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What Mark Zuckerberg didn’t say about Internet.org


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When Facebook Founder and CEO Mark Zuckerberg meets the Indian Prime Minister Narendra Modi later today, he’s likely to make a strong pitch for Internet for all, via Facebook backed Internet.org. Internet.org fits in well with the NDA governments “Digital India” mandate: Digital India is about making the Internet available to the masses, while with Internet.org, Zuckerberg made the pitch yesterday for making the Internet free for the masses. Sounds like a perfect fit, but it hardly is. What PM Modi and his advisors must take heed of, is that what Zuckerberg means by Internet for all, is essentially Facebook for all, along with a few non-profit services thrown in to give it the appearance of philanthropy, and maybe a few co-opted competitors to make it appear as if it isn’t about Facebook only.

Zuckerberg-india

Where Internet.org doesn’t fit with the Modi governments mandate is that it essentially hinders the “Make in India” campaign. At a ridiculously carefully controlled press interaction in Delhi yesterday (the journalists asking the questions appeared to pre-selected, despite being told earlier that questions we submitted would be randomly selected), Zuckerberg didn’t talk about:

– Before a telecom operator gets a roster of services to choose from, how would core services be selected for the Internet.org app?
– Under what circumstances are services going to be rejected for Internet.org?
– Who exactly pays telecom operators for free Internet access and how are the rates paid to telcos decided?
– Are the rates that telecom operators being paid for consumer access to Internet.org going to be higher or lower than market rates, and will there be public disclosures, so these can be compared with pay-per-use access rates in each country?
– Why is Facebook (via Internet.org) distorting the market by splitting the Internet into services that are free and paid for consumer access?

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Our question for Zuckerberg (which didn’t get answered) – “Doesn’t creating a consumer data pricing differentiation between those companies which are on board at internet.org and those which are not, disadvantage those startups who can’t afford to pay telecom operators for subsidising data?”

It’s like the Mobile VAS situation all over again: a few companies will have access to the customer through this free service – and in India, the gap between free and paid is a massive one – and those who are on board will benefit, while competing services  wont. Essentially:

– If Gaana.com is available on Internet.org, what will Saavn do?
– If 99Acres* is on Internet.org, what will Commonfloor do?
– If Alibaba is on Internet.org, what will Indiamart do?
– If TimesofIndia is on Internet.org, what will OneIndia do?
– If YouTube is on Internet.org, what will Vuclip do?
– If MakeMyTrip is on Internet.org, what will Yatra do?
– If Paytm is on Internet.org, what will Freecharge do?
– If Facebook owned Whatsapp is on Internet.org, what will Hike do?

Our guess is that they would be forced to enter special revenue sharing arrangements with telecom operators, for data bundling.

The nexus between Facebook and Telecom Operators

Internet.org allows Facebook to increase its dominance and get new users hooked on to the service. It allows telecom operators to do exactly what they’re lobbying for in India – create a revenue share arrangement between Internet companies and telecom operators. Airtel, an Internet.org/Facebook partner in Zambia, has repeatedly been saying that it should be getting “interconnection charges” for data services from Internet companies. Uninor wants “Data VAS”For more on those lobbying efforts, read this.

In fact, Facebook has actually joined the COAI, the telco association that is lobbying for this arrangement: Facebook is helping create a “Data VAS” situation with Internet.org, where some services (with non profit services thrown in to make it look good) will be available for free, and the rest are paid. Telecom operators are happy because free services get consumed more, and they make more money. Do you think access to the free web (outside of Internet.org) will be cheaper? If telcos make Rs 500 per customer per month via Internet.org, will they charge Rs 150 per month for access to the free web? Or will they increase those rates in order to make customers switch to Internet.org, where they make more money?

Think of the startups, their access to customers and potential future competition for Facebook. If ISP’s didn’t allow open access to social networks, and Orkut was willing to pay for preferential pricing, would Facebook have dominated the social networking space in India?

What Zuckerberg did say

In between what were mostly safe questions (including “why free Internet, why not water?”, “what would you do now if you started up again?”), a reporter from the Washington Post slipped in a second question (only one question per selected person was allowed, and only those who had submitted questions earlier were allowed to ask) about this walled garden approach, and it potentially creating monopolies:

“The way that this works is”, Zuckerberg said, “we’re trying to pioneer this model where the operator can offer free basic services to help people understand why the Internet is valuable for them. Offer a some basic things for free, that are going to be valuable to the society, ultimately with the goal of helping people learn more about what they can do on the Internet. They ultimately can buy data plans to fund the development of the Internet. Ultimately it is up to the operators to choose which services they want to include. Right, so I think it is going to vary from country to country, in terms of which companies people want to include, which non-profit services, social issues are more important that the government wants to fund app development for to include in these packages. And there’s no rule that says that Facebook or any other company has to be included in this. It’s just proving that this is a model that works to get more people on the Internet and to make it so that operators can also increase their profitability so that they can invest more to build more infrastructure so that they can serve more people. I’m optimistic that getting more people on the Internet will help Facebook over the long term too, but there’s definitely no rule that says that Facebook has to be included in each country as a service. If you take a country like China where Facebook is blocked, I can guarantee you that if the model ends of being successful, we are obviously not going to be offered there, and that’s fine because if more people get on the Internet and there are different services there, that’s still good for the world.”

