Net neutrality

Dr. Jitendra K. Das,
The buzz-word doing the rounds in the internet world today in India is “net neutrality”. A huge internet campaign has been launched by netizens supporting the cause of net neutrality. The debate on the issue started with the Telecom Regulatory Authority of India (TRAI) posting a discussion paper on net neutrality calling for public response. However, the plot unfolded when some service providers introduced “new” models such as Bharti Airtel deciding to charge subscribers extra for use of applications like Skype and Viber (Over the Top Services, OTS) and Reliance Communications deciding to offer free access to data and websites to customers of Facebook through their social networking site. Bharti Airtel also launched Airtel Zero, an open marketing platform to allow customers to access specific mobile applications at zero data charges.
The internet must be considered a common good or a public infrastructure. Therefore, any restriction on its usage will favor some. Thus, to keep its public utility in mind an ISP should not block a certain website (because of commercial or other interests) or promote one service over the other.
We must understand that a compromise on ‘fair and just’ operating field leads to formation of monopolists and oligopolists who care least for the consumers. In a mature market this situation will not arise and consumers get a fair deal. In a nascent market, formation of monopolists and oligopolists is bad for consumers and for innovations that potentially improves the market efficiency. Increase in market efficiency means more buying options to consumers at a lower price. When net neutrality is compromised, particularly when the internet based businesses are in a nascent market, the market will quickly tend towards monopoly/oligopoly. This shift will happen real quickly because the internet businesses operate in what we call “increasing return to scale” environment as against the conventional “decreasing return to scale” paradigm that we are more familiar with. Quickly, the ‘increasing return to scale’ can be taken to mean that it is very easy for the big players to become bigger and in the process they get the ability, due to a typical business environment, to kill competition. With no net neutrality, the big and powerful players in the market will always stifle the new entrants, thus making the market more inefficient. This would be bad even in the short run. There will be no ‘long run’. Further, we have to understand that the internet is an infrastructure that should be readily available to all such that smart operators, not necessarily the powerful operators, can configure and deliver goods and services to consumers with equal ease and more efficiently. And only through this fair opportunity the society will grow and not get stifled. That is, the society will grow and prosper only when rights of all citizens, and thus the consumers, is equally protected.
(The author is Director, FORE School of Management)

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