Challenging Regulator in Courts?

Another possibility is a legal challenge to the TRAI order in the courts. The COAI, a lobbying organization for the telecom industry, isn't happy with the order, and industry analysts say it may try to have it overturned either in the courts or in the Telecom Disputes Settlement and Appellate Tribunal.

Outside the industry, Smarika Kumar, a legal researcher formerly with the Alternative Law Forum in Bangalore, said a ban on zero-rated platforms like Facebook Free Basics arguably violates Facebook and its partners' rights to freedom of speech and expression and to equality. An industry group, company or individuals could file a constitutional challenge to the ban, Kumar said.

Evolving Landscape Will Influence Policy

The impact of the order has yet to be felt, but will be more apparent in six months' time. Service providers have offered many schemes giving free or heavily subsidized access to popular websites such as Wikipedia, Facebook and Twitter for around 30 rupees (44 cents) a month which are popular with the poorer sections of Indian society.

Though TRAI has banned these plans, it has offered a reprieve to those consumers who may already have bought them: they have to be used in the next six months. Telecom providers are currently trying to figure out how to disband these offers. Public reaction to being denied these cheap data packs remains to be seen.

More data will probably become available as both sides form their arguments. Kumar believes that TRAI created policy without having enough information.

“India simply does not have enough empirical data. In its absence, it is hard to say for sure which direction potential Indian users of Facebook's Free basics would have turned,” Kumar said.

As this data becomes available, she said, it will shape policy making over the next two years.

Finally, there is no law enshrining net neutrality. This means that the field, while not wide open, is still partially open.

The issue will continue to exercise the Indian public and policy makers because, having rejected Facebook's Free Basics, the government has to find ways of providing subsidized access to the millions of Indians who are not connected to the internet because they cannot afford it. The process of doing that will ensure the debate is kept alive.

To contact the reporter on this story: Amrit Dhillon in New Delhi at correspondents@bna.com

To contact the editor responsible for this story: Joseph Wright at jwright@bna.com