The Free Basics debate: Trai has a point in imposing temporary ban on net neutrality

The article was published in FirstPost on December 24, 2015.

But net neutrality regardless of your preferred definition is a very complex regulatory question and there is no global or even national consensus on what counts as relevant evidence. To demonstrate the chain of causality between network neutrality violations and a variety of potential harms - expertise in a wide variety of fields such as economics, competition law, telecom policy, spectrum allocation, communications engineering and traffic management is required. Even with a very large research budget and a multidisciplinary team it would be impossible to predict with confidence what the impact of a particular regulatory option will be on the digital divide or innovation. And therefore the advocates of forbearance say that the Indian telecom regulator — Trai — should not regulate unprecedented technical and business model innovations like Facebook's Free Basics since we don't understand them.

Till recently I agreed with this empirical line of argument. But increasingly I am less convinced that scientific experiment and evidence is the only basis for regulation. Perhaps there is a small but necessary role for principles or ideology. Like the subtitle of Nassim Nicholas Taleb's book, we need to ask: How to Live in a World We Don't Understand. Let us take another area of technological regulation – cyber security. Do we really need to build a centralised database containing the passwords of all netizens and perform scientific experiments on it to establish that it can be compromised? A 100 percent centralised system has a single point of failure and therefore from a security perspective centralisation is almost always a bad idea. How are we so sure that such a system will be compromised at some date? To quote Sherlock Holmes: “Once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth.” Decentralisation eliminates the possibility of a single point of failure thereby growing resilience. The Internet is perhaps the most famous example. It is not necessarily true that all decentralized systems are more secure than all centralised system of a decentralized network but it is usually the case. In other words, the principle of decentralisation in cyber security does not require repeated experimental confirmation across
markets and technologies.

To complicate matters, the most optimal solutions developed using economics and engineering may not be acceptable to most stakeholders. Professor Vishal Misra has provided a Shapley Value solution using cooperative game theory in the multi-sided market to determine how surplus should be divided between three types of ISPs [eyeball, transit and content] and Internet companies using transparent paid transit arrangements. But a migration from the current opaque arrangement to the Misra solution may never happen because Internet companies will resist such proposals and are increasingly getting into access provision themselves through projects like Google Fibre and Loom. Walter Brown from South African Communications Forum proposes that billing by minutes for phone calls and billing by message for SMSes should be prohibited because on 4G networks voice and text messages are carried as data and price is the best signal to consumers to ensure optimum use of network resources. This according to Walter Brown will eliminate the incentive for telcos to throttle or block or charge differently for VOIP traffic. Again this solution will not be adopted by any regulator because regulators prefer incremental changes with the least amount of disruption.

So given that we only have numbers that we can't trust - what should be some of the principles that form the bedrock of our net neutrality policy? To begin with there is the obvious principle of non-discrimination. The premise is simple – anyone who has gate-keeping powers might abuse it. Therefore we need to eliminate the possibility through regulation. Non-exclusivity is the result of non-discrimination and transparency is its precondition. That can also be considered as a principle and now we have three core principles to work with. Maybe that is sufficient since we should keep principles to the bare minimum to keep regulation and compliance with regulation simple. Some net
neutrality experts have also identified fairness and proportionality as additional principles. How do we settle this? Through transparent and participatory policy development as has been the case so far. Once we have principles articulated in law - how can we apply them to a specific case such as Facebook's Free Basics? Through the office of the appropriate regulator. As Chris Marsden advocates, net neutrality regulations should ideally be positive and forward looking. Positive in the sense that there should be more positive obligations and incentives than prohibitions and punitive measures. Forward looking in the sense that that the regulations should not retard or block technological and business model innovations. For example zero-rated walled gardens could be regulated by requiring that promoters such as Facebook also provide 50Mb of data per day to all users of Free Basics and also by requiring that Reliance provides the very same free service to other parties that want to compete with Facebook with similar offerings. Alternatively, users of Free Basics should get access to the whole Internet every other hour. All these proposal ensure that Facebook and it business partners have a incentive to innovate but at the same time ensures that resultant harms are mitigated.

Just to be absolutely clear, my defense of principle based regulation does not mean that I see no role for evidence and research. As regulation gets under way – further regulation or forbearance should be informed by evidence. But lack of evidence of harm is not an excuse for regulatory forbearance. India is the last market on the planet where the walled garden can be bigger than the Internet – and Facebook is sure giving it its very best shot. Fortunately for us Trai has acted and acted appropriately by issuing a temporary prohibition till regulation has been finalised. Like the US, coming up with stable regulation may take 10 years and we cannot let Facebook shape the market till then.