Zeroing in on zero rating

Metaratings
28 Oct 2014
00:00
Article

Early this month, the Philippines’ two major telcos, the PLDT Group (Smart and Sun) and Globe, started offering free internet services. Globe gave free Facebook while Smart and Sun Cellular announced free bandwidth for browsing, searching, online shopping, and e-mail. However, according to a handful of accounts, the PLDT Group’s free-data promo only allows access to select websites and apps, mainly content that were specified in its advertisements.

The days of zero rating are here. Although some pundits point out that zero rating has been around for quite some time, it is only now that the business model has become, arguably, disruptive enough to warrant some analysis and discussion.

Zero rating is a strategy where telcos and content providers enter into a partnership that allows internet users to access certain websites and apps for lower or no data charges. It is a mutually beneficial business development strategy where the former creates demand for more subscription and the latter expands their market share, in one go.

There is no debate about the benefits of zero rating, insofar as providing connectivity for first-time and low-income internet users is concerned. It is easy to embrace zero rating where internet connectivity is expensive, and when the choices are “no access” or “some access.” People should not be deprived of the benefits of zero rating where governments and telcos have both failed to narrow the digital divide.

But when consumers enjoy free select content, does this necessarily solve the entrenched problems of the digital divide?

The prime movers of zero rating believe in giving opportunities for everyone to access the internet. But for this to be realized, the business strategy needs to be sustainable. Once the sponsored data deal has ended, what happens then? If the goal is to bridge the digital divide, is the next step offering more affordable data plans based on bandwidth, instead of restricted content?

There are also valid questions about how zero rating could compromise net neutrality, since the common practice is for content providers to pay telcos who then give their sites and apps priority access to subscribers. Clearly, the underlying business model has possible implications on how the open internet works as a neutral platform for any and all content.

There is also concern about the future of start-ups. On one hand, it is feared that once zero rating becomes the persisting business model, it might disallow low-budget content to compete for space on the internet. Clout and capital may become the currency of the internet, a far cry from the principles that made it the go-to platform for independent entrepreneurs, innovators and creatives.

On the other hand, it is said that zero rating has supported what once were start-up companies Google, Amazon, and Twitter to promote their services. Hence, zero rating is being argued to be instrumental in encouraging innovation, too.

But the internet is so much bigger now than it was just five years ago. And with it grew online content providers, who now have huge bargaining power to negotiate with telcos. It is not hard to imagine that the uptake of an online site or app will be a gauge, if not the main consideration, of telcos for deciding whether a product is good enough for carrying zero-rated content. So where does this leave today’s as well as upcoming start-ups?

In the end, partnerships forged in zero rating are largely defined by business decisions, with a tinge of altruism. While it is a good thing when big companies find common interests in providing a need, they do so primarily because it expands their own markets. And ultimately, in zero-rating schemes, the beneficiaries are subscribers who become the products themselves.

With the aggressive rollout of sponsored data plans in poor countries, first-time users will see the internet as being equal to Facebook. While that is not inherently bad, some scholars, like Susan Crawford of Harvard University, believe that this “ad-targeting business” all the more exacerbates “existing inequalities” and contributes to “poverty of imagination.”

But to have world peace, one has to be pragmatic. The key is to finding a middle ground where access and innovation are not mutually exclusive.

One must take caution about making a blanket opposition to zero rating, because it does produce tangible benefits. But the same caution should be employed in not embracing it blindly without asking about its implications on how the open internet works, and how it would influence the internet use of the next billion.

Ideally, zero rating is an interim solution, a mechanism to determine demand in unserved areas, and a means to raise awareness to first-time internet users. With both telcos and content providers benefiting, and the government not having to lift a finger, zero rating is admittedly a “convenient” solution to the problem of poor internet access.

However, the real challenge remains for governments, telcos, and content providers to continue to work toward investing in adequate infrastructure and promoting effective market competition to give way to more affordable and quality internet service.

In the process, it is hoped that with zero rating will emerge a more viable business models that will connect the unserved population not only to a few, select content, but to the whole of the internet, including the limitless choices and opportunities that it has to offer.

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