The Indian telecom regulator TRAI appears to have given the go-ahead to apps like Gigato, which allows its partner websites to refund users for data consumed on their apps, by giving mobile recharge credit. The recommendations (which means it is up to the Department of Telecom to accept, modify or reject them) also mention government subsidisation of data for rural India. The recommendations:

A. Government subsidisation of Internet Access

1. 100 MB of data will be given to ” all users who are located in rural and remote areas, as notified by the Government”. “After the expiry of 100 MB of data in a month on a mobile connection, the free data services will be suspended till the beginning of the following month.”

2. The scheme should be implemented for a definitive period with a clearly defined time limit for each subscriber:

free benefit for a fixed number of months for each subscriber.

3. The scheme is expected to cost Rs 10 per subscriber per month. “a cost of approximately Rs. 600 Crore to provide 100 MB of free data to 50 million users for a period of one year.”

B. Third Party Aggregators are being allowed to reimburse data

1. Third Party aggregators, which will have to register with the DoT, are allowed to provide Free Data to users. These will have to be an Indian company, and the registration will be valid for 5 years.

2. An aggregator may buy data packs in bulk with the intention of distributing them to consumers as rewards, without any arrangement with any TSP, and allowing the users for accessing any content of their choice should therefore not be regarded as offering ‘data services’

3. Any third party aggregator must have:

a. No unfair discrimination against any person who may wish to sponsor mobile data

b. Absolute transparency of costs of providing free data to consumers.

c. No arrangement directly with a telecom operator, and deal in a Telecom Service Provider(TSP)-agnostic manner. Any scheme that “requires any sort of arrangement with some or all TSPs for the delivery of free data with the resulting effect of discriminatory tariffs based on content should not be permitted.”

4. The Toll-Free model, where the consumer will effectively get free access to certain websites, and have to pay for websites which haven’t been contracted by the aggregator, is being disallowed because here the reimbursement is being made directly by the aggregator to the telecom operator, because “the consumer effectively get free access to those specified websites.” Also, “Since this model involves the ISP getting into an agreement with the aggregator the model would constitute a form of zero-rating with a strong discriminatory effect.”

5. No direct money transfer model is allowed, since for this, a lot of information about the user will have to be shared with third parties.

My Take (also see MediaNama’s submission)

1. Data-back has the same effect as Zero Rating: If a user has 100 MB data left for consumption. In a zero rating scenario, if a user uses the equivalent of 10 MB, she will be left with 100 MB, and the 10 MB is reimbursed as it is being used: i.e. for every byte used, a byte is given back immediately​. In a data-reimbursement scenario, the usage is metered and the user is given 10 MB back, but after a short period of time, or upon completion of a target amount of usage. The effect is the same, and the user still has 100 MB, and the website or app which was used has been zero rated. Thus, this recommendation to allow third party aggregators to reimburse for data usage effectively goes against the intent of the differential pricing regulation, and should be seen as a net neutrality violation.

2. Creating classifications of users: The TRAI’s differential pricing ruling had said:

“On the other hand, differential tariffs result in classification of subscribers based on the content they want to access (those who want to access non-participating content will be charged at a higher rate than those who want to access participating content). This may potentially go against the principle of non-discriminatory tariff.”

Databack also creates a classification of subscribers on the basis of the content they want to access: there will be no data-back for users who want to access non-participating content.

3. Creating barriers to entry: The TRAI’s differential pricing ruling also highlighted issues with differential pricing:

“Secondly, differential tariffs arguably disadvantage small content providers who may not be able to participate in such schemes. This may thus, create entry barriers and non-level playing field for these players stifling innovation.”

If you look at Gigato’s Google Play page, it tells users that “After you download and register with Gigato, all the apps that partner with us are able to refund you for the data consumed on their apps with unrestricted mobile recharge credit on 2G/3G/4G.”

The Free Data aggregator model has the exact same issues: it also disadvantages small content providers who may not be able to participate in such schemes, or have the wherewithal to register with an aggregator. There is every possibility that the aggregators may create a high entry barrier to entry through higher costs for signing up, or a long wait-time and selecting partners.

4. Creation of a carriage fee model for the Internet: in its submission, the Internet Freedom Foundation had mentioned the danger of creating such an aggregator ecosystem, saying “In time around 10 discovery apps or a rewards platforms which list 100 top websites visited in India will in effect create a zero rating system in which it will be impossible for new platforms and services to enter. This disability will particularly impact smaller startups and entrepreneurs who do not have deep pockets and cannot afford to pay the carriage free to the discovery app or a rewards platform.”

5. The definition of Zero Rating

The crafty thing that the TRAI has done, is that it has defined Zero Rating in a manner that this aggregator model doesn’t come across as a violation. Zero Rating, the TRAI says, is “a term that is generally used to describe schemes that provide free access to data services for subscribers of a particular Internet Service provider for accessing specific content. This may also include zero-rating content in return for edge provider payment or zerorating of select applications or classes of applications without paying any access fees.”

However, Zero rating refers to the act of making access to a particular website or application free. The act of making access to all websites and applications free, without discrimination, is referred to as Equal Rating.

6. The telecom operators aren’t out of it yet:

No prohibition for a telecom operator subsidiary/investee: It is good that the TRAI hasn’t allowed telecom operators to offer Free Data platforms: mobile data is a “Telco good”, of which telecom operators can give unlimited amounts, which gives them disproportionate power to play king-maker, there doesn’t specifically be any restriction for a company that is a telecom operator subsidiary or an investee (like Hike) to do this.

It is good that the TRAI hasn’t allowed telecom operators to offer Free Data platforms: mobile data is a “Telco good”, of which telecom operators can give unlimited amounts, which gives them disproportionate power to play king-maker, there doesn’t specifically be any restriction for a company that is a telecom operator subsidiary or an investee (like Hike) to do this. Telecom operators are not out of it yet: the aggregators will rely on telecom operator data packs, and thus on telecom operators making it available. This reminds us of what Raghav Bahl said in the context of cable TV: channels had a must provide clause, where they had to be telecom operator agnostic, while DTH providers had no must-carry clause. This left channels at a considerable disadvantage. In case of recharges, the aggregators have to be telecom operator agnostic (to quote: “Dealing in a TSP-agnostic manner so as to ensure that the benefits on offer are available to the largest possible number of consumers in the market.”) but there is nothing in the ruling that says that telecom operators must provide data recharges to the aggregators. Lets not forget that a similar regime exists in case of recharges: the telcos have the liberty to withdraw recharge API’s from a provider, which they have done in the past, for example, in case of PhonePe recently:

Dear @archit610. We’re truly sorry and we do feel your angst. Unfortunately Airtel shut off our Recharge services without cause last month. — PhonePe (@PhonePe_) October 7, 2016

More than Facebook, Google must be particularly pleased with this development: there were earlier looking to offer a service that allowed Android apps on the Play Store to be zero rated. They are now best positioned to allow apps to offer databacks as rewards.

With this order, the TRAI has gone against the principles it sought to uphold with the differential pricing ruling in February this year.

Disclosure: I was a co-founder of the Net Neutrality campaign in India, and am also the co-founder of the Internet Freedom Foundation. The views expressed here are independent of the campaign and IFF.