Net Neutrality

Before I dive into the effect of the removal of Net Neutrality on the Indian economy, it becomes extremely necessary to throw some light on the concept itself. How come I did not read this term in my school and college text books? May be I bunked that day! Thanks to my bunch of friends.

Frequently Asked Questions (FAQs) on Net Neutrality

What is Net Neutrality?

The name sounds like an app in the Android Market place…..

In simple terms Net Neutrality means equal treatment of all the websites by the internet service providers (ISP). It’s like “Kanoon ki nazar me sab barabar hain”. Currently the ISP do not provide any kind of preferential treatment to any website i.e. all the websites are accessible at the same speed irrespective of their popularity.

Who are ISPs?

Internet service providers commonly called ISPs are the companies that provide us internet on our Smart Phones, Laptops, PCs and on whatever devices you have managed to access the internet.

Why the big debate on Net Neutrality when the concept was not in our textbooks (Out of Course)?

By now you must have learnt that the most important thing that we learnt in our school days was ABCD… and 123….. not till ∞ , that too in LKG. Apart from that, whatever we have learnt has very rarely been used.

Airtel introduced “Airtel Zero” plan. In simple terms mobile app providers (like Flipkart, WhatsApp) will pay for the data accessed by their users. Flipkart showed interest in joining the “Airtel Zero” which clearly violated the “net neutrality”.

“Wow… My net pack will last longer now” but “All that glitters is not gold”.  

Explained ahead.

Who are the Over The Top (OTT) service providers?

All the services like Flipkart, WhatsApp, Skype, Viber, Wechat, and Line….∞ are called Over The Top (OTT) service providers.

Why are the ISPs worried from the growth of the OTTs?

I tried to figure out this and I found that jealousy is the only reason. It’s like “Saas Bhau Serial”.

ISP:  “How can WhatsApp makers become so rich ($19 billion) by using our platform”. “They should share some of the profits with us.”

ISPs also say that with the popularity of the chatting, voice and video calling apps like Skype, Viber, WhatsApp, Messenger etc. their profit has declined as customers have reduced texting and calling (a point to be noted).

Why Non Net Neutrality is a cause of concern?

With the advent of smart phones and increased internet access the scope of doing business over the internet has significantly increased. Sprouting of many e-commerce websites in India like Flipkart, Snapdeal, Amazon and many more strengthens this argument. The booming e-commerce segment has benefited Indian economy in a number of ways: It has brought employment in the e-retail sector. It has given a boost to the logistics business which has further generated employment in this sector. It has increased the reach of small and medium retailers to the national and international level.

The neutrality of the internet has played a major role in the sprouting of the e-commerce business. A startup firm can easily enter the market without any entry barrier and can compete with the e-commerce giants like Flipkart and Amazon. It is interesting to note that these e-commerce giants have reached to the zenith because of the net neutrality.

The recent Airtel Flipkart deal is kind of an entry barrier for the startup firms as the ISP will provide a preferential treatment to the Flipkart. Its websites and app can be accessed at high speed while that of the new entrant would be extremely slow. Hence it would become nearly impossible for the startups to do business because the e-commerce giants would be in a position to restrict them from entering the market. It would ultimately lead to the creation of an Oligopoly market where few firms would dominate the segment.

Has ISPs profit declined?

Bharti Airtel media release on April 28, 2015 states that “The consolidated revenues for Q4’15 at Rs 23,016 crore grew by 3.6% over the corresponding quarter last year. Consolidated Mobile data revenues at Rs 3,085 crore grew by 59.1% Y-o-Y, uplifted by higher data usage and robust customer growth.

India revenues registered a growth of 11.8% Y-o-Y across segments, led by 11.0% in Mobile, 10.2% in Telemedia and 17.2% in Digital TV. Mobile Data revenue at Rs 2,324 crore registered a growth of 70.4% Y-o-Y in India, uplifted by increase in usage per customer by 41.2% and Data customer base by 30.3%. Data ARPU (Average Revenue per User) has moved up by Rs 43 to Rs 176 in Q4’15. Mobile Data revenues contribute to 17.6% of Mobile India revenues vis-à-vis 11.5% in the corresponding quarter last year.”

Thus the Company itself accepts the following:

• Its revenue is increasing.
• Mobile data revenue has registered a growth of 70.4% Y-o-Y in India.
• Usage per customer has increased by 41.2%.
• Data customer base has increased by 30.3%.
• Data ARPU has moved up by Rs. 133 in Q4’15.

The above facts show that ISPs profit are on a rise on account of increased mobile data usage by its customers. Mobile data usage has increased on account of the various OTTs that have sprouted in the past few years. Thus there is a direct relation between the ISPs profit and the growth of various OTTs. However, ironically, the ISPs are complaining the telecom watchdog in India TRAI that there should be some regulation and restriction on the OTTs. The restriction on OTTs would ultimately lead to the reduction in the mobile data revenue of the ISPs. Consequently the overall revenue would be on a decline.

The effect of non-net neutrality on the consumers

As discussed above the non-net neutrality would ultimately lead to the creation of the oligopoly like situation in the e-commerce business. The consumers would not be able to get the benefits of the perfectly competitive market in the e-commerce business. The kind of deals and offers that they get would ultimately reduce in the absence of competition. The consumers would be at a loss in the long run.

Now the ball is in the TRAI’s hand and it has to decide the future of the booming e-commerce market in India.