India's telecom regulator banned differential pricing. Facebook ended its Free Basics program, which it said would bring Internet to the country's poor. Here's how Facebook damaged its reputation.
Last week was a harrowing one for Facebook in India. At the beginning of the week, India's telecom regulator TRAI (Telecom Regulatory Authority of India) banned differential pricing - the practice of charging different prices to different customers, through which Facebook was offering its free, limited Free Basics Internet to users in the country. The social network had to quickly pull the plug on the year-old program — which bundled a few websites such as Wikipedia, weather and cricket info and Facebook but none of its rivals — that it had touted as free Internet for India's poor.
Then, later in the week, Indian Twitter and Facebook users rose in unison to slam Facebook director and Silicon Valley venture capitalist Marc Andreessen who, while venting against India's net neutrality campaigners, insensitively suggested in his tweets that Facebook Free Basics, like colonial rule, was good for India. The tweets only reinforced the belief among some Indians that Facebook was thrusting digital colonialism on India. The furor had barely died down after a series of apologies from Facebook, its founder and CEO Mark Zuckerberg, and Andreessen himself when news broke that Facebook India head Karthiga Reddy was stepping down. Facebook quickly said the leadership change development was unrelated to Free Basics but many in India took that statement with a dash of salt.
If that was a bear of a week, the vexations may not yet be over for Facebook in India, a crucial market, and its second-largest user geography after home base, the United States. With Free Basics now a no-go, at least for the next two years until the policy comes up for review, the social network will have to find an alternative route to rapidly augment its user base. Zuckerberg's much-vaunted schemes to beam the Internet from the sky through initiatives such as solar-powered unmanned aircraft, satellites and lasers, seem far-fetched and unviable for now.
Meanwhile, Facebook's image in India is dented. The massive and costly lobbying exercise it undertook to push Free Basics (inviting the Prime Minister of India to its headquarters, seen in photo ops hugging the leader and then spending millions on ads pushing Free Basics), coupled with Andreessen's tweets, buttressed critics' view that the social network is trying to gain an unfair competitive advantage by targeting poorer users with its free, pared-down Internet.
Several Indian startups branded Facebook's program as anti-competitive too, because it exercises complete and subjective control over what kind of startup apps and services it promotes on its free Free Basics initiative.
Outside India, Free Basics is being offered in three dozen countries, but it is yet to be launched in potentially-large user geographies like Nigeria and Brazil. Campaigners are hoping that the resistance spreads and regulators in these countries take another look at the program.
"Such a violation of net neutrality leads to balkanization of the Internet and limits the ability of consumers to create content and services, we hope other countries too will push back," said Nikhil Pahwa, founder of New Delhi-based mobile and digital news startup, Medianama, and a strident crusader against Free Basics. "We hope what we did in India will give others hope," said Pahwa, going on to say that countries should not be forced to choose between net neutrality and universal access when the world could easily have both.
But Free Basics was to be a vital piece of strategy for Facebook worldwide growth in the coming years. A few hundred million of potential new users will be from India alone, but the ban could have some serious ramifications.
"Facebook's vision to add the next billion users will get hit, the social network will have to work on its market perception too," said Rishi Tejpal, principal research analyst at Gartner.
Not every global technology firm offering free services in India has run into the kind of trouble that Facebook has. For instance, Google launched free Wi-Fi service to train passengers in a suburban Mumbai train station and is to soon extend it to a hundred other busy train stations in the country. Like Facebook, Google makes revenues through online advertisements that are directly proportional to the amount of users it attracts. However, unlike Facebook, Google is not limiting its Wi-Fi offering to only its search service and YouTube videos.
Sean Blagsvedt, founder and CEO of Babajob, a job portal for India's blue collar workers that was among the websites bundled in Facebook's Free Basics said he would like to see more initiatives such as free municipal Wi-Fi and more Indian language content to reach India's rural, poor, less educated and female populations. "It's very important for the progress of all Indians and we'll continue to lend our support to both private and government programs that expand Internet access for everyone."
Sooner rather than later, Facebook will have to come up with a plan that will increase its user base without compromising the concept of a free Internet. Tejpal, the Gartner analyst, expects Facebook to rethink its strategy in India very soon. "Facebook will have to make things a lot more transparent, they will have to freshly lobby with the regulator," he said.