Indian companies might create apps as per the ‘Make in India’ philosophy, but the lack of a neutral Internet access ecosystem, and the existence of a walled garden like Internet.org, is going to hinder competition. The access, development and social services angle is just sugarcoating.

Internet.org makes business sense for Facebook, but not for India.

*

Read our extensive coverage of net neutrality issues here.

“A municipal water supplier does not decide what kind of Cola you drink” – One97 MD Vijay Shekhar Sharma on Telco’s vs Internet
Reliance Communications’ CS Rao: Telecom Operators & Internet services need to share revenues
You ambushed each other, and now you’re trying to get someone else to save you – Venky Nishtala, CTO, Rediff
Telcos didn’t want to raise rev-share, b2b issues for mobile VAS, so why for Internet services? – Subho Ray, President, IAMAI
Other comments from the TRAI’s Internet Services regulation seminar

* Info Edge India, which owns 99Acres, is an advertiser with MediaNama

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  • Sandeep Amar

    Good one, What ever I read elsewhere I found it farcical, I mean in India our issues are water electricity and food. And what is this sudden weird demand of women on internet. Firstly I feel data is flawed, which says women are 30% of users…I think its more…the comScore claims its 40%…

  • Yet another form of Net in-neutrality!

  • TLWX

    BRILLIANT ! This is a piece of VERY brilliant analysis about Internet.org dual targets ! However, If You or I were in Marck Zuckerberg’ s T-shirt , we would obviously claim the same in order to promote Internet.org (oh sorry , I mispelled Facebook ) towards million of users.
    But all this come from a wrong vision , or let’s say , outdated vision, of walled gardens in modern digital era !!!

  • TLWX

    What indian Telcos , and more generally all MNOs, should consider, is offering to reconstruct more smarter gardens for the mobile users, instead of trying to cope with imposing Geat Walled gardens or potential leaks from whom-ever Great WALLs.

    Offering mobile users a confort zone and sweet spot for them to nurther and grow safely their digital assets, often based of OTT services competing against each other, should be a tactical direction to look after,

    Typically , some path to explore should be offering to mobile end users aspiring to internet access and internet mobile content mass consumption in India , an even wider Customer-centric digital land, where all Walled gardens can be set up one aside the other INSTEAD of spending energy (and money raised) to deconstruct previous walled gardens and breaching some against some others.

    Because of digital nature of things in the end (or rendered so in an IoT vision of tomorrow) in whatever geographical market , there will be many digital leaks , or even largers pathways and alleys digged by the digitally enabled CUSTOMER himself wishing to navigate between acres of the digital land/garden he nurthers .

    So , keeping aside also from short term shiny effects -in the landscape of gardens- of Mobile Apps glass-houses, Telcos should offer in a response to futher progress of any OTT , wider digital lands offered to mobile users, for them to decide how and what they will grow on their piece of (virtual) land.

    Mobile-ID.TEL is a way , BUT offering Mobile Identity to customers SHOULD be TRULY Customer centric, not SIM locked in the hands of …somebody else than the Customer himself….! It has also to offer PIECES of DIGITAL LAND, for the mobile ” gardener” to decide himself whether he will grow fruits, vegetable, or flowers !

    The suggested way is that TELcos do finally offer the soonest, some easy digital space to their Customer in connection to THEIR mobile “identity” or mobile profile , openly accessed by any one until bumping into one of the sub-fences around .

    dot TEL has been built for that years ago, and it appears it is NOW the right time for mobile users to take advantage of dot TEL features, as they can list in their mobile digital space attached to their profile and hub of contacts, any path to their social accounts like Facebook or Twitter , access to their professional accounts, to their phone number or their preferred number to be texted if whished, etc etc….

    Offering now the enough “open” landspace to mobile users for any walled garden they have, is a MUST HAVE for Telcos to allow the Customer to produce whatever ( digital mobile) fruits, with VOIP or other Chat crops side by side with other lines of core network services plants like …. incumbant Voice and SMS !!

  • Prashant Singh

    Pizzahut only sell Pepsi and McDonald only sells Coca Cola . People who love to eat Pizza and Burger both are happy to the limited choice of soda. Because type of soda is a secondary consideration . Sure some people might like Pepsi more than coke but They are happy with having Pepsi if it brings the overall cost of a meal slightly down. We do such economic tradeoff all the time.

