On net neutrality and the national interest

Net neutrality might be an optimum compromise in the absence of full liberalisation of the telecom industry

This is a comment I wrote for the Hindi newspaper Naidunia (Indore). Given that Takshashila might submit an official response to the TRAI public consultation on the subject, it is important to state that this is my personal opinion.

The ongoing debate on net neutrality reveals clashes of several public goals and interest groups. Should service providers have the freedom to sell products of their choice to customers of their choice, or should they not have this freedom? Do consumers have the right to use internet services as they have always been used to? Should the open “ethos of the internet” continue to remain so even after it has passed out of the US government’s management and into the hands of the international community? Will an internet with different lanes for different traffic remain the internet as we know it? Should application and content providers like Facebook, Twitter and WhatsApp enjoy greater profits despite making much smaller investments than telecom service providers?

The issue is complex and entangled, and we should resist the temptation to see it as a fight between good guys and bad guys. There is nothing wrong in corporations trying to maximise their profits as long as they conduct business in a legal and ethical manner. It would be wrong to project telecom service providers who are seeking to improve their profitability as villains. Similarly, it is rather pointless for them to look at over-the-top (OTT) services like Facebook and begrudge them their profits. Different industries have different risks and different rewards. Consumers too cannot claim that things should be as they are and every change is a negative development.

So what should we make of this issue? I would like to answer this question by asking “what is India’s national interest with regard to IT in general and the internet in particular?”. There are three aspects to our national interest:

First, given that less than one in ten Indians has access to broadband, it should be a national priority to increase penetration. There is a correlation between broadband penetration and economic growth rate. India’s development needs our economy to leapfrog into the information age: for this we need reliable, affordable services. So when thinking about net neutrality at this stage, the government must give the highest priority to ensuring the maximum number of people take up broadband in the shortest duration possible.

This, however, should not come as a result of price regulation. Fixing prices and a government that worships at the altar of “low cost” will result in damage. Low prices should come as a result of market forces and competition.

Second, given that India’s IT industry is an engine for growth and development, we must ensure that it remains globally competitive. The industry is worth more than 100 billion dollars and employs more than 10 million people. There are thousands of startups in the country aiming to become the next Infosys and FlipKart. Our IT policy should not create more hurdles for entrepreneurs and ensure that they have the best possible start to build world-class companies. Without Net Neutrality, the risk that startups will face even greater “unfair disadvantages” against established firms is higher.

Third, it is in the public interest for the telecom and mobile service provider industry is healthy and competitive. In the past decade, the regulators pursued the goal of forcing the telecom providers to lower user tariffs. While India has one of the lowest costs of telecom services in the world, the service quality is patchy. Calls drop frequently. Broadband service often is of lower speed and suffers outages. Billing services are terrible. Anyone who has tried calling the customer service helpline of any telecom provider will attest to the fact that it is very difficult to get anything done. All this is because telcos are cutting costs in these areas. There are few lucrative or premium services left where they can increase their profitability. The only protection they enjoy is through licensing — the government limits the competition they face.

When deciding what to do about net neutrality, we must keep all three considerations in mind, and optimise them simultaneously. If the government opens up the telecom service market to greater competition, perhaps by issuing unlimited licenses, then there is a case to allow them the freedom to discriminate among customers. As the state-owned carrier, BSNL can provide a neutral internet. However, if the government does not open the sector to further competition, therefore shielding the telecom service providers from more competition, then mandating net neutrality provides a reasonable approach to promoting the public interest.

The current debate calls for the government to review the entire licensing regime and consider full liberalisation of the telecom industry.

Why a Swachch Bharat cess is a bad idea

A tax break will work better

Prime Minister Narendra Modi’s initiative to clean up the country showed that he was prepared to tackle the most difficult problems India faces—cleanliness, hygiene and sanitation are Mahatma Grade Problems, caused by a simultaneous combination of individual, social, market and government failures. The Swachch Bharat initiative has come about because he used both his popularity and power to try and change mindsets and attitudes. To succeed, it needs the government, business and social leaders to change peoples’ minds and moral incentives. If it becomes yet another government programme, it is bound to fail.

