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Impending Broadband Wars in India

…and what combatants must keep in mind

While we in India are busy fighting over the rights and responsibilities of moving from the subsistence agricultural existence to the industrial era (“land bill”) or over how the profits from digging up coal and lighting up more brick-kilns and coal-fired boilers will be divided (“coal bill”), there is a similar yet different battle going on in the United States. It is a battle that is similar to the land and coal battles in India in the sense that this battle in the US is also about who gets what rights in exploiting a public resource. Yet, it is different in that it is not about rights in the Industrial Age (those issues were settled in the US in the 1930’s) but about rights in the Information Age.

The issue at stake in the US is whether broadband service providers are “common carriers” or whether they are not. Promoters of the view that they are common carriers shout from the rooftops that if the US government does not declare that broadband service providers are common carriers, freedom of expression will be lost forever. The coalition that is on this side are organizations such as Free Press, Public Knowledge, People for the Ethical Treatment of Animals and Common Cause.

Opposing them are telecom providers such as Verizon, AT&T and all of the cable TV industry who make the case that they are not “common carriers” and thus can charge different rates to different channels they carry and that if such differentially priced deals are not allowed, broadband service providers would no longer have the financial incentive to build networks or invest in innovation.

Why does the term “common carrier” carry such incendiary connotations? A common carrier is a person or company that offers services to transport goods or people for the general public under license or authority provided by a regulatory body. A common carrier differs from a “contract carrier” or a “private carrier” in that they transport goods for only a certain number of customers and that can refuse to transport goods for anyone else. Public airlines, railroads, bus lines, taxicab companies are examples of common carriers.

Tim Wu, a Columbia University law professor argues that no authority should be able to decide what kind of information is and isn’t allowed on the Internet. Wu has documented in his book, now considered a classic, The Master Switch: The Rise and Fall of Information Empires how the great information empires of the 20th century have followed a clear and distinctive pattern: after the initial free competition that follows a major technological innovation one corporate power or another emerges that takes control of the new medium and operated what Wu calls “the master switch”. He describes those decisive moments when a medium opens or closes in the history of phones, radio, television, movies and the Internet. All of these businesses are susceptible to the cycle of initial open-ness and then closure and monopoly because all depend on networks, whether they’re composed of cables in the ground or movie theaters around the country. Once a company starts building such a network it will eventually gain control over it and begin moving towards being a monopoly, closes the network to others and all innovation ceases.

Let me paraphrase Tim Wu’s concerns using an Indian context: If broadband service providers, largely telecom companies such as Vodaphone, Airtel, BSNL and increasingly cable operators, start to strike deals with companies such as Star TV or NDTV or Times Now, (or for that matter Google or Twitter) to carry their channels in preference to others because of financial deals that they make with these channels the battle will no longer be about who has a better product but about who can make the better deal. Another example is Toyota or Honda striking a deal with the Bombay Municipal Corporation that Marine Drive in Bombay would be accessible only to their brand of cars. If such deals were allowed, the basis of competition in the car industry would change. Car makers would, instead of trying to make the best product, make deals with highway operators.

“What we’re ultimately asking”, says Wu, “is a question that Adam Smith struggled with. Is there something special about “carriers” and infrastructure—roads, canals, electric grids, trains, the Internet—that mandates special treatment? Since about the 17th century, there’s been a strong sense that basic transport networks should serve the public interest without discrimination. This might be because so much depends on them: They catalyze entire industries…”

On February 26, 2015, the Federal Communication Commission (FCC),the regulator in the US and the rough equivalent of our TRAI, ruled that broadband providers are “common carriers”. So, Round One in this battle has gone against the telecom companies who provide broadband services, but you can be sure that more litigation will follow.

Do we need to worry about such things here in India? The World Bank’s index of how widespread is high speed broadband access in a country says that for 100 people in India only 1 has access to high speed broadband compared to 14 per hundred Chinese, 10 per hundred Brazilians and 29 per hundred Americans, so it would appear that we have quite a few years before we need to worry about such issues. But, on the other hand, the direction of technological development in the world is overwhelmingly pointing to imminent breakthroughs that will make high end services such as education and healthcare more affordable by using high speed broadband such services, so is it worth considering declaring, as the US has done, our broadband carriers as “common carriers”?

 

 

 

 

 

 

 

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Give TRAI’s Broadband Plan a Hand

Piece I wrote for the Economic Times today

    Screams of pain normally accompany the release of a Consultative Paper by the Telecom Regulatory Authority of India, but the one on Broadband released last week  has been met with a deafening silence. This worries all of us in the internet industry.