    When it comes to creating a pull to bring user onboard to internet. Ganna,Saavn,vuclip,Commonfloor and other services you mentioned are equivalent of soda while FB ,WhatsApp , YouTube and Google are burger and Pizza.

    Now extending this analogy ..Recently some of the MacD joints in US started offering free food to homeless people . They came for burger and paid for soda . Do you think it was a ploy to push soda sale ? Basic rule of any consumer business is that if your product is good people will come. FB for now is a defacto choice of Soc Nw. so I don’t think there is a big issue.

    If partnership and clout could have guarrentedd a product success than Google+ would have been a big success . Its clearly not the case.

    I agree with your assertion that there is a agenda with internet.org but not your assessment that agenda is sinister . This is more of sustainable philanthropy IMHO.

    • by that Pizza Hut rationale, Prashant, telecom operators should also have the right to choose what you, as a customer, have the right to access on the Internet. Facebook is the burger, and they can choose to only allow Google now, which is a bigger selling soda, as compared to Shifu. Would that be fine with you?

      Walled gardens like Internet.org and MVAS amount to narrow framing of choice for customer, and restricting opportunity for supplier. There are areas where there is adequate competition, like in the restaurant business, where these moves aren’t monopolistic because the consumer has enough choice.

      But access to the Internet is a space with limited competition because a public resource – spectrum – has been allocated to private parties for access services. In those cases, the responsibilities of access service providers are greater and limited by policy to ensure that they don’t restrict access to limit consumer choice. The rules of the game are very different from your restaurant analogy. As another example, (I think this is the case, but not sure) DTH operators have a must-provide clause to ensure that they don’t discriminate access to content on TV.

      To go back to your analogy, restaurants aren’t public resource, but the streets are. Imagine if the streets to restaurants were privately leased out, and only access to some restaurants was free, and others paid. Even if there was pricing parity between the restaurants, the cost of access would be a differentiator, and the restaurants that paid more to the street licensee would allow its potential customers free access. It creates an artificial disparity on the basis of access.

      On your point of ‘if the product is good enough, the consumer will come’, I do believe that is the case in most cases, but there can be instances where some element of pricing is not in your control, and that makes a big difference. How much are you willing to pay? Each customer has different purchasing power, and a different threshhold for making a choice. How much would you pay for Internet? Rs 200 per month, maybe? Lets say the rates are now Rs 600. Would you still pay? Lets say there’s a choice between free for a few services vs Rs 600 for the rest of the web. Or lets say Rs 1000 for the rest of the web, vs free for a few services. What would you do? For a country, they have to see whether such a move artificially inhibits competition.

      Also, it’s easy for you to say that FB is de facto choice right now, because maybe it is for you. That is not to say that, given fair competition, no one else could have come in and replaced it. Whatsapp is a clear example of what could have been, before they decided to address potential competition by buying it.

      • Prashant Singh

        “Facebook is the burger, and they can choose to only allow Google now, which is a bigger selling soda, as compared to Shifu. Would that be fine with you?”

        I don’t think anyone is restricting any content on Network . Some content are being subsidised and promoted because they are partner . Business as usual. Big Bazaar have their private label brands they gave primimum shelf space to them … does that hurt HLL ? No.

        talking of Shifu and Google Now . Google Now is default bundled with Android . I think its a beautiful software , Fits nicely with android experience and it helps people to develop an understanding of what Shifu is offering and some of them choose to use Shifu. I don’t think Google Now hurt Shifu or that they are mutually exclusive. Google has never tried to made it hard to discover Shifu .Those who want are able to get it.

        You are complaining about restricted choice in Walled Garden . If google/FB/Apple creates a level playing field ( Google Play Store ) Than a lot of entrepreneur complaint about problem of discoverability in a world of too many choices . what happen next ? You either managed to get featured by platform provider , or Buy your way on top of the charts or Spam the hell out of your user . None of it is a preferred output for all parties involve . On one side of spectrum is walled garden of Telco ( though i am not sure if internet.org is exactly that ) and on other end there is wild west of app store and SEO. Who is lesser evil ? People say internet.org because there is a face to it . trust me there are questionable characters on both end.What ever you do devil takes its due. and In the end customer wins.ALWAYS

        • Kapil Raj

          Turning internet into an app store and trying to control what the user will access and what he will not. That’s how I see this internet.org thing. Internet gave everyone of us the power to get published and say what we want to. Getting users is and always was difficult but because of internet publishing became easy. Just imagine the time when there were newspapers before the internet and getting your article published was almost impossible. Internet changed that and made content publishing easier for everyone. Equal opportunity for everyone to say or do what they want to. But if this internet.org thing gets going then we will be back to the newspaper days when getting anything published will only be by the convent of the big brother(FB & Telcos) and gone will be the time of free expression. I seriously doubt that sites like medinama would have existed if this concept was in place. Even I doubt if Twitter would have existed if internet.org was in 2006. Also I doubt that the consumer will win because yes he will get access to free internet but then he will also get to use services that are pre decided for him and the beauty of internet to explore new things will be gone forever. Also you can bid goodbye to innovation on internet because it will cease to exist. It will be like China whwre you use what you are allowed too. As a developer I m deeply troubled and depressed by this News. If it happens than the online world as we know it will finish and getting a website published will be like getting a time slot for a TV series on television.

