How fear and greed could choke India’s internet

By Andy Mukherjee

As payment gateways, Paytm, PhonePe and Razorpay are rivals. But they and more than 100 other internet startups — from a matrimonial site to a discount broker — have come together to sign an open letter to India’s telecom regulator, asking it to reject phone networks’ demand of additional charges on “large traffic generators” and the government’s desire to license online businesses.

The latter threat has loomed ever since New Delhi introduced a draconian draft telecom bill last year, through which it wants to retain sweeping powers of state surveillance while imposing a license requirement on everything from Gmail to FaceTime and Skype. In a nutshell, the world’s largest democracy wishes to move a little closer to a government-controlled internet.  

If that weren’t enough, now India’s biggest telecom firms — Reliance Jio Infocomm Ltd., Bharti Airtel Ltd. and Vodafone Idea Ltd. — have opened a second front. They want large streaming, gaming and social-media companies to contribute their “fair share” to network development, based on parameters such as the number of users or bandwidth occupation during peak hours. While the ostensible targets are Netflix Inc. and Amazon.com Inc.’s Prime Video, the proposal is making even small startups see red.

After all, it’s the tiny operators that will be hurt the most once everyone gets pushed down the slippery slope of overregulation by the government or discrimination at the hands of bandwidth overlords. Sooner or later, the costs will come to bite them.

What the mobile carriers are proposing flies in the face of the idea that the world wide web must be open and equal to all. Access providers mustn’t decide what consumers do with data. If gamers or movie-watchers slow things down for everyone, the heavy users could always be asked to buy more bandwidth for a better experience. If that keeps some people away from Netflix, it’s a market outcome, and not “a choice dictated by the filtering policy of the broadband carrier,” as Columbia University legal scholar Timothy Wu wrote in his influential 2002 paper on net neutrality.

Businesses anyway pay fees to servers hosting their content. Why should they be burdened with an additional network usage charge?

Big firms will adapt. For instance, paying carriers may not make sense for Disney+ Hotstar. The streaming app has lost Indian Premier League cricket rights to Jio, the digital empire assembled by tycoon Mukesh Ambani around the 452 million subscribers of his broadband service. Walt Disney & Co. has reportedly put some India businesses on the block. Chief Executive Officer Bob Iger may as well ditch Hotstar, too.

While Disney may switch attention to other markets, where does a homegrown app trying to win locally go? Online gaming is also providing entertainment to 400 million Indians, but with both hands tied behind its back by rapacious taxation policies. Amazon’s deep pockets mean it is in no hurry to be profitable in the world’s most-populous nation. However, for private equity-backed ventures, the funding winter is very real. To them, both the ideas — of absorbing the compliance costs of licensing, and paying carriers for network use — are unpalatable. 

In 2016, the Indian regulator did the right thing by spurning Mark Zuckerberg’s offer of a free, but limited internet — a walled garden with Facebook as the fountain at its center. The low-cost data revolution that was unleashed by Jio's splashy entry into telecom that year has underpinned the country’s rapid digitization.

But brutal price competition has also shrunk the wireless market. Vodafone Idea, the third-largest telco, is bleeding millions of customers every quarter. The suffocating burden of its 22,47,16 crores debt leaves it with no option except to go along with Jio and Bharti, its larger rivals, and demand “a regulated fair-share charge.”

The zombification of Vodafone Idea was always going to be costly for someone. It seems the bill for an effective telecom duopoly is going not to the consumers of bits and bytes, but to popular apps that create the demand for data. The startup crowd may be spared today, but tomorrow they may also be asked to pay.

Some Indian wireless carriers claim that Europe has already agreed on a burden-sharing arrangement between networks and content firms. That’s just misinformation. Brussels has agreed to no such thing, as Stanford University law professor Barbara van Schewick explained at a panel discussion hosted by MediaNama, which provides analysis on technology policy in India.

As for South Korea’s much-touted “sender party pays” model of 2016, it’s a messy return to the logic of postal services. It isn’t something Seoul can be proud of, nor should New Delhi seek to emulate its example. 

With interconnection becoming expensive in the country, Netflix ended up delivering its content from outside Korea. “It’s really not a great way to do things from an efficiency standpoint,” as Thomas Volmer, head of global content delivery policy at the movie-streaming franchise, told MediaNama. 

If India’s wireless carriers are getting greedy, its government is being fearful. It worries that without ironclad control of the web — exercised with the help of licenses that it can threaten to cancel at any time — it might not be able to sway the political narrative.

The country has, since 2018, held the dubious distinction of enforcing the highest number of internet shutdowns anywhere in the world. A five-month blockade of services after eruption of ethnic violence in the Manipur state in India’s northeast was relaxed last month for three days, and then re-imposed.

Startup founders are right to voice their concerns: While neither greed nor fear may be enough of a threat alone, their combination doesn’t bode well for the health of India’s internet.