This is a Guest Post by Prof. Surya Mahadevan of TAPMI, on invite from Smart CEO’s Editor
Prof. Surya Mahadevan has 30 years of work experience in FMCG and Telecom sectors. He played leadership roles managing large brands such as Tata, Reliance, Aircel, Loop, Maltova, Viva and Amul. He has worked across Sales, Marketing, Retail and Customer Service functional areas and in his last assignment before joining TAPMI, he was responsible for Mumbai Circle Telecom operations as Chief Operating Officer at Loop Mobile. Prof. Surya is responsible for TAPMI brand communication and PR, Executive education and programs on Virtual Interactive learning mode.
Telecom Regulatory Authority of India (TRAI) came up with the regulation on net-neutrality after a detailed consultation exercise. The regulation against differential/discriminatory internet access pricing seems to assert and attribute absolute virtue in Net neutrality.
The uproar of popular opinion expressed in social media placing net neutrality on the pedestal of purity and virtuosity had even the telecom service providers who had initially flirted with differential pricing in alliance with internet portals beat a hasty retreat.
Let us get into the core issue of what was sought to be protected and why.
Telecom service providers intended to offer differentiated lower access charges for a few bundled sites. The access charges for all non-bundled sites will be the same. Moreover, that implies ‘favorable partiality’ for a few sites and neutrality for all other.
Whose business is it?
Do the service providers who have put money to create access have a right to decide what pricing business model they want to pursue?
Airtel’s Zero plan would have enabled end customers to access a whole lot of sites without paying for the data charge. This would have set a new trend of alliances making more and more internet portals accessible without paying data charge.
It is amazing that customers and regulators would sit in judgment of what marketing strategy telecom service providers must follow.
It is also amazing because net neutrality does not mean that the access charge would be the same for all portals for all customers. First, the data charges would be different across different service providers. Second, the data charge would be different across different plans of a service provider. Third, the data charge would be different after the quota as permitted in a data pack is exhausted. Fourth, the data speed could also be modified based on the pack and limit.
Net neutrality only meant that, to each unique customer (on a given network, within the data quota) the access charge for all portals would be charged at the same rate per KB. Moreover, if some portals are offered, in addition at a lower cost or free – that is favorable discrimination – that is (also) not acceptable
Why would Telcos want to offer lower rates for some portals?
It allows them to build alliances with large e-commerce and other portals and generate committed revenue. It increases data penetration and usage. The alliance will also open up a partnership for promotion/advertisement and even revenue share with portals. The alliance is about generating revenue from the participating business enterprise and passing on the benefit to customers. In a way, this is akin to the business model followed in media.
Why would E-commerce sites want to pay access charges: To gain captive and high-frequency visit/business to their portal and possibly sneak an edge over the competition. They will evaluate the return on data cost paid by them based on hits/conversion/loyalty or other relevant metrics.
How would Customer be impacted if net partiality was permitted?
Many e-commerce sites could be free to access. An absolute win for customers. For other non-bundled sites, the data pack or pay per use is available — at the same cost or possibly lower cost. It is therefore neutral for the non-bundled sites.
This is actually the key aspect of the argument. The relative data tariff across telecom service providers is a function of relative competition and has nothing to do with neutrality. If a telecom service provider starts charging “more” for some or all portals, it creates a RISK of customers churning. It will and should be the competition that will determine the price.
Data tariff in telecom has dropped by 90% in the last couple of years due to exacerbated competition.
Who gets adversely impacted by net partiality: Smaller E-commerce portals could have been challenged by dominant players. However, this disadvantage would be so minuscule considering that customers would subscribe to a data pack or plan in any event and all non-free portals could have been accessed from one composite subscription.
The apprehension of blocking and choking was so misplaced as there is nothing much to gain in deploying those devious methods.
It is possible that stakeholders across the spectrum simply fell for the romanticism and perceived virtuosity of net neutrality.
In the process, we aborted the possibility of free/concessional internet access to a bundle of portals.
Implicit in the regulation is the collective denial that pricing or reverse charging based on the type of service, customer type, the volume of business, time of usage or any other discriminant does not happen in a free market economy.
AUTHORED BY Prof. Surya Mahadevan