India Prather – First WhatsApp, then Face.com and Instagram, and now free internet? For the past several months, Facebook, U.S. government officials, and wireless carriers have been in discussion about launching Free Basics, an application (“app”) that would provide low-income and rural Americans free Internet access to resources such as online news, health information, and job leads.
With Free Basics already operating in 49 countries and having connected 25 million people to the Internet, why would the U.S. government hesitate on allowing the app in America and why should wireless carriers be skeptical?
One could look to India for the answer. In February 2016, the country banned Facebook’s app. Months after Facebook launched Free Basics in various parts of India, consumer advocates complained that the social media giant was handpicking which services app users could access. According to the advocates, such favoritism would subsequently lead to the marginalization of any companies and nonprofits not associated with Free Basics. In addition to the preferential treatment concerns, India also banned Free Basics because its telecom regulatory body ruled that the app was “zero-rating.” Facebook’s carrier partners were using Free Basics to retain customers by enticing them with them free access to Facebook, while subscribers on other networks were paying for their usage. And such action, according to India’s telecom regulator, violated the tenets of the country’s net neutrality.
After Free Basic’s platform failed in India, Facebook changed a key feature in the app to make it more appealing in the U.S. Now, Free Basics is available to any third-party organization, provided that the developers abide by Facebook’s terms (such as no use of high-definition images or videos). However, even though Facebook eliminated the issue of favoritism, the U.S. government should still be skeptical about the app because Facebook did not resolve the issue of zero-rating. Also, unlike the Indian telecom regulatory body, the Federal Communications Commission (“FCC”), does not regulate net neutrality rules. Consequently, if U.S. government officials permit Free Basics to operate in the U.S. without regulatory scrutiny, the practice of zero-rating could potentially tilt the online marketplace, leading to large, established firms reaping the benefits.
To shift the attention away from zero-rating and make Free Basics more appealing in the U.S., Facebook is currently in the process of negotiating with smaller carriers rather than with national ones such as T-Mobile or AT&T. According to Facebook, wireless carriers have an incentive to participate in the Free Basics program because about half of the Free Basic users who log on to the Internet for the first time (as a result of the app), end up purchasing a mobile data plan within the first thirty days of use.
However, even though Free Basics may give smaller-phone carriers a way to target potential consumers, these carriers should still proceed with caution when contracting with Facebook because like with any business negotiation, there may be shortcomings. For example, if the U.S. government accepts Facebook’s program and the FCC scrutinizes zero-rating, such effects could raise legal and regulatory costs for these smaller carriers. Furthermore, these carriers should also be aware that Facebook may alter the terms and conditions of their contract in the future. For example, it is possible for Facebook to “usurp the customer relationship and, at renewal time, demand to be paid rather than just carried [by the wireless company].”
In the end, while Facebook’s Free Basic app could connect rural and low socio-economic Americans to the Internet for free, one must realize that the program is multi-faceted. On the surface level, the program is free—consumers will not pay a dime. However, beneath Free Basic’s silver lining is where the bill starts to accumulate. Whether it accumulates from zero-rating, Facebook changing its policy in the future, or some unforeseen shortcoming, the wireless carriers will be the ones footing the bill.
