Mark Goldberg

No such thing as a free lunch

Mark Zuckerberg of Facebook announced that has expanded the availability of its Free Basics service throughout India. For the record, I think this is an outstanding project and I applaud the efforts to develop a creative, market approach to increase the levels of adoption of digital connectivity among low income households.

As I have written before, there are some activists that object to selective zero rating of services, under a belief that all applications should be treated alike by all access networks. Either all or nothing for free services.

I can’t figure out the business case that supports that view.

On the other hand, I can fully appreciate the free sample approach for Free Basics. Reports from say that half the people on Free Basics upgrade to a paid full internet service.

50% of people who use Free Basics are paying for data – and access the internet outside of free basic services – within 30 days of coming online for the first time.

It isn’t surprising. “Try it, you’ll like it” was the tag line in early 1970’s advertising for Alka Seltzer. The fact is, it works. That is why there are sample tables at grocery stores.

No, Free Basics isn’t providing access to the entire internet. But, let’s be realistic. It is free. And as the name implies, the service provides some important basics.

Those free samples at the grocery store aren’t supposed to be a full lunch or dinner.

Maybe we need to approach zero-rated services is by remembering that not every service is supposed to take the place of a full internet access service.

I noticed internet packages on a cruiseship line that offer three levels of access: Social ($5 per day) offering access to Facebook, Twitter, WhatsApp and a handful of other messaging sites; Value ($16 epr day) with most of the web but no Skype or streaming services; and, Premium ($25 per day) with the full internet. Should passengers be filing complaints with regulators about network discrimination? Or, do we accept that the cruise line is offering choice. If you want full internet, it costs $25 per day, but if you can get by with parts, here are some lower priced alternatives.

As Zuckerberg says in his annoucenment, the latest expansion of Free Basics is another step toward connecting all of India. I have said it before, but it is worth repeating: banning zero rated services raises prices for some, reduces rates for no one while limiting choice for all.

With respect to retail services that are highly competitive, regulators might want to consider less intervention in order to allow innovative business models to emerge. Heavy handed ex-ante regulations are likely to inhibit innovation and ultimately deliver questionable consumer benefits.

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