Wrong solutions to remedy digital divide

It is easy to get swept away in the maelstrom of views and counter views, but difficult to arrive at an informed decision on the subject of net neutrality: the unguarded access to legal, along with illegal-online content, without broadband service providers (BSPs) being allowed to block, degrade, or create fast/slow lanes with regards to this content that rides Over-The-Top services (OTTs).

The pertinent question to ask is: why fix the internet when it is not broken and that too for all the wrong reasons? These include Inter alia; India’s overwhelming dependence on mobile broadband due to the abysmal optical fiber/wire penetration coupled with scarcity and high cost of spectrum and the fog-like congestion of the internet.

To meet these challenges BSPs need tools to prevent congestion and shore up their revenues through levies on content or tie-ups with OTT providers so as to invest in infrastructure, improve service quality and make surfing affordable for the poor and bridge the growing digital divide.

Reason One: India depends a lot on wireless broadband. It is true that we have an abnormally high mobile to fixed broadband ratio of 4:1 and only 15.2 million wired broadband connections in a country in excess of 1.2 billion. This has arisen from a legacy of over-protectiveness towards PSU incumbents such as-Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) - who would not allow private operators to access their infrastructure and neither was this policy wise mandated.

As PSU monopolies led to further inefficiencies, but regulatory barriers made investing in costly optical fiber infrastructure unattractive, innovation-driven, privately provided, wireless services took over. India has a fixed broadband penetration ratio of 1.2 per 100 as against the world average of 9.4 per 100. The PSUs incumbents continue to lose 2-3 million landline connections every year, possibly due to the shoddy quality of service offered by them.

This apparent imbalance, however, should be rectified through prompt regulatory reforms rather than accepted as permanent; nor should it become a reason for interfering with net neutrality. It’s important to note also that in terms of competition and performance, we don’t fare too well in the wireless broadband space either, ranking 113th in the world with a penetration ratio of 3.2 per 100, performing worse than both Nepal and Sri Lanka.

We have one of the lowest broadband speeds in the world, both in wired and wireless broadband and broadband prices as a percentage of per capita incomes are higher in India than in Pakistan or Sri Lanka. The top four players command about 75 percent of the wireless broadband market. They are the new incumbents and predictably, they too would like to protect their turf.

Applications like WhatsApp and Skype represent Schumpeterian creative destruction offering much cheaper messaging and voice services over the internet. To avoid going the land-line way, mobile service providers must embrace technological progress, adapt, innovate and compete, rather than being allowed to thwart consumer access to applications or OTT providers’ access to consumers.

Reason two: Scarcity of spectrum. The scarcity of adequate and continuous spectrum must be solved by better spectrum planning in the long run and the use of technology to enhance spectrum efficiency in the short run. The former includes freeing up spectrum space held by defense and railways, and allowing spectrum trading and sharing.

The latter includes employing techniques like multiple small cells to support more users with the same amount of spectrum and creating Wi-Fi hotspots to shift users from mobile broadband to unlicensed Wi-Fi spectrum, whenever feasible. If additional infrastructure costs must be borne to this end or if BSPs must be incentivised to do so by rationalizing indirect taxes or through subsidies, then so be it. Meddling with net neutrality is absolutely not the right solution.

Reason three: Bandwidth hogging applications should cost more. BSPs in India offer multiple tariff plans with different browsing speeds and download limits. Beyond the download limit, the speed goes 

down drastically (fair usage). BSPs offer top-ups, to maintain speed, albeit at a high cost.

While OTT players respond by continuously innovating to make their applications more bandwidth efficient, users are certainly not enjoying a free lunch at the cost of BSPs. The more they download, the more they pay. Also, growing data usage is a source of revenue for BSPS. Data revenue has nearly doubled, from Rs.3,057.83 crore in June 2013 to Rs.5,910.28 crore in September 2014.

Reason four: These BSPs need a share of OTT players’ revenues to fund universal connectivity. There are more transparent and less harmful ways to encourage investment in broadband infrastructure. India has a Universal Service Obligation Fund (USOF) to subsidize and promote rural telecom services. As per USOF rules, a subsidy is available to both public and private sector players and is discovered through a transparent bidding process. This makes it the ideal means to bridge the digital divide.

Reason five: Free or cheap content to allow a taste of the internet. The utility of the internet cannot be reduced to a few applications. Notwithstanding the harm, this would do by way of discouraging innovation and distorting consumer choice, do we really want our price sensitive, digitally uninformed masses’ internet experience to be limited largely to Facebook or Bing?

We already rank below 11 African countries and among the Least Connected Countries on the ICT Development Index which includes ICT skills, usage, and access. For deserving users, USOF can subsidize access to important applications (e-health, e-education etc.) in a transparent manner, leaving them to explore the rest of the internet as they please.

The transformative power of the World Wide Web lies in externalities created by its scale and scope - billions of users and a mind-boggling array of information, products and services. Should we curb the freedom of this open exchange and that too for the wrong reasons?