Sunday, April 19, 2015

You don't need to save the Internet

There have been a lot of one-sided opinions on Net Neutrality catering to the end-users point of view; here is my endeavour to explain Net Neutrality from the business and free market point of view. Most of you must have watched the 'fear mongering' AIB video on Net Neutrality. For a change, the ribald jokers of AIB have come up with something meaningful instead of their usual crass and obnoxious videos. It is pretty convincing but is misleading and far from the truth.

Now what is Net Neutrality? As AIB explains, Net Neutrality means all internet content is equal, must be equal and allowed to be charged equally. But is all internet content really equal? Internet content can be divided into four broad categories:
1. Browsing
2. Video Streaming
3. VoIP (Skype etc)
4. Downloading big files (movies).

In all these categories, the traffic load on the server is different. For example: When you open FB, it quickly fetches the page from the server while consuming data in KBs but when you watch a YouTube video the server is constantly busy, consumes your data in MBs and needs a 'dedicated bandwidth'. Similarly, a VoIP chat or downloading big files consume more data and keeps the server busy for a longer duration. Currently, the charges are levied by averaging out the above categories. If you don’t watch videos but only browse, you still pay for videos. If charges were levied by segregating the content as above, consumers will be charged based on “What You Use Is What You Pay” thus a person who only browse will end up paying less than what he or she is paying now.

AIB uses the example of Airtel Zero tying up with Flipkart which will be accessible at high speed compared to the rival sites like Amazon whose access will be deliberately slowed. This is incongruous and misleading as Airtel Zero is not what it is made out to be. Here is the explanation of Bharti Airtel CEO, Gopal Vittal "If the application developer is on the Airtel Zero platform, they pay for the data and their customer does not. If the developer is not on the platform, the customer pays for data as they do now. Companies are free to choose whether they want to be on the platform or not. This does not change access to the content in any way whatsoever. Customers are free to choose which web site they want to visit, whether it is toll free or not. If they visit a toll free site they are not charged for data. If they visit any other site normal data charges apply."

Airtel Zero is a similar technology like toll free numbers, which enable the customers to make contact to the company without being charged for the call.. When customers call the toll free number they are not charged; it's the company which pays. Countering the arguments on Airtel Zero providing differential speed and access to applications, which are not on Airtel Zero platform, Vittal said that the same treatment will be provided to all irrespective of their presence on Zero platform. He blamed such arguments against Airtel Zero as a deliberate effort by ‘some quarters’ to confuse people.
P.S Snapdeal, rival of Flipkart, is an official sponsor of AIB.

The Rights of Business Operators:-

Consider Internet to be a huge mass of land. The Government has divided this land into 22 circles (Delhi, Maharashtra, Mumbai, Kolkata, West Bengal, West UP, East UP etc). The DoT (Dept of telecom) invites private companies to bid on electromagnetic spectrum available for these circles. For example, in the recently (March 2015) concluded 'fiercely competitive' spectrum auction of 420 MHz in which GoI fetched ₹1.1 lakh crore, Reliance Jio, Bharti Airtel, Vodafone, Idea, Reliance Communication and Tata Teleservices were major bidders. Each of these circles is allocated with certain spectrum frequency (further divided into 200 kHz blocks) based on the demand. Now this 420 MHz of spectrum is divided into 'frequency bands' of 800 MHz, 900 MHz, 1800 MHz and 2100 MHz.

The private players bid and the highest bidder gets the licence to operate in the circle. For the Mumbai circle which has 7.5 MHz of the 420 MHz spectrum, Reliance Jio and Tata Teleservices won the bid at ₹909 crore per block (which is of 200 kHz) in the coveted 800 MHz band. Now calculate the price for 7.5 MHz if the cost of 200 kHz is ₹909 crore. The seven operators who won the bids had to pay an initial amount of ₹28,872 crore within 10 days, with the rest in installments after a two-year moratorium.

The DoT has sold a small piece of land to an entity for a huge sum and granted a monopoly via auctions. Now looking from the company's perspective- you can't question the owner's right to do what he or she wants to do with that monopoly. It's like you buy a land in a posh area, pay a hefty price, set up a business and someone else decides the price of the product or services. Let the market decide the price. If the price is feasible, the consumer will buy the product/services else they will move to other sellers. When mobile was introduced in India, incoming calls were charged at ₹10 and outgoing at ₹17. But with more new entrants it is now where it is - cheapest in the world.

The brouhaha on Net Neutrality is a classic example of Marxian mentality- a mentality of proletarian caught in a bourgeois' net. If the telecom companies, during the advent of high speed Internet, had started charging different prices for the contents, nobody would have bat an eye. Don't we pay an exorbitant price for ₹20 popcorn tub at the multiplexes or the hefty price for ₹10 samosas at the airport or haldirams? Doesn't Tata Sky charges premium package for entertainment channels like Colors and Star Plus. Don't different vehicles pay different toll charges for using the same road or bridges?

Credits: -
1. DoT website for statistical data
2. Guru Prasad for the categorisation.

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