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certain data does not count against a mobile plan. About half of the world’s operators have used zero rating for more than a decade, and it has been helpful to increase internet adoption particularly in developing countries. Facebook’s Free Basics, which offers users free access for essential services in developing countries has encouraged millions to get online without any charge for data. Facebook reports that about half of Free Basics’ users become Internet adopters in 30 days as a result of the program. 52 Facebook has suffered an undeserved backlash from net neutrality advocates who capriciously conflate principles of Internet openness with anything that does not meet their unrealistic and undesirable standard. It would seem that Internet activists would support efforts from mobile operators and Internet companies to facilitate people of low-income to get online, particularly those in developing countries. Such programs should be celebrated by activists as valuable demonstrations of corporate social responsibility. My paper on zero rating is one of the few empirical investigations to test the assertions that zero rating practices are harmful. In general zero rating is used by small and entrant mobile operators as a way to differentiate from incumbents. The entities that take advantage of zero rating tend to be small and emerging content providers and applications. But even in cases where established services such as WhatsApp and Instagram enjoy zero rating, I do not find that they do not crowd out competing services. In fact even where WhatsApp is zero rated, those countries enjoy a multitude of messaging apps. The amount of zero rating activity is less than 1% of all contracts and traffic in the markets studied. Thus the impact of zero rating is negligible but not negative. My research finds the opposite to advocates’ claims; it turns out that bans on zero rating harm competition and consumers. However bans negatively and disproportionately impacted smaller telecom providers and their customers. The research was set up to test the purported harms as suggested by critics of zero rating The operator that offers zero rating will win market share. The zero rated service will win market share. The presence of zero rating will preclude the emergence of new applications and services. Users don’t go to non-zero rated content. If Facebook is free, they don’t venture beyond it. Operators that zero rate their own content foreclose other content. I looked at countries with hard net neutrality rules that imposed bans on zero rating: Chile, Netherlands, and Slovenia. In Chile and Slovenia, there was no record of consumer complaints about zero rating. Bans were implemented as the result of a single complaint by a net neutrality activist organization. In Netherlands the ban was implemented to effect a policy desired by the Ministry of Economic Affairs, not the telecom regulator. There are a number of compelling studies and reasons to allow differential pricing including 52 https://developers.facebook.com/docs/internet-org 16 | 7 January 2016 | Differential Pricing for Data Services
Differential pricing strategies are important to achieve social/public goods, for example how differentiated prices are used to provide medicines, an key input for public health (Yadav 2010) Users prefer to select mobile subscriptions on a range of parameters, not just speed and price (Fortunati & Tipale 2014; Postrel 2004). Programs such as Free Basics increases the number of users on network and has the double benefit of fostering content consumers and creators (Eisenach 2015) Differentiated pricing strategies common amongst Internet OTT services including the loss leader (FTC) and freemium (Lukin). It is illogical and inconsistent not to allow it for mobile internet services. Differentiated pricing is used particularly by entrant TSPs and service based competitors such as MNVOs. Economist William Baumol discussed how price differentiation is used to recover fixed costs. But he notes that price differentiation is common in markets both with high and low barriers to entry. Markets are so competitive that it is impossible for operators to enter without it (2005). My research shows that TSPs don’t use price differentiation because they want to, but because they have to. Prices in the mobile market are already so low. TSPs cannot offer lower prices or they will not cover costs. As such the only way they can attract customers is to make differentiated offers for content. The freemium 53 model is widely practiced in digital industries. This consists of a free digital offer for software, media, games, or other service, but a charge or premium charged for special features, increased functionality, or virtual goods. LinkedIn, Amazon, online newspapers, and countless other companies offer freemiums. It is not logical that such companies should be allowed to offer for free—or zero rate 54 —certain aspects of their service to stimulate adoption and yet TSPs cannot. Regulators may enter some legal challenges by doing so. Another reason not to enact proactive bans on price differentiation is that they may constitute violations of free speech and enterprise. Court cases on this very topic are playing out in the US and Europe. They underline the important point that the ability to make an offer in the market— to provide a differential price--is a form of free speech. Getting people online as quickly as possible facilitates their human rights, and reducing the rate of adoption by insisting on “perfect” access actually delays people’s enjoyment of human rights. Moreover requiring that people buy only one kind of mobile package—or constraining the parameters on which mobile service can be offered--rather than tailoring packages to consumers’ wants, needs and budget, has the perverse effect of making the poor subsidize the rich. In the countries where zero rating is banned, the lowest price offer disappears in the market, hurting those who have never tried the Internet and those with the least willingness and ability to pay. 53 Lukin, Jarid, “Jarid Lukin (@jblukin) | Twitter,” November 7, 2014, https://twitter.com/jblukin. 54 Michael Katz, comments: “Should Wireless Technologies Be Regulated Differently?,” ISOC-DC TV - Live Events, (October 15, 2014), http://www.isoc-dc.org/isoc-dc-tv/. 17 | 7 January 2016 | Differential Pricing for Data Services
Page 1 and 2: 7 January 2016 Ms. Vinod Kotwal, Ad
Page 3 and 4: My qualifications to participate in
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Page 31 and 32: Arguments in favor of zero rating S
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