So the Modi government’s proposal to impose a cess on telecom services to finance the Swachch Bharat campaign should cause us disappointment and alarm. It is the wrong approach to the problem, using the wrong method. Here’s why.

Levying a cess dilutes the moral incentive that a borderline conscientious citizen faces. Instead of a gnawing feeling when she sees garbage in public places, the marginal citizen is likely to feel the same-old, “I’ve done my part but the government is not doing its job properly”. There is evidence that compliances rates (for tax payments and other rules) goes up when citizens see the government delivering honestly and effectively. Similarly, the perception that government is inefficient and corrupt reduces compliance. In other words, levying a cess on citizens is not only likely to cause them to outsource their guilt and responsibility, but also try and avoid having to pay the cess. Swachch Bharat should be about emphasising that hygiene and sanitation are about personal honour and dignity, not about pay-tax-and-forget.

That’s not all. A cess is a bad way to raise revenues. A cess on an unrelated activity is a terrible way to implement a bad way to raise revenues. As this blog commented on the previous government’s use of a cess on restaurant bills to finance education, there is no better way to signal that a government has confused public finance priorities than a cess. If a programme is important, it should be financed through the core budgetary revenues. Clearly, one of the prime minister’s most important priorities ought to be enough of a priority to be funded through the conventional budget.

If at all a cess has to levied, it should be on non-essential spending. Furthermore, a specific tax on an unrelated economic activity merely to raise revenues is a very bad idea. Telecommunication services are already subject to heavy price regulation, leading to very bad quality of services across the board. An additional tax on these services will burden consumers, impact telecom service provider revenues (and hence the license fees they pay the government) while doing nothing to improve service quality. Telecommunications services appear to have been chosen for the cess mainly because it is easy to collect from them, and people will have to make calls and access the internet anyway.

Why could the tax not have been levied on entities and industries that dirty public spaces? At least that would have attempted to recover the cost of the negative externalities.

But here’s an even better idea to implement Swachch Bharat: give a Swachch Bharat tax break to all income tax payers. When filing their taxes, let taxpayers tick a box saying “I have done my best to make India clean”. Of course, a lot of people will claim the tax exemption without changing their behaviour, but a some will. It is better to trust the citizens more to do the right thing, than to tax them more on the premise that they will do the wrong thing. That’s the only way Swachch Bharat can work–when the relationship between the citizen and the country changes into one of mutual trust and mutual concern. The campaign is about capturing hearts and minds, not more rupees.

The Modi government would do well to resist the temptation to use age-old sarkari methods to solve a nagging social problem.

What should India do about US snooping?

How do you solve a problem like Maria?

Boundless Informant Heat Map

According to reports in The Guardian—based on information illegally divulged by NSA contractor Edward Snowden—we know that India is among the top ten countries that the United States snoops on. In March 2013 alone, one of NSA’s programmes collected 6.3 billion pieces of information from India. (Yes, all the hoopla in the US about spying is limited to outrage over the US government spying on its own citizens. Spying on other countries’ citizens is somehow acceptable to many freedom- and privacy-loving Americans.)

What should the Indian government do about this? Here are some options:

1. Do nothing. High officials can express their disapproval. The foreign ministry can register a strong written protest. The US ambassador can be told in no uncertain terms that New Delhi is displeased with the snooping. Essentially, nothing actually changes.

2. Take defensive measures. It is incredibly hard to defend Indian communications networks against the kind of surveillance that the NSA is carrying out. It is impossible to harden all networks—although the government can attempt to move its employees onto more secure platforms. When so many government employees still use Gmail, Hotmail and Yahoo for correspondence with people outside government, there is a lot that the government can do to make official communications more secure. This still leaves public communications heavily vulnerable to snooping by one and all.

