Why defeat in India leaves an uncertain path for Facebook's 'Free Basics'

The social media giant has touted the service for its humanitarian benefits, saying it provided affordable Internet to users around the world. On Monday, India's telecom regulator shot it down.

Weeks after chiding Facebook for lobbying its users to support the controversial "Free Basics" service through a “crudely majoritarian and orchestrated opinion poll,” India’s telecommunications regulator has banned the service.

Free Basics, which the social media giant launched in 2013 as Internet.org, is intended to provide stripped down Internet capabilities for free to people in rural and poor communities around the world.

While Facebook has pointed to the service’s humanitarian potential, critics have long argued that Free Basics’ offer of only a small number of websites, and its partnerships with a small number of mobile carriers — in India, only a single carrier offered the service — violates net neutrality (the idea that users shouldn’t be directed to particular sites or blocked from accessing others).

In its decision, released on Monday, the Telecom Regulatory Authority of India agreed, saying that it would act to prohibit “discriminatory tariffs” paid by users to go online. The regulations, which didn’t mention Facebook by name, would also likely affect Airtel Zero, a similar service offered by Bharti Airtel, the country’s largest telecom company.

“The Authority has largely been guided by the principles of Net Neutrality seeking to ensure that consumers get unhindered and non-discriminatory access to the Internet. These regulations intend to make data tariffs for access to the Internet to be content-agnostic,” it said in a statement.

It plans to review its policy — which would fine violators up to $730 per day, capped at around $73,000 – every two years, reports NDTV.

The defeat of Free Basics in India — the world’s third-largest Internet market — likely marks a setback for Facebook, leaving the company in limbo as it hopes to gain more users throughout the developing world. The service was also recently banned in Egypt.

"While disappointed with the outcome, we will continue our efforts to eliminate barriers and give the unconnected an easier path to the Internet,” the company said in a statement on Monday.

Leading up to TRAI’s decision, the social media company deployed a large marketing blitz to publicize the service through newspaper ads and billboards that promoted the service’s benefits as what the company has called an “onramp” to full Internet access for Indians unable to afford a traditional data plan.

“We know that for every 10 people connected to the internet, roughly one is lifted out of poverty,” Facebook chief executive Mark Zuckerberg wrote in an editorial in the Times of India in December, adding, “Who could possibly be against this?”

But in touting Free Basics’ humanitarian benefits in providing access to sites such as Facebook, Wikipedia, Bing Search, and local news, Mr. Zuckerberg also pointed to the benefits for mobile carriers, writing in the Times that of the 15 billion people who have gone online through the service, “half the people who use Free Basics to go online for the first time pay to access the full internet within 30 days.”

In India, Facebook's tactics – including generating support for Free Basics by getting users, some unwittingly according to reports, to click on a button supporting the site – have generated debate. “I do not support this, it is a Scam by Facebook!” wrote one user in an email released by TRAI.

Facebook, in turn, charged that the regulator blocked emails from Free Basics supporters, a charge the regulator denies, Forbes reports.

Late last year, the regulator told mobile carrier Reliance Communications, which has partnered with the social media site, to suspend offering Free Basics, saying it intended to investigate the practice of “differential pricing” — offering similar services for different prices.

In the US, services such as T-Mobile’s Binge On, which offers unlimited video streaming that doesn’t count against a customer’s data cap, has also fueled a similar debate about the practice of so-called “zero rating.”

But while Binge On and other services have prompted mixed messages from the Federal Communications Commission, which has asked for more information from the providers while also praising the service’s ability to generate competition in the online video market, Free Basics has often provoked a harsher response.

Last month, a group of more than 500 startup founders and venture capitalists in India objected to Facebook’s defense of Free Basics and its partnerships with carriers.

“The Internet is not a marketplace where government licensed access providers are allowed to act as gatekeepers choosing what the citizens of our nation can access and on what terms; it is a neutral platform,” they wrote in a letter sent to Indian Prime Minister Narendra Modi, who met with Zuckerberg and other tech leaders during a closely-watched trip to Silicon Valley in September. “We should be wary of allowing it to be sliced up via differential pricing which, in the long run, will only increase costs and decrease access to content – impacting the poor more than anyone else."