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The “Fair Usage Policy” and data caps for broadband in India must go


How would you define “unlimited”? In response to a consultation from the Indian telecom regulator TRAI in 2010, Bharti Airtel, India’s largest telecom operator and private ISP, said that while “a strict definition of the word ‘Unlimited’ would mean ‘without any limits’, we beg to differ with the use of the word ‘Unlimited’ in tariff advertisements being termed as misleading”…”The word “Unlimited” has to also be seen from the perspective of the conditions imposed.”

In 2009, ISPs in India, led by Airtel and Tata Indicom, introduced the “Fair Usage Policy”, wherein users with unlimited data plans found that their speed of Internet access was halved if they used up a certain amount of data. In order to get back to full speed, they were forced to fork out more money. At the same time, ISPs continued to advertise “unlimited” broadband plans. Airtel’s justification for this misleading advertising was one for the history books: “the limits set out by most service providers is implicitly unlimited since the capping on usage is done at a very high level.”

Since the institution of the FUP, the relationship between ISPs and their customers has been typified by the first two letters of this acronym: FU. One by one, virtually every ISP systematically rolled out policies that limited Internet usage, with users previously on unlimited plans switched to these “unlimited but with limits” plans without explicit consent or permission. The argument from Airtel then was that the policy was “aimed at encouraging responsible usage among the very few, who make inappropriate use of this service”, essentially saying that a few customers were using too much bandwidth. In effect, the FUP was essentially used to introduce data caps in India, and push customers to pay more for speeds that they were used to. The result: improved monetization for ISPs, and the milking of an Internet user base that wanted higher speeds and more data, not less. Is it any surprise that earlier this year, Airtel wanted the TRAI to allow FUP of as low as 64kbps?

What made things worse was that customers really didn’t have a choice: wireline Internet access in India has, for long, been controlled by neighborhood monopolies, most customers have one or two other ISPs to choose from. The cost of right-of-way access, and the fact that the thugs who run local cable operator businesses would regularly cut wires of competing ISPs meant that the top 4-5 ISPs own most of the market. Fair competition would have driven

The cartelization led by companies that own both telecom operators and ISPs has hurt the growth of broadband in India. India has added less than 10 million wireline broadband connections since 2009, when the Fair Usage Policy was introduced. We have an embarrassingly low wireline broadband base of 17.32 million. Our 2010 target was 20 million, eventually crossed only by including wireless users, for most of whom, until recently, Internet connectivity rarely crossed 100kbps, even though they were on 3G. That isn’t true broadband, and wireless will not be as consistent wireline for broadband access. In fact, this cartelization also helped the same telecom operator cartel: it allowed them push policy towards increasing wireless broadband usage, where they make more money per MB (at around Rs 0.2 per MB) than wireline (believed to be around Rs 0.02 per MB).

The TRAI failed to act in 2010, when it didn’t fine telecom operators for misleading consumers; in comparison, FCC in the US recently fined AT&T $100 million for misleading consumers with its Fair Usage Policy.

Here’s why the FUP and data caps should go:

Firstly, the idea behind data caps and FUP, when they were introduced, was that networks have limited capacity, and users who were using a lot of data were “choking” the bandwidth. However, FUP and data caps aren’t the best way of addressing choking the bandwidth: increasing capacity is. As a country, we ought to incentivise investment in increasing capacity, and not support mechanisms that prevent it.

Secondly, this isn’t 2009. Watching this three hour History Channel documentary or this two hour video of a debate on whether the Universe is a simulation isn’t “irresponsible” or inappropriate” usage, and who is it Airtel to decide whether the usage of an Internet connection is irresponsible or inappropriate? It’s supposed to be merely a facilitator of Internet access, and nothing more, unless, of course, it wants to take on liability for what its customers access online.

Lastly, because of improvement in speed of access over the years, there is much more rich media content online: the growth in video consumption in India is indicative of the demand for video, and now there are speeds that allow it. We’ve seen a substantial increase in speeds of access (some ISPs offer as much as 100mbps, whereas in 2009, most offered around 1mbps), but not a proportionate increase in FUP or data limits.

So while ISPs are encouraging consumption of rich media by offering higher speeds, they are artificially creating scarcity and monetizing it with FUP and data caps. Thus, FUP and data caps are only being used as a pricing tool. From a policy perspective, this government has said that it wants to encourage more Internet usage, not less: it would do well to scrap FUP and data caps, or at least end this FUP based cartelization by making it easier for more ISPs to flourish and compete.

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