Telecom Regulatory Authority of India, Pre-Consultation Paper on Net Neutrality, 2016

India was considered one of the great regulatory success stories. Because of the reforms to unleashing market forces, mobile subscriptions increased 500-fold and prices dropped more than 95 percent.  This story is a textbook example of the value of good telecom regulatory policy. However the Telecom Regulatory Authority of India appears to abandoned its rational approach with its recent ban of differential pricing. There appears to be a misunderstanding about the word “discriminate” when it comes to price differentiation. There is a secondary definition of discrimination which has to do with prejudice, for example “an employment policy that discriminates against women”. However the primary definition is to recognize a distinction, to differentiate, or to perceive differences, as in “babies can discriminate between different facial expressions.” The economic concept of “price discrimination” is predicated upon this primary meaning. When a vendor can perceive differences between two or more customers, then it may be possible to charge them different prices for the same product (price discrimination) or to customize the product offered to each in a manner that reflects the difference (product differentiation). If the customized products impose different expended or expected costs on the vendor, then charging different prices does not constitute price discrimination. 

If any institution is in a position to regulate differential pricing, it is the telecom regulator. The very history of telecommunications regulation is about enabling differential pricing for telephone service. Price differentiation has existed for decades in local calling versus long distance, in interstate versus intrastate communications, in business versus consumer services, and in low versus high-volume users. If net neutrality advocates support that the Internet should be a public utility like the telephone network, then it is ahistorical and illogical that differential pricing should not be applied to the Internet, especially if the goal is to make it affordable for the maximum number of users.

One of the failings of net neutrality advocates is to define a clear vision of what should change when rules are in place. “Without Net Neutrality, the next Google would never get off the ground,” observes Save the Internet, a leading global advocate for net neutrality. If we take them at their word, we should see the next Google emerge from countries with hard net neutrality rules. But it never has. The fact of  the matter is that the world’s internet traffic is increasingly concentrated to a few destinations. Countries with hard net neutrality rules experience an increase in the market share of the largest providers such as Google and Netflix. Moreover as my research shows, local content and app development declines.

I know from having lived in India that it is a country with tremendous potential for excellence and self-determination. As such, TRAI should distinguish itself not by copy-pasting the policy recommended Google-funded Internet activists, but crafting an authentic, evidenced-based approach suitable for its national interest.

Read about the proceeding.

Read my comments on TRAI website.

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