Crony connectivity, and Internet for us( The Hindu , Net neutrality debate )

If the objective is to connect the whole world to the Internet, then Free Basics by Facebook (previously known as is a controversial method to achieve it. The company wants to provide a subset of the Internet free of charge to consumers, with mobile telecom operators bearing the costs of the traffic. Facebook acts as the unpaid gatekeeper of the platform.
This kind of arrangement has come to be called “zero rating” and attracted criticism from Internet civil society groups like the Electronic Frontier Foundation. It argues that the Free Basics scheme has “one unavoidable, inherent flaw: Facebook’s central role, which puts it in a privileged position to monitor its users’ traffic, and allows it to act as gatekeeper (or, depending on the situation, censor)… there is no technical restriction that prevents the company from monitoring and recording the traffic of Free Basics users. Unfortunately, this means there is no guarantee that the good faith promise Facebook has made today to protect Free Basics users’ privacy will be permanent.”
Monopolists vs free market

In India, Internet civil society activists are opposing Facebook’s scheme for additional reasons. While the attempt to introduce new users to the Internet is a good thing, they argue, the scheme risks breaking the network into many smaller ones and skewing the playing field in favour of apps and services that enjoy privileged pricing.

Zero rating in general and Free Basics by Facebook in particular has many defenders among advocates of free markets and capitalism. They argue that if the mobile operator wishes to lose money or cross-subsidise some users at the cost of others, then it should be allowed to do so. Government intervention in pricing usually has bad unintended consequences, and it should be no different in the case of Internet traffic.
The Telecom Regulatory Authority of India (TRAI) has re-engaged in a public consultation seeking submissions on which path it should take: the conservative path of insisting on net neutrality, a laissez-faire approach of non-intervention in the decisions of private firms, or other options in between these two.
What seems to be taken for granted but should really surprise us is that companies and policymakers accept that getting the developing world online requires methods that are different from how the developed countries got there. So, how did the hundreds of millions of people around the world become Internet subscribers? Not because of government schemes, but because they could afford it. They could afford it because market forces — competition — drove prices down to levels that made an Internet connection affordable. Unless government policies get in the way, there is no reason why the same forces will not reduce prices further to make the service affordable to ever more people, with lower disposable incomes.
There is empirical evidence for this: the 980 million mobile phone subscribers in India are able to make phone calls because they can afford the charges. Even after some price capping by TRAI, most mobile telecom operators are doing well. Despite persistent call drops and atrocious customer service, consumers enjoy reasonably good service and the industry as a whole is fairly healthy.
All this happened without a mobile phone operator providing free calls to a limited set of numbers in order to demonstrate the value of mobile phones and to encourage more people to take up subscriptions. Operators did, however, innovate in retailing, launching prepaid packages and recharging these connections. On the flip side, they also cut costs by skimping on customer service, overloading spectrum and sharing tower infrastructure.
Competition is the key

TRAI should reflect on its own success in transforming India from a low teledensity country to a moderately high teledensity one. This happened not due to “no-frills services for poor and developing country users” but by ensuring that market competition is allowed to take its course. There is no reason why mobile Internet services will not become as popular as mobile phone services as long as there is adequate competition.

Therefore, the debate on whether or not to permit zero rating is beside the point. What TRAI ought to be asking is whether there is sufficient competition in its current policy framework. Should it be licensing more telecom operators? Has the government made enough spectrum available so that mobile operators can lower prices and ensure adequate service quality? Are there bottlenecks in the hands of monopolists that raise the costs of service?
The path to achieving the dream of Digital India lies not in foreign companies deciding on what basic services India’s poor ought to access free of charge, but by encouraging ever greater competition and a level playing field. This calls for the regulator to have a hawkish approach towards anti-competitive behaviour by existing market players.
Now, let’s say that the government really wishes to make the Internet affordable to citizens whose incomes are too low to pay for it. There is a good case for this based on positive externalities: that some benefits of an individual’s connection to the Internet accrue to society as a whole. Much like primary education, an Internet connection allows a citizen to participate in the modern economy. Just as society as a whole benefits if all citizens are educated, it benefits if all citizens are connected. To be clear, this is not an argument for the government to run telecom businesses. Rather, it is to say that it is in the public interest for nearly everyone to be connected to the Internet.
Growth as a force multiplier

