When Facebook Founder and CEO Mark Zuckerberg meets the Indian Prime Minister Narendra Modi , he’s likely to make a strong pitch for Internet for all, via Facebook backed Internet.org. Internet.org fits in well with the NDA governments “Digital India” mandate: Digital India is about making the Internet available to the masses, while with Internet.org, Zuckerberg made the pitch yesterday for making the Internet free for the masses. Sounds like a perfect fit, but it

hardly is. What PM Modi and his advisors must take heed of, is that what Zuckerberg means by Internet for all, is essentially Facebook for all, along with a few non-profit services thrown in to give it the appearance of philanthropy, and maybe a few co-opted competitors to make it appear as if it isn’t about Facebook only

Where Internet.org doesn’t fit with the Modi governments mandate is that it essentially hinders the “Make in India” campaign. At a ridiculously carefully controlled press interaction in Delhi yesterday (the journalists asking the questions appeared to pre-selected, despite being told earlier that questions we submitted would be randomly selected), Zuckerberg didn’t talk about:

– Before a telecom operator gets a roster of services to choose from, how would core services be selected for the Internet.org app?
– Under what circumstances are services going to be rejected for Internet.org?
– Who exactly pays telecom operators for free Internet access and how are the rates paid to telcos decided?
– Are the rates that telecom operators being paid for consumer access to Internet.org going to be higher or lower than market rates, and will there be public disclosures, so these can be compared with pay-per-use access rates in each country?
– Why is Facebook (via Internet.org) distorting the market by splitting the Internet into services that are free and paid for consumer access?

Our question for Zuckerberg (which didn’t get answered) – “Doesn’t creating a consumer data pricing differentiation between those companies which are on board at internet.org and those which are not, disadvantage those startups who can’t afford to pay telecom operators for subsidising data?”

It’s like the Mobile VAS situation all over again: a few companies will have access to the customer through this free service – and in India, the gap between free and paid is a massive one – and those who are on board will benefit, while competing services wont. Essentially:

– If Gaana.com is available on Internet.org, what will Saavn do?
– If 99Acres* is on Internet.org, what will Commonfloor do?
– If Alibaba is on Internet.org, what will Indiamart do?
– If TimesofIndia is on Internet.org, what will OneIndia do?
– If YouTube is on Internet.org, what will Vuclip do?
– If MakeMyTrip is on Internet.org, what will Yatra do?
– If Paytm is on Internet.org, what will Freecharge do?
– If Facebook owned Whatsapp is on Internet.org, what will Hike do?

Our guess is that they would be forced to enter special revenue sharing arrangements with telecom operators, for data bundling.

The nexus between Facebook and Telecom Operators

Internet.org allows Facebook to increase its dominance and get new users hooked on to the service. It allows telecom operators to do exactly what they’re lobbying for in India – create a revenue share arrangement between Internet companies and telecom operators. Airtel, an Internet.org/Facebook partner in Zambia, has repeatedly been saying that it should be getting “interconnection charges” for data services from Internet companies. Uninor wants “Data VAS”. For more on those lobbying efforts, read this.

In fact, Facebook has actually joined the COAI, the telco association that is lobbying for this arrangement: Facebook is helping create a “Data VAS” situation with Internet.org, where some services (with non profit services thrown in to make it look good) will be available for free, and the rest are paid. Telecom operators are happy because free services get consumed more, and they make more money. Do you think access to the free web (outside of Internet.org) will be cheaper? If telcos make Rs 500 per customer per month via Internet.org, will they charge Rs 150 per month for access to the free web? Or will they increase those rates in order to make customers switch to Internet.org, where they make more money?

Think of the startups, their access to customers and potential future competition for Facebook. If ISP’s didn’t allow open access to social networks, and Orkut was willing to pay for preferential pricing, would Facebook have dominated the social networking space in India?

What Zuckerberg did say

In between what were mostly safe questions (including “why free Internet, why not water?”, “what would you do now if you started up again?”), a reporter from the Washington Post slipped in a second question (only one question per selected person was allowed, and only those who had submitted questions earlier were allowed to ask) about this walled garden approach, and it potentially creating monopolies:

“The way that this works is”, Zuckerberg said, “we’re trying to pioneer this model where the operator can offer free basic services to help people understand why the Internet is valuable for them. Offer a some basic things for free, that are going to be valuable to the society, ultimately with the goal of helping people learn more about what they can do on the Internet. They ultimately can buy data plans to fund the development of the Internet. Ultimately it is up to the operators to choose which services they want to include. Right, so I think it is going to vary from country to country, in terms of which companies people want to include, which non-profit services, social issues are more important that the government wants to fund app development for to include in these packages. And there’s no rule that says that Facebook or any other company has to be included in this. It’s just proving that this is a model that works to get more people on the Internet and to make it so that operators can also increase their profitability so that they can invest more to build more infrastructure so that they can serve more people. I’m optimistic that getting more people on the Internet will help Facebook over the long term too, but there’s definitely no rule that says that Facebook has to be included in each country as a service. If you take a country like China where Facebook is blocked, I can guarantee you that if the model ends of being successful, we are obviously not going to be offered there, and that’s fine because if more people get on the Internet and there are different services there, that’s still good for the world.”

Indian companies might create apps as per the ‘Make in India’ philosophy, but the lack of a neutral Internet access ecosystem, and the existence of a walled garden like Internet.org, is going to hinder competition. The access, development and social services angle is just sugarcoating.

Vodafone chief Vittorio Colao was quoted as saying that Internet.org wasn’t fair. “It is almost like Zuckerberg does philanthrophy, but with my money,” he said. Considering Facebook hasn’t partnered with Vodafone, it is not clear what Colao means when he says ‘with my money’. One can only assume he is referring to the potential loss of customers who may be opting for free internet.org over Vodafone data plans.

Internet.org makes business sense for Facebook, but not for India.

source medianama