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Differential pricing of data services will create ‘carriage fee’ monster, says Star

MUMBAI: Allowing telecom service providers (TSPs) to have differential pricing for data services would create a situation akin to that in the cable TV sector where broadcasters have to pay carriage fee to multi-system operators (MSOs). Therefore, this would create an entry barrier for smaller players, Star India has said in its response to the Telecom Regulatory Authority of India’s (TRAI) consultation paper on ‘Differential Pricing for Data Services’.

The broadcaster has vehemently opposed any move to allow TSPs to have differential pricing for data usage, contending that principles of non-discrimination, transparency, affordable access, healthy competition and innovation are likely to be violated in case the regulator allows differential pricing.

It further stated that allowing the TSPs to charge differently for different uses of data will create a tariff regime where the TSPs create different classes of subscribers based on the kind of content they want to access.

In addition, by allowing the TSPs to determine different prices for different websites, applications and platforms, the regime allows TSPs to alter the nature of competition between these websites, applications and platforms in a manner not linked to the quality of the services they provide to consumers and the business models of their choosing.

The provision of differential pricing will also incentivise TSPs to extract unfair value from its presence as an intermediary with the power to dramatically change the nature of the relationship between users and service providers.

The broadcaster argued that differential pricing would also lead to unholy alliances between TSPs and content providers.

Differential pricing will allow TSPs to create different versions of the internet that will favour big players while leaving the smaller players in the cold. In this connection, the broadcaster cited the example of cable TV industry to illustrate its point.

The MSOs prioritise content to be carried in their cable platforms based on carriage and placement fees being paid by content owners.

This anti-competitive behaviour by MSOs has hurt small content providers the most as carriage and placement fees act as entry barriers for new content providers, the broadcaster argued.

This has led to a situation where carriage and placement fees prompt MSOs to deliberately prioritise, package and push unwanted channels to the detriment of the consumer. The consumer ends up paying for content that he has no desire to subscribe to.

According to Star, another implication of differential pricing would be that TSPs would differentially price data to promote their in-house applications, websites and platforms to the detriment of better, cheaper applications, websites and platforms from competing providers.

Nothing would stifle innovation more decisively than enabling such a scenario to emerge, it noted.

The consultation paper suggests that, as in the early days of voice regime, the same principles should apply to ‘on-net’ as well. Given the ecosystem is still at an early stage, it is imperative that the non-discrimination applies equally to on-net and off-net.

It also violates the basic tenet of internet access—that the flow of information is free (subject to the laws of the country) and no private player can determine what information can be accessed and what is less easily available.

While noting the impact of growing data usage on the country’s GDP growth and in generating employment, the broadcaster stated that creating a new regime that has the potential of introducing artificial distortions at a critical stage in the evolution of the data economy may  have a devastating impact on the number and diversity of applications and services, and  therefore on GDP growth and employment.

Websites, applications and platforms should have the full freedom to provide incentives to their users, whether financial or non-financial in nature, based on their own economic models and investment principles. But these transactions should be firmly between the consumer and the website/application/platform, Star argued.

Such incentives are a regular order of business in the offline world as well and limiting the ability to provide such incentives will have a devastating impact on innovation and the emergence of new business models.

The broadcaster also stated that market forces should determine the relationship between TSPs, content providers and other parties active in the digital environment to foster innovation, creativity and the development of a hyper-competitive yet nascent content industry.

It also raised concerns that a network-centric regulatory construct on content creators would be akin to putting a square peg in a round hole as the economics of industries dependent on intellectual property rights for value creation are very different from the economics of TSPs/ ISPs and other distribution pipes.

In effect, the net neutrality principle has never been applicable to or determined how content is licensed but rather to the behaviour of distribution pipes and network service providers. “We will, therefore, urge both TRAI and the DOT to shape and delineate the debate and discourse on net neutrality accordingly,” Star argued.

It also suggested other models to expand internet access like providing free internet access for rural consumers, allowing TSPs to provide free internet to consumers, at certain time periods when the network utilisation is low, allowing TSPs to provide free internet access to new consumers, building access points around the country geographically selected to provide access to those consumers who cannot afford to buy private services, and enabling TSPs to provide free internet access to consumers below a certain income level.