While it is tempting to provide free or subsidised services — like we do in India for many such things — the best method to achieve this outcome is to raise people’s incomes. If the Indian economy grows at 8 per cent over several years, the income effect will make Internet connections more affordable even if prices do not fall.

In other words, the best scheme to bring the Internet to all involves boosting competition to bring down prices and pursuing economic growth to raise people’s incomes. This is the formula that has worked elsewhere in the world, has worked in India and will continue to work. Schemes like Free Basics by Facebook and Airtel Zero are unnecessary from the perspective of connecting the unconnected.
Now, Facebook is not a charity. So, it probably must have a good explanation to its shareholders why it is spending so much of its time and resources in promoting a good cause. That explanation is likely to go: “more Internet users in the world means more users for Facebook, which we monetise in our usual ways”. It might also hint that being the gatekeeper, however open, of Internet content for hundreds of millions of people will give it a lot more market power. This is important, for as Chamath Palihapitiya, venture capitalist and an early Facebook executive says, the company worries that it will lose out if it does not capture most of the world’s Internet content on its own platform.
TRAI must take a call on whether such business strategies are anti-competitive. But in dealing with the question, the regulator must not allow itself to be persuaded that such schemes are necessary for bringing the Internet to the masses.
(Nitin Pai is director of the Takshashila Institution, an independent think tank and school of public policy.)


Report of Deepak Mohanty Committee on Medium-term Path on Financial Inclusion (GS 3)

Who: Report of Deepak Mohanty Committee on Medium-term Path on Financial Inclusion

What: Released by the RBI

When: 28 December 2015

The Reserve Bank of India on 28 December 2015 released the Report of the Committee on Medium-term Path on Financial Inclusion. The committee was constituted on 15 July 2015 by the RBI with the objective of working out a medium-term (five year) measurable action plan for financial inclusion.

The 14-member committee was headed by RBI Executive Director Deepak Mohanty.

Salient recommendations of the committee

• Banks have to make special efforts to step up account opening for females, and the Government may consider a deposit scheme for the girl child –Sukanya Shiksha – as a welfare measure.
• Given the predominance of individual account holdings (94 per cent of total credit accounts), a unique biometric identifier such as Aadhaar should be linked to each individual credit account.
• Account lined Aadhaar and the credit information should be shared with companies to enhance the stability of the credit system and improve access.

• To improve ‘last mile’ service delivery and to translate financial access into enhanced convenience and usage, a low-cost solution should be developed by utilisation of the mobile banking facility for maximum possible G2P payments.
• In order to increase formal credit supply to all agrarian segments, digitisation of land records is the way forward. This should be backed by anAadhaar-linked mechanism for Credit Eligibility Certificates to facilitate credit flow to actual cultivators.
• A scheme of ‘Gold KCC’ (kisan credit card) with higher flexibility for borrowers with prompt repayment records, which could be dovetailed with a government-sponsored personal insurance, and digitisation of KCC to track expenditure pattern.
• Encourage multiple guarantee agencies to provide credit guarantees in niche areas for micro and small enterprises (MSEs), and explore possibilities for counter guarantee and re-insurance.
• Introduction of a system of online registration of BCs, their training and monitoring their activity including delinquency, and entrusting more complex financial products such as credit to trained BCs with good track record.
• Corporates should be encouraged to nurtureSHGs as part of their Corporate Social Responsibility (CSR) initiatives.
• National Payments Corporation of India (NPCI) is advised to develop a multi-lingual mobile application for customers who use non-smart phones, especially for users of national unified USSD platform (NUUP).

