Arguments for and against zero rating in developing countries

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Background and context

Several studies in developing countries show a positive economic impact from increased internet penetration (Minges, 2015; Amiri & Reif, 2013). More specifically, studies have shown that increased internet penetration can have a significant positive impact on a developing countries’ Gross Domestic Product (GDP) growth (Amiri & Reif, 2013). This growth has been modelled to range from 1.38% to 3.19% for each ten-percentage point increase in penetration (Amiri & Reif, 2013). Furthermore, increased internet penetration can yield nonmonetary benefits in the form of indirect higher quality-of-life or convenience benefits, which are not typically captured by GDP numbers (World Bank, 2016). These can include improvements in health benefits, education, social cohesion, and digital inclusion (Deloitte, 2014).

While not a pure public good, access to the Internet can be classified as club good that is excludable by access-fees, but non-rivalrous (World Bank, 2016). Due to a combination of high access prices and low incomes in developing countries, access to the Internet has become unaffordable for many (Malcolm, 2014). As of 2014, only 31% of the population in developing countries had access to the internet, compared to 80% in high-income countries (World Bank, 2016). This disparity has come to be known as the Digital Divide and a solution that is commonly proposed by internet service providers (ISPs) is the “zero rating" of popular services (Malcolm, 2014). While appealing, zero rating schemes violate the principle of network neutrality.

In June 2016, the United Nations Human Rights Council passed a resolution that “condemns unequivocally measures to intentionally prevent or disrupt access to or dissemination of information online" (United Nations, 2016). The resolution also calls upon all states to consider formulating “Internet-related public policies that have the objective of universal access" (United Nations, 2016). The resolution promotes digital inclusion and establishes a need for universal and neutral internet access. Achieving increased internet penetration targets while still maintaining network neutrality, presents a current and relevant development problem for many countries.

Origins of network neutrality and its relevance to developing countries

The EFF describes network neutrality as “the idea that [ISPs] should treat all data that travels over their networks fairly, without improper discrimination in favour of particular apps, sites or services" (Electronic Frontier Foundation, 2017). It is a principle that emerged as part of the debate on “open access", which studied the vertical integration of ISPs and cable operators (Wu, 2003). At the time, the principle of network neutrality was regarded as an end-goal system-of-belief for innovation policy, while broadband discrimination and open access were the means.

In 2010, the FCC began a process to pass rules supporting network neutrality, however these were overturned by a court-case in 2014 (Robertson, 2014). In June 2015, under chairman Tom Wheeler, the FCC was finally able to adopt its proposed Open Internet rules, which applied to mobile internet and traditional wired connections (Kastrenakes, 2015). Furthermore, they reclassified ISPs’ legal standing, assigning the FCC more authority to regulate against: blocking, throttling, and paid prioritization (Federal Communications Commission, 2017).

The FCC has legal authority in the USA only and therefore questions have been raised about the applicability of their position internationally. However, the FCC’s position has two important implications for developing countries. Firstly, any form of restriction on traffic in developed countries will have a significant negative impact on connectivity regulation in developing countries, since most of their internet infrastructure and service structure relies on developed countries (Kehinde, et al., 2014). Secondly, since there is no international body equivalent to the FCC, network neutrality regulation has become a domestic issue where the adopted approach varies by country (Malcolm, 2014). Consequently, most countries, especially developing ones, look to the FCC as a regulatory role-model.

What is zero rating?

Zero rating is when “an ISP applies a price of zero to the data traffic associated with a particular application or class of applications" (BEREC, 2017). In other words, it is the exclusion of particular data from a user’s data cap (Malcolm, et al., 2016). Zero rating is only one of the many issues that undermine the principle of network neutrality. Yet it is incredibly pertinent to developing countries, as it is a solution that mobile operators regularly offer to address the Digital Divide (Malcolm, 2014). Many of the internet’s largest web properties have benefitted from zero rating, including: Google, Twitter, Wikipedia, WhatsApp, KakaoTalk, WeChat, and most notably, Facebook.

