In the last few weeks, there is an increasing furore over net
neutrality. Indian legal system is different from a lot of other
countries - it is highly regulated and for all my belief in free market,
I have not been able to prove to myself that this is bad. So in my
first blog post, I want to bring out some arguments that make sense in
this regulated world.
I will begin with the
telecom space in India. Over the last 15 years or so, it has grown
massively - driven by falling prices. I have myself made STD calls at Rs
16 per minute - and this was at a 75% discount (after 11:00 p.m.)
Today, I pay one-hundredth that prices - and for mobile which is several
times more convenient. I have also seen the scenario 25 years ago where
the DoT had a monopoly and it took years (and several hundred Rs in
bribe) to get a phone connection. While much of the improvement came
because the NDA government kept tweaking the mobile policy til it got it
right, I believe the price reduction also happened because of two
reasons - the entry of reliance (and the price war it brought) and the
separation between TRAI and BSNL (and DoT) together with a (populist?)
mandate to reduce prices.
I think the way
TRAI functioned is a good example of perfect bureaucracy. Look at the
cost structure and the industry size and gradually keep reducing prices.
Everyone was happy - the government got popular support (and a lot of
money), the operators were ensured profits and a lack of price war, the
common man got affordable communication and as prices kept falling a
host of innovations came about.
There is no
reason why exactly the same mechanism cannot be followed for bandwidth.
Begin with estimating the bandwidth cost, put up a cap on the bandwidth
prices and keep reducing these as bandwidth usage increases.
Much
of the defense of net neutrality that operators are providing is that
there is no reason why app developers cannot pay in place of users.
Sure, the holes can be punched in that argument but the argument is
likely to be upheld in a court of law - and net neutrality is not a
fundamental right as of now. As far as I am concerned, net neutrality
can go for a toss as long as bandwidth prices are low enough. What we
really need is to ensure that telcos are not allowed to disable
competing apps like Whatsapp.
My sense is
that with 4G, bandwidth prices will be of the order of 1-2p per MB - so
regulated prices should come to 50Rs per GB. What the regulator can also
do is force arms length deals with OTTs - in other words ask the
contracts between telcos and OTTs to be open in terms of the bandwidth
costs charged and force telcos to provide internet packs at (say) 10
times this cost. In fact, once the transparency comes about political
pressure will take care of the rest.