• State Level Bankers Committees (SLBCs) are advised to focus more on inter-institutional issues, livelihood models, social cash transfer, gender inclusion, Aadhaar seeding, universal account opening, and less on credit deposit ratio which is a by-product.
• As a part of second generation reforms, the government can replace the current agricultural input subsidies on fertilisers, power and irrigation by a direct income transfer scheme.

The Committee also made several other recommendations to improve the governance system, strengthen the credit infrastructure and augment the government social cash transfer so as to increase the personal disposable income of the poor to put the economy on a medium-term sustainable inclusion path.


Everything you need to know about Kelkar Committee Report on Revisiting & Revitalizing PPP Model (GS 3)

Vijay KelkarThe Union Ministry of Finance on 28 December 2015 released the report of the Committee on Revisiting and Revitalising Public Private Partnership (PPP) Model. The 9-member committee was headed by former Finance Secretary Vijay Kelkar and submitted its report on 19 November 2015.
The committee was constituted on 26 May 2015to review the experience of PPP Policy and suggest measures to improve capacity building in Government for their effective implementation.
More importantly, the committee recognized the PPP Model in infrastructure as a valuable instrument to speed up infrastructure development in India.
Hence, it called for PPP contracts need to focus more on service delivery instead of fiscal benefits alone.
The recommendations of the committee are of relevance to the overall growth of the economy as PPP projects have become the preferred mode to develop large scale infrastructure projects.
At present, over 12007 PPP projects are under implementation across the country, involving about7.2 lakh crore rupees worth of investment.
Key recommendations of the committee
• Significance: Speeding up of the PPP model is urgently required for India to grow rapidly and generate a demographic dividend for itself and also to tap into the large pool of pension and institutional funds from aging populations in the developed countries.
• India’s success in deploying PPPs as an important instrument for creating infrastructure will depend on a change in attitude of all authorities dealing with PPPs-public agencies, government departments supervising and auditing and legislative institutions.
• The Government may take early action to amend the Prevention of Corruption Act, 1988 which does not distinguish between genuine errors in decision-making and acts. This is necessary to make only malafide action by public servants punishable and not errors.
• Experience has also underlined the need to further strengthen the three key pillars of PPP frameworks namely Governance, Institutions and Capacity, to build on the established foundation for the next wave of implementation.
• The Committee strongly endorsed setting up of the “3PI” which can, in addition to functioning as a centre of excellence in PPPs, enable research, review and roll out activities to build capacity, etc.
• Independent regulators should be set up with a unified mandate that encompasses activities in different infrastructure sub sectors to ensure harmonized performance by the regulators.
• Model concession agreements be issued only when 80 per cent of the land for a project has been acquired.
• The committee advised against adopting PPP structures for very small projects, since the benefits of delivering small PPP projects may not be commensurate with the resulting costs and the complexity of managing such partnerships over a long period.
• Unsolicited Proposals (“Swiss Challenge”) may be actively discouraged as they bring information asymmetries into the procurement process and result in lack of transparency and fair and equal treatment of potential bidders in the procurement process.
• Since state owned entities SoEs/PSUs are essentially Government entities and work within the government framework, they should not be allowed to bid for PPP projects.
• The Committee recommended the government to notify comprehensive guidelines on the applicability and scope of access tounder RTI and Art 12 of the Constitutionand auditing of financial related matters in order to avoid any delays in public asset provision.
• Banks and financial institution should be encouraged to issue Deep Discount Bonds or Zero Coupon Bonds (ZCB) to mobilise long term capital at low cost.
• Ministry of Finance may develop and publish a national PPP Policy document and it should beendorsed by the Parliament to impart an authoritative framework to implementing executive agencies as well as to legislative and regulatory agencies charged with oversight responsibilities.


Fear of Facebook colonising digital space looms over IT capital