I’m guessing a lot of public policy people are horrified at my assertion that business incentives work very differently from public policy. But this has always been true. You can set all kinds of guidelines and regulations from the standpoint of public interest, and the same companies who agree with you on the policy side will go and do the exact opposite thing because it helps them commercially. Policy is just one side of the coin. Dhanda is the other. 

My favourite example of this is Net Neutrality in India. 

To recap, a few years ago, Net Neutrality—i.e., the idea that all content on the open web must be “equal”—took hold in India. It began when Facebook came up with the idea of launching something called Free Basics, a website which would allow Indians to access parts of the internet without having to pay for it, effectively prioritising one form of content over another. An intense public debate and discussion followed. A movement called ‘Save The Internet’ was born, with participation from activists, lawyers, journalists, and even stand-up comedians. And after a vibrant and spirited campaign, Trai ruled in favour of net neutrality. The telcos and big internet companies who were looking to splinter internet content lost and the good guys won.

Here’s a story immediately after the Trai ruling, articulating what the policy was intended to accomplish.

Great policy. Big success. Well done, everyone. And I’m not being facetious. India’s ruling is often cited as one of the most progressive public policy laws in net neutrality globally, and it’s a testament to both Trai and all those who fought to get the law passed.

Essentially, the intention was to prevent telecom operators from picking and choosing certain types of content which they could offer for free to their users. This would create entry barriers for smaller players, and would lead to telecom companies actively promoting certain content in their plans at differential rates. 

But guess what actually happened?

Here’s an example.

Is this a violation of net neutrality? 

I mean, strictly speaking, as per the narrow definition of the ruling, it’s not. 

But isn’t this the future that the net neutrality law and its activists fought to prevent? A world where telecom companies selectively give away certain types of content for free, and offer differential rates of pricing that prioritise some websites over the other? It feels like everyone won, and yet we ended up in a future that we tried to stop from happening in the first place. I’m sure there are Net Neutrality purists who’ll get very angry and believe that this version of telecom operators giving OTT access for free in their plans is very different from the version where telecom operators were going to give Facebook’s Free Basics for free. Sure. My point is that Net neutrality is a little bit like religion. You may have your narrow version of what “pure” net neutrality looks like, but if you zoom back and look at the big picture, the differences are mostly a matter of opinion instead of something structural. And in the end, nobody really cares if they aren’t the ones paying a price for their beliefs.

Anyway, the big learning from the net neutrality debate is that the activism and the laws focused on the moral, theoretical argument of fairness and legality and ignored… incentives. 

I’ve written about the incentives for OTTs like Disney+Hotstar, Netflix, and others to work with telecom companies to distribute their content. As long as these incentives exist, it doesn’t matter what laws you create to enforce a narrow definition of what can be done and what cannot be done. If it makes sense for them, both parties will find a way. The laws won’t be broken, but we’ll end up in the same place. 

What’s to say the same thing won’t happen with telecoms and OTTs? 

Right now, OTTs like Netflix, Disney, YouTube, and others are fighting hard against paying telecom companies for broadband infrastructure. And the arguments being made across op-ed columns and research reports by think tanks are being made based on the concepts of fairness and legality, just like when Net Neutrality was being debated. However, I believe that OTTs and telecom companies are joined together, particularly in India, and that their incentives align much more closely. And for these reasons, they’ll probably figure out a way to come to a financial arrangement. 

As we know by now, Netflix, Hotstar, Prime, and others are much more reliant on telcos to expand and distribute their content. It’s also evident that telcos are arguing for a fair share not from a position of strength, but weakness. Maybe it makes sense for OTTs to help them out if, in return, they get a say in which circles and areas of India telecom companies can expand their services, and at what price points. Maybe it helps grant them exclusivity into bundling plans for prepaid, postpaid, and fibre connections? And maybe they can get all this by spending a fraction of what they already spend on creating content. From the standpoint of these OTTs, how different is it really from an investment made into a distribution channel?

Also, I’m not even getting into the complicated position that Jio finds itself in, where it’s simultaneously both India’s largest OTT and largest telecom network.

Like I said, India is different. 

Does it make sense for JioCinema to pay Jio? I don’t know, but I can imagine some incentives probably exist for it to happen. Just as similar incentives exist for Netflix to pay Airtel, or for YouTube to pay Vodafone Idea. 

You can make all the laws and regulations in the world, but in the end, the incentives always win. 

Perhaps the question that OTTs are figuring out isn’t whether they should pay telcos, but how much they should pay to make it worth it.