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Net Neutrality: India's Position LOK SABHA SECRETARIAT PARLIAMENT LIBRARY AND REFERENCE, RESEARCH, DOCUMENTATION AND INFORMATION SERVICE (LARRDIS) MEMBERS’ REFERENCE SERVICE REFERENCE NOTE. No.6/RN/Ref./February/2016 For the use of Members of Parliament Not for Publication NET NEUTRALITY: INDIA'S POSITION ------------------------------------------------------------------------------------------------------------------------------- The reference material is for personal use of the Members in the discharge of their Parliamentary duties, and is not for publication. This Service is not to be quoted as the source of the information as it is based on the sources indicated at the end/in the text. This Service does not accept any responsibility for the accuracy or veracity of the information or views contained in the note/collection. NET NEUTRALITY INTRODUCTION Open and non-discriminatory access to the Internet has revolutionized the way people communicate and collaborate, entrepreneurs and corporations conduct business, and Governments and citizens interact. This has led to rapid growth in people-to-people, business-to-people and Government-to-people communications shaping new forms of social interactions, businesses and governance. Thereby, Internet has emerged as a source of innovation in all aspects of human life facilitated by the open, easy, inexpensive and non- discriminatory access to the Internet and the related investments in constructing high speed networks enabling the explosion in data traffic to be carried. The debate on Net Neutrality has sprung from the desire to preserve and protect the open nature of the public Internet arising from the apprehensions of emerging new business models that may impinge on the inherent characteristics of the Internet as we know today1. UNDERSTANDING NET NEUTRALITY There is no standard definition of Net Neutrality. Net Neutrality is globally understood as a network principle of equal treatment of data packets moving across the internet. The concept has been used more broadly to describe the open and non-discriminatory access to the Internet. The expression "Network (Net - for short) Neutrality" was coined by Prof. Tim Wu in 2003 in his paper "Network Neutrality, Boradband Discrimination". According to him “Network neutrality is best defined as a network design principle. The idea is that a maximally useful public information network aspires to treat all content, sites and platforms equally. This allows the network to carry every form of information and support every kind of application”2. The principle of Net Neutrality states that internet users should be able to access all content on the internet without being discriminated by Telecom Service Providers (TSPs). 1 Net Neutrality- DOT Committee Report, May 2015 2 Ibid 2 This means that all websites or applications should be treated equally by TSPs, all applications should be allowed to be accessed at the same internet speed, and all applications should be accessible for the same cost. To understand the concept of net neutrality, it is important to note the four different kinds of stakeholders in the internet space that may be affected by the issue. They are: the consumers of any internet service, the Telecom Service Providers (TSPs) or Internet Service Providers (ISPs), the Over-The-Top (OTT) service providers (those who provide internet access services such as websites and applications), and the Government, who may regulate and define relationships between these players. TRAI is an independent regulator in the telecom sector, which mainly regulates TSPs and their licensing conditions, etc3. NET NEUTRALITY DEBATE Currently, Net Neutrality is a topic of great debate across the world. The debate is, first and foremost, a technical and economic one, with the following core issues at stake : Traffic management Managing scarcity of bandwidth by differentiating the traffic streams conveyed over the network; Investment and increasing capacity; The quality of service provided to end users. Unrestricted access of internet. No premium charges for riding over the network. Concerns regarding departure from Net Neutrality - Arguments in favour of Net Netrality A policy decision to outright depart from “Net Neutrality” raises various antitrust and public interest issues. There are concerns that TSPs will discriminate against certain types of content and political opinions. Such practices may hurt consumers and diminish innovation in complementary sectors such as computer applications and content dissemination. Discriminatory pricing proposals, if implemented, could raise a variety of significant anti-competitive concerns. 3 Net Neutrality in India by Apoorva Shankar, PRS Legislative Research, dated 9.2.2016 3 Access networks, if left unrestrained by non-discrimination rules, have incentives to favour their own services, applications, and content and to kill competing services. In the absence of non-discrimination rules, last mile carriers can leverage their market power to control/support their voice telecom services. One of the concerns is the possibility that TSPs will degrade and/or restrict capacity in traditional internet access to force applications and content providers to use the TSPs new “premium” service. The possibility exists that this degradation and restriction of capacity will happen in a coordinated way, in a cartel-like fashion. Besides concerns over incentives for creativity, there is another concern regarding allowing TSPs to charge fees from content producers: it can result in TSPs “competing” for content, as seen in other platform industries, by charging different fees and bargaining on exclusive arrangements with content providers. In turn, such bilateral agreements could inevitably lead to fragmentation—where certain content would only be available on certain TSPs—and hence multiple “internets.” The ability of smaller and start-up Content and Application Providers (CAPs) to compete with the more established CAPs may be affected if they are unable to secure access to specific TSPs or afford access-tiering charges, particularly if a TSP with market power reaches an exclusive arrangement with an established CAP or where smaller CAPs are unable to secure affordable access. These potential barriers to entry may deter new start-ups from joining the market, which threatens to hinder innovation and diversity in the long run. The fact of the CAPs being charged instead of subscribers will likely mask the true cost of internet service to subscribers. This will further create price distortion and surplus loss; because the generally more competitive market for large business customers will not shield them from the levies imposed by the access carriers. Also, there is no simple index or measure of capacity or bandwidth use of an application that is closely correlated to the willingness to pay for that application. For example, bandwidth use is high for some highly valued services, like video on demand, but bandwidth use is very low for information services, such as search or bidding in auctions in real time, which are also highly valuable. In the absence of legally mandated nondiscrimination, TSPs may attempt to capture the consumer surplus that remains after uniform pricing. Arguments that Counter Net Neutrality Principle Some experts believe that mandating Net Neutrality would be inconsistent with sound economic management of the internet. Innovations in application services can be better achieved if innovators can respond to price signals from platform providers, such as broadband producers. So, for example, innovators might take into account potential congestion costs of bandwidth-intensive applications. 4 There is a demand for “fast lane” internet in certain sectors, this enables content providers to ensure priority delivery of their content. Telemedicine is one such example. According to some experts, if Net Neutrality is imposed, due to rise in data traffic, TSPs will be forced to increase the cost of access for consumers and consumers would be worse off. Instead, CAPs that earn by advertising and other business models should be charged by the TSPs. CAPs are the strongest advocates for Net Neutrality. If a particular TSP were to threaten to charge a Google or Amazon, they could withdraw the service from that TSP. The loss of this service could result in possible loss of clients for the TSP to other TSPs that have access to these services. While the CAP may lose access to the TSP‟s subscriber base, however, the largest CAPs are now so big and have such a diverse set of users internationally that such a move would have little impact on their overall revenue. This argument is strongest when there is a vibrantly competitive retail broadband market. Globally, the market is already dealing with the issue by virtue of a range of new mechanisms, including: Tiered pricing structures, so that data hungry users are charged additional sums for the data used; and The use of certain delivery networks by CAPs to reduce their access costs and improve the quality of service for their customers. An over-application of Net Neutrality rules will actually reduce the ability of providers to offer properly tiered services to third parties. For example, Net Neutrality rules should not prevent TSPs from providing higher Quality of Services (QoS) to business customers (or home workers). However, where the incumbent has market power, then they will need to be applied in such a way that prevents incumbents from acting anti- competitively and discriminating in favor
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