Net neutrality: Sony India finds analogy in MSO packaging of prioritising content

NEW DELHI: While opposing differential pricing for data services, Sony Pictures Networks (SPN) India has – like Star India earlier – said that this replicates the system where the multi-system operators (MSOs) and not the customers had been prioritising the content to be carried on their cable platforms.

In its response to the Telecom Regulatory Authority of India’s (TRAI) Consultation Paper of 9 December on ‘Differential Pricing for Data Services,’ SPN India said such a differential pricing regime would also create a system, “which replicates the harmful effects of arrangements between carriage and content playing out in the cable and satellite space wherein MSOs instead of consumers have been prioritising the content to be carried on their cable platforms, the basis of such prioritisation being the carriage and placement fees being paid by content owners.”

The broadcaster said this anti-competitive behaviour by MSOs has led to small content providers being hit the most as carriage and placement fees act as entry barriers for new content providers. Differential pricing with regard to data would inevitably create the same concerns as in the MSO and content space.

SPN India said, “It is submitted that differential pricing, is a discriminatory regime of charging different consumers different prices for the same product or services and is antithetical to the fundamental rationale of openness and equality. Differential pricing of data services is conceptually the very antitheses of net neutrality, and competition. Providing sponsored or subsidised data to consumers is a prime example of a differential pricing regime since it involves charging different consumers different prices for the same product or services.”

Even though service providers have suggested time and again that any concern of market abuse/discrimination, should be addressed on a case to case basis rather than by imposing a blanket ban on any particular business model/pricing innovation, SPN India submitted that differential pricing is against competition and a level playing field and cannot be addressed by placing adequate safeguards.

Differential pricing leads to restriction of access to information, SPN India said. It enables telecom service providers to play the role of “gate-keepers” to the internet where they are in a position to differentiate between data packets.

SPN India said the principle of net neutrality “clearly prohibits any blocking, differentiation or prioritisation of data packets based on their type. Once differential tariffs for data are in place, the principles of net neutrality no longer hold valid since such tariffs are based on differentiation of data packets. While they may be portrayed as means of subsidising costs of accessing the internet, it needs to be understood that such subsidisation is also a way of differentiation, which can distort the equilibrium of the internet as it is enjoyed today, where everybody has unrestricted access and also has equal opportunities.”

According to the company, allowing TSPs to charge differently for different uses of data essentially would essentially create a tariff regime where TSPs would have the right to create different classes of subscribers based on the kind of content they want to access and determine different prices for different websites, applications and platforms. Such differential pricing would thus allow TSPs to fundamentally alter the nature of competition between these websites, applications and platforms in a manner not linked to the quality of the services they deliver to consumers, but on the business arrangement between the TSPs and the websites, applications, platforms etc.

The possibility of competition between different companies could be subverted if competitors could collude with TSPs. Such collusion would invariably result in financially able entities paying carriers to ensure that a competitor’s website loads slowly, or is inaccessible altogether, or the use to it is more cost intensive.

Saying this would also end up distorting and altering the primary role of TSPs, SPN India submitted that a differential pricing arrangement in addition to having the effect of directly determining the price of data would also limit or control access to or control of the provision of data services while having an appreciable and adverse effect on competition, which does not form a part of such an arrangement.

It said such activities in addition to being anti-competitive and unfair, would also give rise to increasing market entry costs for non-participating entities, using dominance in the market to abuse the same through service tie-ups and predatory pricing.  

Thus, any such differential pricing arrangement for data services between the TSPs and websites, applications, service, content providers etc would be violative of the provisions of the Competition Act, 2002.

As an example, SPN India said that in recent times it had been seen that a prominent TSP in the country was providing access to one of the foremost social media networking sites on a zero rating plan. Such an arrangement would have an appreciable and adverse effect on competition, which does not form a part of such an arrangement. Sony added that such service tie-ups and predatory pricing would ensure that there is an increase of market entry costs for non-participating entities, which incidentally did not exist when the said social media networking site itself was a start-up.

SPN India also felt that the TRAI should seek the opinion of the Competition Commission of India (CCI) to understand the anti-competitive effects of the differential price regime.

It gave the example of other countries where TSPs had been fined for zero-rating certain internet-based services. Furthermore, differential pricing as a model has been banned in countries such as Japan, Chile, Norway, Netherlands, Finland, Iceland, Estonia, Latvia, Lithuania and Malta.

Differential pricing of data services would enable large incumbents to create a framework with TSPs that allow them, covertly or overtly, to create different versions of the Internet which they package and control. This would inevitably result in various versions of the internet, with or without all features, including ones that are available at lower prices and include only the content and the service providers that have chosen to play by the regime established by the large incumbents, and another version being the less privileged one which would be expensive, more difficult to discover, and occupied by the smaller players who don't have the financial ability and muscle to take on their powerful counterparts.

While stressing that its stand on differential pricing for data services was not meant to stifle an innovative data regime, SPN India said it, “strongly believes that while there is an urgent need to connect a billion unconnected people and narrow the digital and developmental divide, we certainly believe that there are other transparent and more effective ways of achieving that goal.”

The broadcaster suggested that investing in infrastructure for common access and providing subsidised and non-discriminatory access directly to the consumers could be some of the ways that could be explored. Subsidised time based models, creations of public or community networks are some of the other routes available to expand access to the Internet.

Additionally, local data centre requirements could also reduce costs of accessing the internet. Local data centre requirements mandate that enterprises establish a data centre within a country as a condition of being permitted to provide certain digital services in that country.

Such requirements prevent data form being produced, stored, and processed anywhere. Brazil, China, Indonesia, Malaysia, South Korea, Venezuela, and Vietnam are among the many countries that have imposed or are considering imposing local data centre requirements. We could also consider having similar data centre requirements in India.

Additionally, SPN India said any such requirement would also have the added advantage of enhancing security of data since they would lie on servers within the country.

SPN India added that the TRAI paper does not talk about Big Data, a broad term, which is generally used to refer to the use of predictive analytics or certain other advanced methods to extract value from data. In the differential pricing regime, since the TSPs would be acting as gatekeepers to certain packets of data, based on their business arrangement, they would also tend to obtain sensitive information of consumers such as their data usage patterns. Such data patterns in addition to raising issues of privacy would effectively make it easier for sellers to identify new customer segments and target those segments with customised marketing and pricing plans.

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