Exponentially growing start-ups have become digital suckers

Sonal Desai
New Update
Kalyan Banga

MUMBAI, INDIA: While the debate on Net Neutrality has taken an unprecedented high, let us try and understand a service provider’s perspective on the issue.


One is they have made significant investments in building infrastructure and their networks cannot be just used by the exponentially growing start-ups ecosystem who have become digital suckers. They create newer technology platforms, congest the service provider’s network to a great extent, thereby using operator margins by giving away majority of their services for free.

The service providers argue against Net Neutrality and their collated opinion is articulated in the following points.

Excessive use of the Internet is leading to serious bandwidth issues due to congestion. It has been observed that the usage is skewed considering around one-fifth of users consume more than four-fifth of their bandwidth by either streaming songs, videos or downloading large files. Such netizen activities have pushed service providers to think differently and devise business models to sustain themselves in the ever challenging environment of dipping ARPUs, high infrastructure (indeed it is very expensive) as well as maintenance cost and competition.


Making separate paths to provide efficient Internet to all netizens since they generally have concerns related to speed and bandwidth. Service providers argue that by charging more for certain services, to offer faster access to consumers would invariably reduce congestion on their network and in turn make it faster and smoother for users. They argue that unless they are able to generate greater revenue from such services which are accessed over the net, they would not have funds in future to invest in building further infrastructure and thereby impacting user experience in future.

SPs have invested billions of dollars in spectrum fees, network roll-outs, license fees since infrastructure is backbone to providing proper internet access; yet there is negative return on capital employed in India. Industry estimates say, to realize PM Narendra Modi’s vision of Digital India connecting 1 billion Indians, approximately Rs 3 lakh crore to-Rs 5 lakh crore has to be spent over next 10 years. To make such high investments, service providers need to find ways that can guarantee returns for such voluminous investments in long run so that they can provide better user experience to the netizens.

What’s happening in the US?

In USA, Federal Communications Commission has defined Network, or Net Neutrality as another way to refer to open Internet principles. However, according to some experts, Net Neutrality has no widely accepted definition, but usually means that Telecom Service Providers charge consumers only once for Internet access without differentiating between content over the network and content providers.


With an intent on clarifying things, new rules on how the Internet should be governed have been recently approved by the FCC. In what is seen as a victory for advocates of Net Neutrality, the commission voted in favour of the following changes:

• Broadband access been reclassified as a telecom service, thereby bringing it under the ambit of stricter regulation

• Internet providers cannot go for deals with content companies, for smoother delivery of traffic to consumers

• Service providers would not be able to speed up or block service for a fee

With these rules coming into effect, service providers have voiced their concern. It has to be seen how they take it forward considering they plan to appeal against these changes brought in by FCC.


Net Neutrality implies there cannot be price discrimination between customers that access content and suppliers of the content. However experts feel that price differentiation is valid considering view of externalities ie if a video service providers uses up lot of bandwidth it should pay more for the same. Some experts are of the opinion of allowing differential pricing for audio, video streaming and large file downloads with rest remaining as in for the benefit of the wider population.

While net neutrality is imperative for us to access freely and fairly any service or information through internet, what is probably needed is a new look at the entire commercial aspect to ensure revenues can be raised by service providers without offering differential treatment to consumers for their data access.

The article is authored by Kalyan Banga, Director, Market Research & Analytics; VOZIQ, and views expressed are his own

narendra-modi net-neutrality experts