by Dheeraj M N and Suhas S Kowshik

Our guest writers put forth their views, countering the recent petition against the Free Basics initiative by Facebook.  

Recently, a few academicians from IITs and IISC issued a joint statement, criticizing Facebook’s ‘Free Basics’ initiative, urging TRAI to reject the proposal. Largely comprised of three main arguments, the original document can be found here. In this article, we carefully analyze the claims made and offer our views on the same.

 

Net-Neutrality-e1451427936961Claim 1 : Facebook defines what ‘basic’ is:

Counter:

In India, people and corporations are afforded freedom of expression. People can claim that their theological view of the universe is the absolute truth, food companies can claim that their food provides basic nutrition. Similarly, Facebook considers what it offers through free basics as ‘basics of internet’. They don’t have any authority to define these as universal basics nor are they claiming it.  It is their opinion and they are free to have it and one is free to disagree with it.

Similarly, people in the country have a lot of liberty. They can choose what they eat, they can choose what they wear and they can choose to vote for whoever they please. Similarly they should have the freedom to choose what data plans they want. Facebook offering Free Basics doesn’t take away normal internet from the table and people are free to choose.

A large number of beneficiaries can’t even participate in the debate, as they don’t even have access to internet and the privileged few are making the decisions for them. A better alternative would be to let them have a choice. The opposition to the scheme should be through discourse. Since TRAI norms are not irreversible, the regulations can be changed if and when the service is actually grossly misused.

 

Claim 2: Facebook will have access to all your apps’ contents.

Counter:

Here, we quote the official document released by Facebook, explaining the security and privacy aspect of Free Basics, which can be found here.

When you use the Free Basics mobile website, information is temporarily decrypted on our secure servers to ensure proper functionality of the services you use and to help you avoid any unexpected charges. We preserve the privacy of that information while it’s decrypted by only storing the domain name of the service you visit and the amount of data being used—the same information that would be visible using end-to-end encryption—as well as cookies that are stored in an encrypted and unreadable format.

HTTPS is a protocol which is widely used to communicate securely with servers. Since Free Basics also supports this, there is no additional risk of a third party stealing one’s data. As quoted above, Facebook stores only the domain name and the amount of data and not anything else (This information is also available to all ISPs in normal plans). Therefore, there is no breach of privacy. However, there is a flaw that Facebook may illegally take one’s data. But trust is part of every such contract. For example we repose faith in Gmail, web-browsers, etc. to stand by the contract. There are heavy legal consequences for its breach.

We are convinced that if there wass no mechanism to ensure adequate security and privacy, financial service providers like banks will not even get into free basics platform and compromise their customers’ safety.

 

Claim 3: It’s not actually free and telecom services will increase costs in other places

The joint statement goes on to say, “If you see an ad which says ‘buy a bottle of hair oil, get a comb free’, you know that the cost of the comb is added somewhere.  If something comes for free, its cost has to appear somewhere else.”

We must realize that Facebook is not a charity organization but is a corporation working for profits. This Free Basics scheme is of course meant to profit the firm. But that doesn’t mean that it disadvantages other people in the process.

To go with the example stated, if one gets a comb free along with hair oil, the hair oil company can do that by reducing its profit margin. But, the sales increase (maybe eventually because of the advertisement) because more people are attracted towards the new option and hence total profits increase. Trade is not a zero sum game where profit of an agent A is caused by loss to some other agent B. Trade can actually cause profit to both agents A and B. This concept has been extensively studied in Economics through concepts like comparative advantage.

This seems to be just a customer acquisition strategy. Their own data shows that 50% of the people who used free internet shifted to paid internet schemes within one month.1 This increases the number of customers for internet service providers, Facebook while also enhancing the penetration of internet throughout the country. In fact that this will probably be the case in India too since free basics is really limited in utility – it cannot stream videos, speeds are low and many services like email cannot be accessed. We feel that many people will switch to paid schemes after getting a taste of internet because data is fairly affordable with most plans costing in the range of Rs. 6-8/ day.

 

On Differential Tariffs ( and Net Neutrality):


With regard to the larger debate on net neutrality, we would also like to briefly discuss the general issue of differential pricing as envisaged by TRAI (Telecom Regulatory Authority of India), details of which can be found here. Differential Tariffs, which is the subject of discussion according to TRAI, means Internet Service Providers(ISPs) recognising certain websites/applications/platforms and allowing discounted access. As argued in the link, this maybe disadvantageous since ISPs can stifle the access to certain websites as per their whims and fancies. This can lead to ISPs promoting their own websites at the cost of others and other anti-competitive and discriminatory practices. There are concerns that this will create an entry barrier for small developers. But, differential pricing has the advantage that internet becomes more affordable to a larger set of people. Blindly allowing differential pricing is not a sound idea. It is in this regard that TRAI asked for comments from all stakeholders. There are many checks which can be enforced by TRAI to ensure that the concerns are taken care of.

Regulators can make sure that there is no negative discrimination in the sense that access to an opponent’s/ non-participants website is not throttled by the ISP. But, a participant’s access may be boosted in terms of speed after payment to the ISPs.

We argue that boosting is not anti-competitive in the sense that it doesn’t stifle the growth of new/small companies. The cost of boosting is conceivably proportional to the amount of data transferred from the server. A new/small company will have fewer servers and will typically transfer smaller amount of data. This will generate a lower tariff for boosting. A larger company will have to transfer thousands of times higher data and pay much higher tariff for boosting. Therefore, boosting won’t be a deal breaker for smaller providers and the cost can be absorbed into the operating cost of other facilities.

There are concerns that ISPs will raise the cost of ‘full internet’ to disincentivize people from using it and hence divert traffic to their own partners. Since there are many competing ISPs, this will not happen because of free market considerations. Suppose an ISP A resorts to such a practice, its competitor B will reduce its prices for full internet to attract A’s customers, thus causing a loss to A. Therefore, it is in A’s interest not to resort to such discriminatory practices.

If  cartelisation is observed i.e, if A and B collude, regulators can always enter the picture then to ensure course correction by introducing floor on bandwidth or ceiling on prices.

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  1. https://info.internet.org/en/2015/07/27/one-year-in-internet-org-free-basic-services/