3. Attempt to achieve a balance-of-snooping. Start snooping on ordinary Americans (okay, suspected terrorists only) until the US government gets concerned. Then negotiate a truce to control snooping, much like arms control deals that managed arms races. Even if cyberspace offers asymmetric opportunities, the gap in capacities between India and the United States are mindbogglingly large. It will takes years of sustained investment and effort for the Indian government to do anything that’ll worry the US government enough to want to negotiate. The Chinese might be able to pull this off, though.

4. If you can’t stop them, join them. Use the India-US strategic partnership to collaborate with the United States in the cyber-surveillance and intelligence domains and use the collaboration to acquire skills, capabilities and technology that India does not currently have. Once such capabilities are acquired, India will have more options.

Update: I make some of these points in an NDTV programme.

When BlackBerry went to New Delhi

BlackBerry must comply with Indian law. India needs a new debate on privacy.

Yes, terrorists can use anything to communicate with each other, plan attacks and help carry them out.

Hafiz Mohammed Saeed can write letters, in code, and send it by post to his sleeper agents in India. He probably does that. But not all means of communications are alike in their ability to help terrorists carry out attacks. A terrorist with a satellite phone with real-time voice and data connection is far more dangerous than a terrorist who carries letters in his pocket. So the argument that terrorists can use anything to communicate is not a valid counter to the argument that government agencies can prevent, investigate and prosecute terrorists better if they are capable of intercepting or blocking real-time communications.

For instance, there is a reasonable argument that the damage to life and property in Mumbai during the 26/11 attacks might have been lower if the terrorists had been denied access to real-time communications, from satellite phones, to cellular phones to broadcast television. There is also a reasonable argument that the ability to intercept the phone calls made by the terrorists plays an important role in prosecuting them in courts of law and in courts of public opinion. India’s law enforcement agencies have had the ability to tap your phone for ages, but apart from the odd political scandal, it is difficult to build a case that this has somehow led to the infringements of the rights of ordinary citizens.

The current debate over Blackberry’s messaging system must be placed in this context. The ongoing discussion between the Indian government and Research In Motion (RIM), the Canadian company that provides BlackBerry services, involves two inter-related issues.

First, whatever might be RIM’s values, business practices and corporate policies, its business in India is governed by Indian law. The contention that “no one else has a problem with our service” is no defence—India has security considerations that might be peculiar to it, and as long as the requirements are constitutionally legitimate, RIM must comply. It is disingenuous to conflate the legitimate authority of a constitutional democracy—imperfect as India’s is—with that of the demands made by totalitarian or authoritarian states. The two are morally and practically different. [See this editorial in the Globe and Mail].

RIM could insist—as it has just done—that it is not treated any differently from others in the field, but it cannot get away with the excuse that its corporate policy overrides the rule of law in India.

Second and the more important issue is for India to establish due processes to determine just who, under what circumstances and under what checks and balances gets to actually block or intercept communications. A national debate over digital privacy, powers of government and mechanisms for redressal is now urgent, as the Indian economy and society become ever more reliant on communications networks.

It is clear that citizens need greater, more credible safeguards. It is also clear that the government needs to be more capable of addressing threats that arise from advances in communications technology. What is not clear is whether the political establishment sees these as priorities worthy of wider public deliberation. The usual practice of passing legislation without adequate parliamentary debate is neither likely to reassure citizens of their rights nor offer new ideas to law-enforcement agencies.

This blog has consistently argued against blunt measures like banning telecommunication services, even and especially in insurgent & terrorist affected areas. Governments must learn how to operate in an information-rich, networked world. Therefore, to the extent that the Indian government’s threat to block BlackBerry services is a device to press RIM to better co-operate with the law-enforcement agencies, it is tolerable. Such a threat is credible only if it can hurt both the government itself and RIM. This appears to be the case.

However, it would be a serious mistake if the government were to make such a ban permanent. Not because India needs the BlackBerry, but because the underlying rationale is self-defeating.