Let’s resolve in 2016 to let tech serve the poor everywhere. It is unlikely that we could find anyone who thinks it is a good idea to stand in the way of tech serving the poor. Still, the proponents of recent tech policy proposals are, whether they intend to or not, doing just that.
How is this happening? In recent years, many people and countries have embraced net neutrality, a concept that has a liberating ring to it, but in reality is anything but. Net neutrality began as an ambiguity and has morphed into an illusion that, in the name of doing good, is hurting the most vulnerable among us.
Net neutrality: Protecting something that never was
Net neutrality was initially a vague concept that sought to keep the Internet the way some people thought it was (but was not (0)) and to create an Internet that gives all customers and content providers equal opportunities (but does not (1)). These net neutrality proponents rightly believed that the Internet had enabled numerous tech innovations. Then, assuming that this enabling environment might be in danger because networks were changing, the proponents sought to keep the Internet’s network capabilities locked in the past by promoting an evolving mix of regulatory principles. Reflecting the ambiguity in what net neutrality meant, I have witnessed numerous papers and presentations begin with an admission that the researchers didn’t know if their analyses reflected what the net neutrality advocates were proposing.
But net neutrality proponents didn’t stop at trying to freeze the Internet in time. They imagined the Internet as a pipe with seemingly costless capacity that moved content and interactions seamlessly, both in a technological sense and in an economic sense. This view enabled an ideology that the greater good would be served if everyone received identical benefits from the network. Thus, demands for policies such as bans on usage-based pricing have emerged to make ISPs featureless.
The impact of net neutrality on the poor and tech startups
How are the ideals of net neutrality holding back those who are the most economically vulnerable? There are probably many, but we will focus here on three policies that carry with them an illusion of preventing ISPs from harming their customers but in reality hold back poor users and fledgling tech companies. These are:
- Prohibitions on pricing plans that help the poor pay for what they can afford;
- Injunctions on free content delivery; and
- Denial of network features.
Net neutrality hurts the poor when it denies them usage-based prices. Some advocates (2) argue that usage-based prices are evil, hurting Internet users and enriching ISPs. However, usage-based prices, especially those that make it easy for customers to control their bills, have proved to be a benefit to the poor in mobile telecommunications, energy, and other services. For example, the poorest of the poor in Africa and Latin America were early adopters of mobile telephony because they could purchase prepaid services, share SIM and prepaid cards, and limit their outbound calling. (Incoming calls were free to the receiving party in most countries.) Similar billing arrangements have made electricity and water affordable to these customers. Low-income households in the US made a quick migration from landline telephone service that had a fixed monthly fee to usage-based mobile phones, in part because they found it easier to manage their mobile service bills (3) than bills for flat-rate landline service.
Net neutrality also hurts the poor by imposing injunctions on free content delivery, more commonly known as zero-rating (4). Net neutrality proponents see zero-rating as an exercise of market power (5). Indeed some developing countries (6) are prohibiting the practice in the name of net neutrality.
But networks have provided free content delivery for decades, creating benefits for price-sensitive customers, often in ways that are good for business. This was the idea behind toll-free calling, such as 800 numbers in the US. Outside the telecom space, Amazon offers free shipping for certain orders, presumably to stimulate demand among customers who might not otherwise buy. Some hotels offer courtesy shuttles, allowing customers to avoid taxi fares. And as we mentioned above, the poor in many developing countries were able to afford mobile phones in part because they did not have to pay for incoming calls. Prohibiting zero-rating will make it harder for the poor to obtain some Internet services.
Finally, net neutrality hinders fledgling tech businesses by limiting their access to possible network features. One example is the prohibition against fast lanes, that is, the opportunity for a content provider to have its service delivered faster than average for the network. One of the mantras against fast lanes is that only the big operators, such as Google, could afford them, so the little guys would be disadvantaged. But it appears that the opposite is true (7). The large tech companies can distribute their content geographically and invest in their own network infrastructure to improve customer experience. Small tech companies that lack scale cannot afford to do this on their own, but might be able to afford to pay a network provider that builds such capabilities into its network. Thus, the idea that the network should be featureless disadvantages startups relative to their incumbent rivals.
Net neutrality has become an illusion in that its rhetoric leads to the appearance of giving customers greater opportunity and controlling market power. The reality is that it is keeping the poorest and most economically vulnerable among us from getting the services the rest of us take for granted. Let’s resolve to stop this.