Opinion

Neutrality Advocates Upside-Down On Zero-Rating

This actually happened in India.

Facebook, together with mobile phone partners, offered Indian consumers a plan called FreeBasics.  Sign up, and over 80 sites that bring you messaging, information, access to services, and the like will be delivered to you free – that is, no data charges.  In essence, they are willing to pay your bill for you so you can try it out.

Sure, Facebook was one of them, and it was a great way to show new users the Internet, while also letting them communicate with friends and relatives, get health and education services, and so on.

India has a large middle class, but it’s still a poor country, and hundreds of millions of people remain unconnected.  Here was a subsidized opportunity to let them enter the Internet world.  In fact, the World Wide Web Foundation, an advocate for “net neutrality” and Internet regulation, said this: “A zero rated app is an offer consumers can’t refuse.”

And that’s why they opposed it, and led the fight to stop it – just like they’re doing here in America.

Three of the four leading mobile phone operators in the U.S. all are now offering some version of this idea, in which they provide their customers the opportunity to avoid paying for some of their data usage.  T-Mobile has their Binge On service that doesn’t charge customers for watching video from participating companies.  Netflix, one of the Binge On participants, has been extremely positive about the results.

Netflix’s CEO Reed Hastings recently said, “The great thing that T-Mo is doing is making unlimited video consumption a possibility with freedom from worrying about the data caps. It’s seeing a great reception amongst our users and we are seeing viewing going up and I think T-Mo was seeing some real positive benefits from that.”  (And remember – the “neutrality” types oppose data caps, so freedom from worrying about them must be a good thing.  Nope.)

Verizon and AT&T have launched plans that are more like 1-800 numbers which provide toll-free mobile broadband usage for certain downloads, video or other content – the sponsor pays for the call.  These services are available to any company that wants to participate and make its content data-usage-free for its customers (just like Facebook’s Indian offer was open to all websites – no discrimination).

This is big stuff.  It demonstrates that there are two sides to the Internet – you want to reach “stuff,” but “stuff” also wants to reach you, and is willing to pay your bill for you to do it.  And yet, the “net neutrality” posse – the self-described advocates for competition – want to prohibit this competition, because it’s anti-competitive.

Huh?  Why?  Because the advocates know that big companies can only be brought down by regulation.  But we see daily evidence that it’s not true — Tesla is eating away at the big carmakers, and Solar City at the big electric utilities. The fact is, the opposition to zero-rating is based on a view of a world that doesn’t exist.  They think that prohibiting this “free usage” feature is the way to promote a competitor to Amazon or Facebook or YouTube.

But if you were the money behind a challenger to these established monopolies, you’d instantly grab the chance to introduce your product to the consumer by making it free to them.  In fact, if you were Google or E-Bay or Amazon, you’d want this “zero rating” thing killed in the crib, because then a prospective competitor wouldn’t have access to it.

Finally, the biggest disconnect the neutrality advocates have is that they think they know what the consumer wants and are ready to fight for it, even if it isn’t.  They assume the consumer wants unlimited data plans without caps, even if they’re more expensive.  They assume that consumers don’t want the choice of free data and a lower bill, even as many of them are flocking to it.  They assume they know better than consumers, which is why they want to stop them from taking an offer so good it couldn’t be refused.

The neutrality advocates have gone beyond wrong – they’ve moved on to arrogance, hoping to impose their ideas about how things “should” be on consumers who want something different, and on low-income (and in India, poor) families who want relief from costs.  Let’s let markets sort out what consumers want, and let’s take the advocates’ hands off the regulatory levers while those markets do their job.

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