This is a quoted, point by point rebuttal to the Airtel Zero Press Release, an ingenious piece of writing that can be viewed in its entirety here. Do read that before diving in.
Let's do this by the paragraph.
It’s only been a couple of days since the launch of Airtel Zero, an innovative and open marketing platform that will allow customers to access mobile applications “free of cost”, and we are seeing a big and somewhat unrelated debate on net neutrality with regards to the product.
Before we get into whether the debate is unrelated or not, it's nice to understand what net neutrality is. Nikhil over at Medianama has a very clear explanation, but it boils down to this: no blocking or throttling, transparency and no paid prioritization.
Airtel Zero is a data plan designed to zero-rate app usage. That's paid prioritization and violates net neutrality, and this is why we're having a debate. I'm sure by some stretch of imagination you can call this plan innovative, but as it stands right now, it's hardly "open". Only a select few partners have been invited to participate, and while Airtel says this will change, they haven't announced pricing tiers or any selection criteria whatsoever. What do I mean by this? Let's take the top free apps on the Play store: you have at least two messaging apps and at least three ecommerce apps. Will all of them pay the same charge to Airtel Zero to sign up? How will Airtel charge video consumption on its network as opposed to messages? These questions currently have no clear answer.
While opinions from critics of the product are very welcome, it is pertinent that we set the record straight and look at some key facts relating to Airtel Zero and the benefits it brings to customers and the industry alike.
First and most important point: Airtel Zero is “free” for all our consumers and open to all marketers. Yes, open to all – big or small.
Setting the record straight is a noble goal. However, the passage that follows is disengenous. Let me rewrite that. First and most important point: Airtel Zero is "free" for all our consumers ("free" in quotes, because either they don't have any other alternative or they can't easily opt out from it, and also because we might charge in the future) and open to all marketers who pay.
In fact, since we announced Airtel Zero on April 6, over 150 start-ups – with majority being small start-ups – have contacted to enquire about the product. For the record, every one of them told us what a great platform we will be providing to them and for a change they will have an “equal opportunity” to run with the big boys. On an average, Airtel Zero will help reduce their marketing costs by almost three quarters. Not bad, I would say, though some may still feel otherwise.
Almost three quarters? So wonderful! How are these marketing costs calculated I wonder? Because we launched Chillr a while back and didn't pay a dime to Airtel to market our product and still got a ton of users. In fact, almost all of our marketing were either word of mouth or through our launch partner HDFC Bank. Now in addition to these costs, we'll have to pay Airtel too? How amazing! Isn't this great?
Also isn't it great that Airtel is going to charge us the same amount that it's charging PayTM? Yup the same PayTM with $575M+ in bank. Such a joy to have a platform on an equal footing. [/end sarcasm]
There is also a high level of misinformation surrounding the product, which is not surprising since the very concept of Net Neutrality is a bit misunderstood. Let us also bust some of the myths regarding Airtel Zero.
Agreed. Let's clarify.
Myth: The product concept amounts to preferential access
Airtel's Reality: Not at all. Airtel Zero provides universal access and is free for all our customers. Customers have the choice to decide whether they want to come there or not.
Actual Reality: It's true that customers have a choice whether to port out of Airtel or not. Let's imagine a scenario where every mobile operator has such Zero schemes. Where would they port out to? This is where regulators such as TRAI have a role.
Also, Airtel Zero doesn't provide "universal access". That would mean (and this is going by the definition of universal), every website and app would be zero rated. Preferential (again by a common man's dictionary) is when certain apps and websites are zero rated, and certain others aren't. Who decides these apps? Airtel. How are they decided? By some form of (as yet opaque) commercial agreement between these app & website vendors and Airtel.
Myth: Large companies with big budgets will be favoured and smaller start-ups will lose out
Airtel's Reality: NO. On the contrary we have had lots of ‘small’ start-ups calling us and congratulating us for building this platform, which offers them a great opportunity to market their products at very low costs. Over 150 companies are already in touch with us and want to sign up.
Myth: ‘Smaller’ Start-ups will not be able to afford to pay for the data charges
Airtel's Reality: Why not? Today, when a consumer downloads a new app and uses it for a day, the total amount of data consumed is roughly about 20-30 MB. Assuming a price of INR 1/MB of free data, this will translate to INR 20 for the start-up. Compared to this, the average cost of marketing digitally through large media/ internet companies is about INR 50 to 300 per download. So, this platform will actually make it cheaper for small companies to gain distribution as well as visibility.
Actual Reality: If the 150 number is true, it's sad that a lot of startups are buying into Airtel's ploy: it's apparent short-term benefit for longer term disaster. On the other hand, 150 is still a fraction of the Indian startup scene.
How many first time entrepreneurs will be able to afford Airtel Zero? That's a rhetorical question since Airtel hasn't announced pricing tiers, but let's assume it's Rs. 20/user as Airtel did. So to get 10000 users, I have to chunk out INR 2L to Airtel. Let's assume it's a free game that a small startup is developing that has the potential to become the next Angry Birds. To get the first million users on board, the startup would have to pay Airtel INR 2Cr. Is this in any way fair or reasonable for a small startup that wants to offer a product for free? For a larger venture-backed company however, this might just be written off as CAQ (customer acquisition cost). There is an inherent discrimination here which cannot be contested by fancy language and stats of increasing adoption.
Even assuming that Airtel would do everything a dedicated marketing company would do1, comparing voluntary payment to a third party agency to market your product and what amounts to extortion ("pay us or else we make the customer pay") is absurd. Don't fall into this logic trap.
