Indian Regulator Bans Zero-Rated Services

The Telecom Regulatory Authority of India (TRAI) has issued a ruling that zero-rated data services will be banned in the country. The rules state, in part, “No service provider shall offer or charge discriminatory tariffs for data services on the basis of content.” Violators will be fined INR 50,000 (US $734.00) per day. While this dictum (which makes permanent a temporary measure put in place in December 2015) is general in nature and singles out no entity, in practical terms its principal target is Facebook’s FreeBasics service. Offered under the company’s global Internet.org initiative and in partnership with Indian mobile operator Reliance, this service offers users access to Facebook without it counting against their data allotments. TRAI’s announcement comes after months of criticism of Facebook by industry participants and net-neutrality advocates in India. It also follows a campaign by Facebook called “Save FreeBasics,” which created controversy and provoked more opposition than support. By issuing this ruling, TRAI has apparently decided that net neutrality is more important than spreading the internet throughout the country. Facebook’s FreeBasics was created to serve the internet giant’s stated goal of increasing access to the internet by making data available to emerging users who otherwise might not be able to afford it—or at least to incentivize them to use mobile data more than they ordinarily would. Facebook CEO Mark Zuckerberg sees Internet.org as a public service (although ultimately a revenue driver), but it seems that Facebook miscalculated in assuming that FreeBasics would be seen as a disinterested contribution to India’s welfare. In a sense, TRAI may be responding to public opinion in ruling against Facebook; the negative reaction to the “Save FreeBasics” effort indicates that the U.S.-based internet company has generated less goodwill in India than it had hoped.  Reliance’s competitors, such as market leader Airtel, will doubtless appreciate the ruling. The question remains, though, whether TRAI’s ruling truly helps the Indian data ecosystem. This is an emerging market in which a rapidly growing number of customers are using data for the first time. While we sympathize with TRAI’s desire that they not be exploited or misled by MNOs or content providers and that fair competition be encouraged, we wonder whether an initiative that spurs adoption of data services might not be ultimately more beneficial to the Indian market.

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