    Is the silence symptomatic of Indian telecom players’ and policy maker’s long standing disinterest in broadband?

    TRAI’s thought on how to make broadband more affordable and better quality mark a revolutionary departure from India’s normal laissez-faire telecom policy stance. It actually proposes an Rs 32,000 crore government initiative to build India’s Information Super Highway. , This, when done,  will impact our economy more,  much more, than even the Golden Quadrangle, that network of highways that is being built to connect our great cities.
   
    This initiative does not come a moment too soon.  For a country that has taken bold new initiatives in expanding education and health care and all aspects of our national infrastructure, we have treated the most important infrastructure of the modern knowledge economy, a broadband infrastructure, with benign neglect. As a result, India’s Broadband record is dismal. Broadband prices in India are the highest in the world (with the exception of Myanmar). India’s broadband connections are a mere 9 million.

    Part of the reason for such benign neglect is an under-appreciation by our policy makers and public about the role of broadband in a modern economy. Talk of building better physical roads or bridges and we can easily imagine what this entails and what benefits that brings. Talk of broadband and many go, ‘Oh, that’s what my teenage son uses to download mp3 music!’

    Broadband is that but it is also much more. Broadband is what will drive electronic commerce which in turn will make our big business more efficient, and allow our small businesses to  reach out to world export markets. It is also what future-oriented companies like Aravind Eye Hospital use to deliver low cost, high quality medical services. It is the backbone on which high quality school and college education can be delivered cost-effectively to our vast population. And it is the base on which eGovernance initiatives rest.

    There is also an ideological misunderstanding behind this benign neglect:  many policy makers and the Indian elite may be read the wrong lessons into India’s massive private-sector lead mobile phone expansion. Why not leave broadband expansion to the private sector and they will do what they did for mobile phones: raise international capital, compete with each other, bring down prices and expand the industry.

    But this, as I said, is a misunderstanding. Broadband infrastructure is like a bridge or an intercity highway: costly to build and on which the financial returns may come only in 15 to 20 years. The mobile-voice businesses get to profitability much sooner and this make private equity capital much more available for mobile voice services and very difficult for broadband data services. If the State does not build it, no one else will.

    How, you may ask, have the US and Europe done it? The answer to this is that by the time internet came around in the mid 1990’s, the high quality copper or fibre infrastructure was already built out. All they needed to do in those countries was to build internet services over the same infrastructure.  In India, there is next to no such infrastructure even today. Somebody has to build it.

    In spite of that head start, many advanced economies are doing even more:  the United States Federal Government has already put our $110 bn in 2004 and $350 bn in 2005 and continue to spend at similar level to bring broadband to America’s rural areas. The national governments of Britain, Australia and Japan have done or are in the middle of similar levels of spending.

Why not leave it to the Mobile Phone companies to offer broadband services through wireless, you may ask. After all, haven’t they bid gigantic amounts for broadband wireless spectrum for this very purpose? The answer to this is that no doubt they will, but because of the very nature of wireless broadband technology, such services will cost Rs 1500 to Rs 2000 a month- excellent for the lap-top toting executive but too expensive for middle class India.

    For broadband to get to the 100 million households who make up 40% of all households in India, we need a service which is priced no more than Rs 200 per month, not Rs 2000 per month. And we need this service with no ifs and no buts: no conditions that limit the amount of data you can download and no conditions on the time of day when you can use it.

    TRAI proposes to get there by 2014, that is, in four years from now.
TRAI’s grand vision is to take broadband fibre right up to 374,000 villages at a cost of Rs 32,000 crore. TRAI estimates that Rs 18,000 crore of this is to be spent on the manual labour of digging trenches and laying the cable and the balance Rs 13,000 crore is the cost of fibre optic cable and telecom equipment. They suggest that the manual labour component be done National Rural Employment Guarantee Scheme. The equipment cost of Rs 13,000 crore, they suggest, be met from the Universal Service Obligation Fund.

     They also propose that a National Fibre Agency be created to execute this massive project. Once this core network is built, private sector companies like Cable Operators, Cyber Cafes and Internet Service Providers can tap into this and create a vibrant reseller market taking the service to consumer homes, schools and offices.

    Rarely, has a government policy making group set out such a carefully thought-out and visionary plan.
     Let’s give TRAI a hand.
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