        • Rishi

          Prashant, I think your restaurant and Shoppers’ Stop analogies are both poor fits to this situation, because they don’t fully take into account the essence of what we are discussing here, which is the economic concept of distortion of the playing field. Let me explain.

          The only way to fit our restaurant analogy is by assuming a consumer (let’s call him Hrishi) lives in a city block with only Pizza Hut, and no McDonalds or any other restaurant for that matter and if he has to go to McD (or KFC or any other restaurant) a little far away, there is an economic/non-economic cost in terms of taxi, bus or rail transport (a substitution for the cost for mobile number portability). Therefore, with only Pizza Hut to go to, if Hrishi finds free Pepsi on offer but has to pay for Coke, it distorts the playing field for Coke (or any other drinks company or even a start-up). Worse, Pizza Hut has a strong economic incentive to possibly charge even a premium for Coke because Pepsi pays it for every drink sold. Therefore, it leads to an uneven playing field and grants unfair advantage to Pepsi. In other words, Pepsi (in collusion with Pizza Hut) is artificially raising a barrier for Coke to reach Hrishi. Now it’s the goddamn job of free markets regulator (Competition Commission of India in our case) to interject and even out this playing field (and I hope suo moto, without a complaint from Coke). :-)

          The Shoppers Stop analogy is similarly a poor fit, because of real value involved (let’s say Rs. 100 for parking?). It is highly debatable that Hrishi would go out of his way to favour SS and buy clothes only from it, disregarding his taste in fashion, colour, size and fit which might be better available from an outside store in the mall, to save Rs. 100. In other words, I can argue that parking fee waiver hardly distorts the level playing field between SS and other stores (in a mall). However, things would be very different if SS were to offer Hrishi a nice three-course dinner with a glass of wine for buying clothes from SS – now THAT is a distortion of playing field and we’d not be surprised that other store owners would raise a stink. :-)

          Finally, we often see promotions from operators giving away a month or two of FB, Whatsapp or Twitter free. These are clear and blatant cases of distortion of the playing field – because in effect, operators are giving consumers like Hrishi a strong economic incentive to choose something free, over something that costs money. But these are still less harmful IMHO compared to a bundling of five-six different services and giving it to consumers for free, because the bundling hugely raises the economic incentive for Hrishi to stick to the free, and therefore the playing field has gotten far more distorted (to the detriment of every single Internet service outside of the bundled services).

      • Prashant Singh

        ” the restaurants that paid more to the street licensee would allow its potential customers free access. It creates an artificial disparity on the basis of access.”

        Shopper Stop used to offer parking fee wavier coupon if you shop beyond 1500 INR. I never felt its unfair to other. Point is such artificial disparities are artificial advantage . They don’t last much . In long term restaurant need to serve good food if he has to stay in biz.

        Building product is tough. if throwing money can solve that than Access would beat Oracle , Poke would beat Snapchat and Everyone else would have beaten WhatsApp. Turns out there is more to making product than deep pockets.

        and this whole ” public resource” point is strange . who is public ?..who decide for whats good for them ? Its the same public who elected FB as default Soc Nw company .. You will say Govt and regulators …SAVE ME!!!

        there is this speech from NEWS Room Episode which is relevant tp quote here.

        “In the infancy of mass communication, the Columbus and Magellan of broadcast journalism, William Paley and David Sarnoff, went down to Washington to cut a deal with Congress. Congress would allow the fledgling networks free use of taxpayer-owned airwaves in exchange for one public service. That public service would be one hour of airtime set aside every night for informational broadcasting, or what we now call the evening news.

        World over This so called Public service of evening news has became a state propaganda platform . Which has brought lot of bad things to society. I am not sure about you but Between a politician and a Capitalist I will always choose Capitalist . Lesser Evil . My $0.02

    • bdutta

      Should people believe that McD started offering free food in form of Burgers and charging for soda, as a gesture of genuine philanthropy and without any agenda ?

      If philanthropy with an agenda still achieves some social good, without necessarily precluding some other social good, it – IMHO, is still good. When I say “good”, I mean something that has an impact with a positive mid-term and long-term impact. Question here is, is Internet.org, really going to have positive, mid-term and long-term impact, without necessarily some social harm as well ? I deliberately didn’t talk of ‘shorter-term’ impact, because those are often, false indicators.