In 2013, Facebook launched internet.org to “bring affordable internet access to everyone in the world" (Zuckerberg, 2014). A year later, Zuckerberg (2014) announced that the internet.org app would be available, free of charge, for Airtel subscribers in Zambia. It offered users zero rated access to 13 web-services including: AccuWeather, Facebook, Google Search, Messenger, and Wikipedia among others (Rosen, 2014). The service continued to grow across the globe, reaching countries such as Tanzania (Dohen, 2014), Ghana (Mutegi, 2015), Colombia (Williams, 2015), and Myanmar (Trautwein, 2016). In February 2017, Facebook Free Basics was available to more than 25 million people in 62 countries (internet.org, 2017). Growth of the service has not been without challenge however. Both the Egyptian and Indian governments have banned the service on grounds of network neutrality violations (Statt, 2015).

As developing countries strive to address the Digital Divide, they are faced with a dilemma. Should they increase internet penetration by reducing access fees through zero rating, or maintain a truly neutral network? The following two sections will consider the arguments for and against the adoption of zero rating in developing countries.

Arguments for zero rating in developing countries

The first and most obvious argument in favour of zero rating is one of basic access. In a country like India, the debate around network neutrality is less about speed, fast-lanes, or bandwidth prioritisation; rather it is about access (Eagle, 2015). For someone in Bangalore who simply wants to browse Wikipedia or contact her family on Facebook, zero rating is a way to make this possible (Eagle, 2015).

A second argument for zero rating is an economic one. By promoting zero rated access, “Facebook and the network operators are working to increase the demand for internet access within these developing countries, spurring local businesses to invest in broadband infrastructure." (Donoso, 2016). The argument presented is that free access to a subset of the internet, will persuade those users who can afford it to subscribe to data plans that give them access to the whole internet.

Thirdly, the core principle of net neutrality is less of a priority for developing countries, primarily due to the issue’s American-centricity. Many arguments presented in pro of neutrality are founded on core American civil liberty values. As a result, there is concern that the issue is “misinformed outside of the United States by the peculiarities of the American [context]" (Guadamuz, 2011). However, this is a weak argument, since the American position significantly impacts developing nations who rely on the developed world for an internet connection backbone (Kehinde, et al., 2014).

Arguments against zero rating in developing countries

Most common arguments against zero rating fall into at least one of the EFF’s five classifications: (1) distorting content consumption, (2) distorting access markets, (3) walled-garden effects, (4) privacy and security vulnerabilities, and (5) centralised power in new internet gatekeepers (Malcolm, et al., 2016).

Zero rating can impede competition by distorting content consumption and access. This occurs when users adopt zero rated content and services, at the expense of alternatives. For example, a study found that the zero rating of Twitter and WhatsApp in South Africa resulted in significant spikes in demand for these services (Malcolm, et al., 2016). While this may be less of a concern for larger companies, it does impede competition from small local businesses who could provide local language alternatives, for example.

By restricting access to only a small selection of services, users are unaware of the broader internet. A survey found that the number of users in developing countries such as: Myanmar, Indonesia, Philippines, and Thailand, who said that they used Facebook, was much larger than those who said that they used the internet (Mirani, 2015). This divergence suggests that people cannot distinguish the broader internet from the walled garden of Facebook. It also challenges the economic argument for zero rating, which suggests that those users who can afford subscriptions would upgrade their data plans.

Finally, zero rating concentrates power with gatekeepers who may exploit user privacy. This introduces foundational vulnerabilities that can be used by corrupt governments to harm their citizens. This has been recognised as a key concern in South Africa for example, where the Internet Service Providers’ Association (ISPA) published a statement endorsing network neutrality as a key tenant of democracy (ISPA, 2016).

Concluding remarks

Increased internet penetration can generate socio-economic benefits for developing countries. It is recommended that nations continue to prioritise a neutral internet that is free of improper discrimination. More specifically, it is recommended that governments reject zero rating schemes, unless they can be shown to improve access without any of the competition barriers and privacy concerns discussed.

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References

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