What is the Economics behind Net-Neutrality?

Telecom regulator TRAI’s decision not to allow Facebook’s Free Basics is of great significance and more than anything. it has global implications as well.

Nobody can deny that internet has opened a world where all people are making social interactions, engaging in trading and commerce, getting education and having entertainment.

Commerce, education and communication have shifting to internet. Google has just emerged the largest firm of the world and it shows that future big enterprises will be from the digital world.

Here, a digital company’s potential depends upon the number of users it has. Facebook’s free basics is an attempt to attract internet users by offering them free access; but limiting internet to companies they like.

First impression about free basics gives it a social value – it gives free internet. Free Basics allows users to browse some sites and apps without paying for mobile data.

At the other end, free basics is against net neutrality according to TRAI.

Net neutrality means access to free and unbiased internet for all. In simple terms, anyone from anywhere around the world should be able to access or provide internet services and content without any discrimination.

Economics of free basics

Once attracting large number of people into free basics, it will become an internet-II. Ad revenue, customer interface options and other commercial value of it will go up once it is developed. Understandably, FB as the admin and its partners will decide administration of free basics. Competitors are excluded. Such a situation is not there at the internet now. It is open to all including the ISIS as well as for Buddhist monks.

Thus anybody can imagine that free basics has some commercial content in it. It exclude others websites and provides a platform for FB in the future. In India, thus the advocates of net neutrality opposed it and the startups also argued that FBs effort is not good for internet.

Implications of TRAI’s decision

FB has already given free basics in nearly 40 countries. But no number is as important as India’s rising internet users. India has the second largest number of FB users after the US.

India is the future market place for internet titans. It is not protecting the digital world as China is doing. India is the darling of all US digital firms including Google, Amazon and Facebook as India doesn’t have a version of these companies at home. On the other hand, China has its own google and face book by banning the two US entities.

More than that, India’s decision will be keenly followed by other developing countries as well. The cultural and economic weight of the country in the developing world gives it lot of likeminded peers. Hence the writing is very clear – India’s decision has nearly ended FB’s plan of constructing its own internet platform.

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