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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Facebook Helping to Grow Mobile Data Market, Zuckerberg Says

Facebook CEO Mark Zuckerberg addressed the role of his company in increasing access to the internet, in a panel discussion at Mobile World Congress in Barcelona. The launch of the Internet.org app, which is backed by Facebook, in emerging and developing markets has resulted in nearly 7 million people using mobile data for the first time, he said. Zuckerberg was joined on stage by representatives of some of the operators that have launched the app, which provides free data for connecting to popular internet sites. These included Telenor CEO Jon Fredrik Baksaas, Airtel Africa CEO Christian De Faria and Mario Zanotti, SVP of Operations at Tigo parent company Millicom.

According to the Facebook CEO, operators’ rate of acquisition of new data customers increased by at least 40 percent in those countries where the Internet.org app has launched. In Colombia, the number of people using data on Tigo’s network increased by 50 percent, and Tigo’s monthly smartphone sales grew tenfold in Tanzania since the launch of Internet.org. In Zambia, Kenya and Ghana, Airtel saw increases in the number of people using data and data usage itself, and both voice and SMS activity grew across Africa. As Facebook is one of the most popular online services, the company can play a key role in helping mobile operators grow their data businesses, Zuckerberg said. “The overwhelming feedback we’re hearing from our partners is that it works. It grows the internet and grows their business," he said.

With its Internet.org initiative, deep-pocketed Facebook has purchased and bundled access to low-bandwidth sites such as Wikipedia, health-related services, and Facebook itself and provided it free of charge to users in developing countries. The purpose is partly philanthropic, but also promotional. As Zuckerberg observed at MWC, Internet.org has resulted in large upticks in the number of people using data in developing markets, as well as in the actual amounts of data consumed. The idea is that when those first-time data users begin to want internet-based services that are not covered by Internet.org, they will pay for more data, as well as for higher-end devices. The extent to which that will happen depends on how much disposable income those users have, so the long-term influence of Internet.org on operators’ revenues, beyond the subsidies Facebook pays them, remains to be seen.

The above item appeared in a recent issue of Tarifica's "The Story of The Week", a weekly report that analyzes noteworthy developments in the telecoms industry from around the world. For past issues or to learn more about Tarifica or The Story of The Week: http://www.tarifica.com/contactus.aspx     and   Follow Tarifica on LinkedIn.