The booming digital economy has implications for a country soon predicted to have 283.8 million users – the world’s second largest Internet user base after China. Internet traffic in India is expected to increase five-fold by 2018, with a CAGR of over 40%, according to a recent consultation paper prepared by the Telecom Regulatory Authority of India (TRAI). In this article, I address how India is grappling with infrastructure, innovation and a net neutrality debate as it seeks to bring the majority of its population online.
Several major mobile Internet initiatives have recently been launched in India, which aim at establishing better access to the Internet by shifting the charges of consumer data to content providers. Mark Zuckerberg’s Facebook joined forces with Anil Ambani-led Reliance Communications to launch Internet.org as a free Internet portal for India, featuring 33 sponsored over-the-top (OTT) services and apps, including Facebook and Babajob. Last week, Sunil Mittal-led Bharti Airtel unveiled Airtel Zero, an open marketing platform that enables content providers to extend toll-free apps to end-users.
Some claim these initiatives allegedly deal a big blow to net neutrality in India. They claim that such toll-free services that shift payment to content providers will split the Internet into paid and free ecosystems and will negatively impact the Internet as a whole. But “First World” or “American” concepts of net neutrality don’t translate onto the Indian Internet experience, which is evolving against a vastly different social and economic backdrop than that in the United States or developing world. India has four times the population of the United States, but only 5% of India’s total population uses the Internet, while nearly 80% of Americans do. India is also estimated to host one-third of the world’s poor, with nearly 40% of its population of 1.2 billion people falling below the international poverty line.
Services such as Internet.org and Airtel Zero are examples of social entrepreneurship in practice – the innovative application of business techniques to solve social problems. In India, public administration of public goods has proved to be slow, inefficient and lacking in resources and capacities. A more efficient solution to many of India’s socioeconomic needs resides in public-private partnerships and CSR initiatives of the private sector. Reliance and Airtel’s initiatives should be viewed as innovative partnerships forged between India’s leading telcos and content providers to generate new streams of private funding, which will allow a continued build of the expensive infrastructure that India desperately needs to achieve the lofty goals of its new Prime Minister. By empowering hundreds of millions of people – many living below the poverty line of $1.25 a day – with broadband and mobile Internet as a conduit for education and telemedicine among other offerings, a partnered promotion of connectivity and software products can collectively advance India’s development metrics by significant magnitude.
One of the most successful entrepreneurs in American history, Mark Zuckerberg, was once a startup entrepreneur himself and has invested millions in Indian startups such as Little Eye Labs. Zuckerberg has made clear his position in favor of net neutrality in the United States. The type of net neutrality proponents argue for in the U.S. is one that follows the four bright line rules that include: 1) no blocking, meaning consumers should be able to access any legal content; 2) no throttling, meaning telcos shouldn’t intentionally slow down certain types of Internet traffic; 3) increased transparency, urging disclosure of the ways in which certain Internet data is prioritized; and 4) no paid prioritization, meaning content providers should not be able to pay for faster lanes, leaving unpaid OTTs on a slower, “dirt road” Internet.
It warrants reflection, then, that Mark Zuckerberg himself is sponsoring Internet.org in partnership with Reliance Communications, as a public good service that enables millions of unconnected people across Africa and India get online. The reason for this is that neither Internet.org nor Airtel Zero violate the four basic principles of net neutrality discussed above. The Internet.org and Airtel Zero platforms don’t alter the fundamentals of the Internet – but instead, proliferate distribution portals and nodes at a faster rate, while covering the cost of such expansion through private sector funding.
According to Tom Wheeler, Chairman of the U.S. Federal Communications Commission (FCC), there are two basic features of net neutrality: “One is making sure that the Internet stays fair and open for innovators and consumers; and the other is to make sure that those who are building networks have the capital, have revenue base, on which to build.”
Toll-free apps that allow content providers to pay for end-user charges do not make India’s Internet any less fair or less open, but rather, make the Internet more accessible to India’s largely rural population. In the case of Airtel Zero, the platform can accommodate unlimited partners ranging from startups to established companies, each paying a fixed rate for data usage by consumers. Thus, ability to pay for Internet access no longer needs to stand as a barrier between a startup and its consumer base. The startup now has the option to treat its customer base to a complimentary app, implementing a true “Freemium” business model. As stated by Gautam Raj Anand, CEO and Founder, Hubhopper, “Airtel’s new marketing initiative opens up a new field of interaction between app developers and their end users. It also gives apps a new way of reaching potential users, which is always a welcome development.”
While the Internet backbone is relatively mature in the U.S., Indian network operators must make significant capital expenditures on developing the infrastructure necessary to hardwire a rapidly growing Internet. They must also bid in competitive auctions for licenses to acquire spectrum. The spectrum auction last month was the most expensive in India’s history, garnering a record $18 billion paid by firms like Idea Cellular, Bharti Airtel and Vodafone. The latest license auctions likely leave Indian telcos among the most indebted network operators across all of Asia.
Initiatives like Internet.org and Airtel Zero provide network operators with new revenue streams paid for by those in a position to bear the costs. The burden of building India’s Internet infrastructure could, alternatively, be borne by consumers in the form of higher taxes and fees (as is soon expected to be the case in the U.S. following its adoption of net neutrality rules). However, any inability of Indian consumers to bear such charges would stifle the development of the Internet, thus impeding India’s rapid growth and pushing it further away from the goal of a digitally inclusive India.
By adapting their business models into more unconventional structures that shift the economic burden for Internet access onto a ballooning OTT industry, Indian telcos are becoming “smart pipes” about digital inclusion and poverty alleviation. These types of innovative partnerships could be just what is needed to accelerate Indian Prime Minister Narendra Modi’s dream of a “Digital India” into reality.