Myth: Telecom companies will charge other companies for data used by customers. This is a way of making money.
Airtel's Reality: Telecom companies have been working with businesses for decades to offer ‘Toll-Free’ voice services, wherein, a business pays to a customer to call in. Airtel Zero is the same concept.
Actual Reality: When we were a mobile value-added services (mVAS) company, we used to work quite closely with mobile operators. They had a business model that was very similar to the current App Store models that Google & Apple have. It was a lot more controlled though, in that telecom operators decided which apps to have on their deck, and who to promote via campaigns. There was also another important difference: the store owners—the telecom operators—took as much as 90% of the revenue. Needless to say, there wasn't much innovation happening in the industry. The best product to come out of that era were caller ring back tones. I don't think anybody remembers them with fondness.
When Apple (and to a much larger extent Google) opened up their stores with a more reasonable revenue share and better capabilities through smartphones, we had an explosion of creativity and innovation. I remember working with mobile operators to open up their cell-tower based location APIs until one day all of us realized that smartphones had a GPS and we didn't need them anymore.
Nobody wants telecom operators to be the toll-booth operators for the data era (like they are for voice & mVAS). This will stifle innovation and lead us back into an age where you need a data carrier's support (& perhaps permission) to launch a product.
More importantly, data should be thought of as a service-agnostic transport for apps and content. Imagine a scenario where Airtel comes up with Airtel Zero messaging plans (for Whatsapp-like services) and Airtel Zero dating plans (for Bharat Matrimony & Tinder). Is this a world we would like to live in?
Myth: Airtel Zero is against Net Neutrality and gives advantage to those who can pay for data.
Airtel's Reality: As a concept Airtel Zero has nothing to do with Net Neutrality. It is free for each and every customer and offers the same speed to all. It charges the same amount to each company for data without any discrimination.
This is a recurring theme now, but Airtel's scheme is discriminating against any app or website vendor who does not or cannot join Airtel Zero. It is also zero-rating apps that are part of the Airtel Zero program. Positive discrimination violates net neutrality.
Myth: Speed to access the apps that are not on Airtel Zero will be throttled
Airtel's Reality: Completely incorrect. There is no difference in speed to access various apps, whether they are on Airtel Zero or not.
I think it's too early for Airtel to promise no throttling, but let's take them on their word. This however, ignores the larger issue that customers would pay (or pay more) to access websites or apps that are not a part of the Airtel Zero program. This leads to a drop in adoption for new apps and services.
It's also hard to believe that this isn't the start of a slippery slope. Why not have a "Airtel Zero Prime" plan for select businesses who will then get better data rates?
Today, some mobile devices can store 50 or more apps, others can store five and some can't even do so. Will Net Neutrality imply that all devices must be standardised and offered at the same price to make the net neutral?
There are multiple mobile technologies – 2G, 3G, 4G - to access internet. Should all speed and pricing be the same in the garb of Net Neutrality?
Nobody is asking mobile operators or manufacturers to be toll-booth operators for the Internet. Left to itself, industry forces will drive down the price for more capable smartphones and drive up average data rates. Certain services (like say Youtube) will only be accessible beyond a certain data speed (perhaps what TRAI classifies as broadband now). Perhaps in the future there will be certain apps, websites or services that will only work at 1Gbps. But those products will only succeed if they are useful and valuable and there is a sufficient customer base that can use them. As an aside, I think this paragraph was just written as an aide to misdirection, this hasn't come up at all in debates, and is frankly ridiculous.
Some customers pay cheaper data rates based on volume purchased. Does Net Neutrality imply that everyone must pay the same rate irrespective of usage?
What Net Neutrality implies (and perhaps this is getting repetitive) is that for data purchased by a customer, he gets access to all of the Internet without any blocking, throttling, in a transparent manner, and without paid prioritization. Airtel Zero falls into the last category (paid prioritization), and is a mechanism whereby participants of the program get their apps and websites zero-rated on Airtel.
In the end, the debate over the past few days has brought out one thing clearly – a large number of people are still not clear on what Net Neutrality is all about. This gives an opportunity to the so called experts to make various as well as baseless arguments. While their point of view is important, we should have a more informed and nuanced debate without painting a picture that is based on rhetoric rather than reason.
I agree wholeheartedly with a lot of what is said in this paragraph. Creating FUD is not helpful and a reasoned understanding of net neutrality is in order. However, an article that is factually incorrect & misleading (see contentions above) and bombastic (see the last quote below) isn't helpful either.
Given the facts above, what better way to contribute to the Digital India vision of the Government of India. Never before has an open and innovative platform like Airtel Zero been on offer that will help drive internet adoption through free usage (and companies and app developers being an equal partner in the process). It will also drive innovation in the internet and mobile app space by providing a cost-effective and non-discriminatory platform, in particular, to smaller companies. This will truly drive ‘Make in India, For India’.
TLDR: Let's be blunt about what Airtel Zero is. It's the last-ditch efforts of a mobile operator to retain pricing control over its data network. By providing a mechanism to zero-rate certain apps & websites that join the programme, Airtel Zero is engaging in paid prioritization, which violates net neutrality.
When it couldn't innovate and bring great products out in an open market, Airtel seems to now think charging other folks who do is a great strategy. Honestly, it's just sad to see such press releases.
About the author:
Vishnu Gopal is CTO of a technology company based in Kochi, Kerala. Views expressed are personal.
Do be rational when you comment. Trolls aren't appreciated.
This is ridiculous because telecom operators in India don't even know how to market their own products. ↩