- Aug 01 2017
While the FCC and TRAI chairmen may share similar goals, India’s telecom regulator should pick and choose what it wants to take away from the US debate.
Ajit Pai – Donald Trump’s chairman of the Federal Communications Commission (FCC) – has been grabbing headlines since his appointment, with many fearing he plans on “destroying the open Internet.”
In May, the FCC voted to advance Pai’s proposal to repeal the commission’s 2015 net neutrality regulations, beginning the long process of undoing the rules. The decision to repeal is facing a fierce pushback from the US public and net neutrality activists. If approved by the FCC later this year, it is likely to be challenged in court.
Closer home, India’s telecom regulator, TRAI, seems keen on moving forward, building on its February 2016 regulations – with open house discussions on net neutrality held in Mumbai and Bengaluru in the last few months. Last year, the Indian regulator prohibited service providers from discriminating on the basis of content. The regulation banned providers from giving free access to select content, effectively disallowing ‘zero rated’ services. The regulator, with the release of a comprehensive consultation paper in 2017, is now making headway in the net neutrality debate – exploring how to define core principles, regulate traffic management practices and monitor for violations. On the other hand, FCC earlier this year decided to stop investigating into zero rating practices altogether.
The juxtaposition of Pai’s unraveling of the net neutrality regulations against TRAI’s attempt at a granular examination is relevant on two counts.
First, both Pai and R.S. Sharma, the chairman of TRAI, essentially share the same outlook. Both have acknowledged the centrality of bridging the digital divide in their regulatory mandate – exploring how best to keep the Internet open while providing access to the unconnected.
Second, both regulators are also introspecting on whether they are best placed to identify and censure non-neutral practices. The question of whether net neutrality is better preserved on an ex-post basis by an antitrust regulator or by a telecommunications regulator ex-ante, bears heavily on both their minds.
The difference in their approach, however, is evident from Pai’s unequivocal support for evidence-based regulation. The FCC chairman thinks that Internet should be best left unregulated in the face of “hypothetical harms” to the consumer. Pai supports net neutrality – the Internet must be open and equally accessible to all – but he disagrees on how best to ensure it.
Sharma, in contrast, has so far seemed to disfavour evidence-based adjudication in his only binding regulation on the subject.
The FCC’s 2015 rules reclassified Internet services as “common carriers” subjecting internet providers to stricter regulation. This allowed the regulator to recognise and enforce the principle of net neutrality for the first time, prohibiting internet providers from giving preferential treatment to any data on the basis of source, content or destination. Two years later, FCC with Pai at its helm is looking to roll back these rules opting instead for ‘light touch’ regulation.
In April, Pai issued a notice of proposed rule-making, a 58-page document premised on the claim that since the 2015 Open Internet Order, infrastructure investments by Internet service providers had reduced – a claim that has been questioned by net neutrality proponents. He is also of the opinion that the 2015 order has created regulatory uncertainty, hindering ISPs from innovating and expanding access to unconnected regions. His approach calls for a reversion to the Clinton-era regulations that categorised the Internet as an information service (bereft of common carriage requirements) and not as a telecommunication service. Pai reposes trust in the market to correct itself and trust in existing regulators like the Federal Trade Commission and the Department of Justice to step in on the evidence of harm to the market.
Pai is right about a hands-off approach in the absence of empirical evidence. His assertion, however, has been coloured by his sympathy for internet service providers – evident from his removal of the FCC’s privacy rules that prevented ISPs from competing with traditional over-the-top service providers in the data-for-advertising marketplace. He has also begun questioning the harm emanating from relatively clear violations of net neutrality such as throttling and faster lanes. His most compelling assertion about the reduction in infrastructure investments is also not as watertight as a numbers-driven claim needs to be. This has led to a lawsuit against Pai demanding the disclosure of all communication between his staff and ISPs.
These developments stateside have been driven by, in equal parts, technology and politics – the change in the administration has resulted in a change in the outlook of the regulator. The debate, however, still stands to inform India’s regulatory approach – there is more than one way ensure net neutrality and protect the ethos of an open Internet. India should avoid the same pitfalls and introduce regulations that are not shortsighted and reliant on clear market evidence.
The Indian data market is currently undergoing an upheaval with high investment in infrastructure, lowering of data pricing and plummeting device costs. Many of these changes have been brought about by Reliance Jio’s entry into the market and the consequent shake up of India’s telecom incumbents. On the other hand, revenues this past year have taken a hit, partly as a result of these changes and partly due to TRAI’s ban on differentially priced services. However, as the dust settles and the disruptions pass, it is revenue generation that will determine continued investments and innovation – pivotal to bridging India’s digital divide.
TRAI’s recent exploration of an unbiased third party data aggregation for providing free Internet is definitely a step in the right direction because it is mindful of India’s need for data affordability. The regulator is also seeking stakeholder inputs through its open house discussions instead of reacting in a knee jerk manner. TRAI must now bolster its regulatory inputs through evidence of market effects of free data services and consult the Competition Commission of India, going forward.
The question of which regulator is best suited to promote net neutrality was inadequately considered the last time around. One of the problems with a preemptive approach generally and TRAI’s 2016 regulation specifically is that there is likely to be a degree of ambiguity around which practices are permissible and which practices are not.
The US has interestingly turned existential, questioning whether regulations are needed at all and if so, which regulator is best placed to keep the net neutral. For governing the Internet, it is choosing to abandon legacy laws but is turning to its legacy institutions to protect its openness. TRAI must learn from this debate what it can and ignore what it must. The Indian regulator must be careful to avoid what ails the US – an attempt at a regulatory rehaul – by drafting rules that accommodate competing interests, evolving technologies and the access imperative.
Sharma would do well to heed the advice of the former chairman of the FCC when he noted that a regulatory proposal on net neutrality should offer three things: an agency with full authority to protect consumers, rules that can evolve to fit new devices and networks and consistent guidelines that make it clear what behaviour is and isn’t appropriate.
This commentary originally appeared in The Wire.