Saturday, December 26, 2015

The business of ZeroRating

ZeroRating conversations are dominating Network Neutrality issues these days, whether it is the FreeBasics controversy in India, Binge On by T-Mobile, or Verizon's recent announcement of a plan similar to AT&T's sponsored data. Here are a few thoughts to consider about ZeroRating and why it makes no sense (to me).

If ISPs Zero Rate content, somebody has to pay for the bandwidth. Suppose the Content provider pays for it. Then there is a pricing problem:

  • ISPs cannot charge the content provider a price above the price they charge consumers. Suppose they charge consumers X per MB of data, and they charge content providers X+Y per MB of data. Then, for sufficient traffic where overheads are accounted for, it is cheaper for content providers to send recharge coupons back directly to the customers who used their services. Long term, pricing above the consumer price is not sustainable.
  • ISPs cannot charge the content provider a price below the price they charge consumers. Suppose they charge consumers X per MB of data, and they charge content providers X-Y per MB of data. Then if the plan is truly open, a company like Gigato can come along, buy data in volume and become a virtual ISP. They can funnel traffic to services via their servers (they can remain good guys and not decrypt or store private data), sell the bandwidth to consumers at X-Y/2 and pocket the difference. The ISPs lose out.
Or alternately, the ISP pays for the bandwidth of the content.
  • This opens the possibility of vertical integration, where ISPs ZeroRate their own content, and that is extremely bad for competition. Or ISPs ZeroRate only a select group of content providers, for non-transparent reasons (FreeBasics or Binge On "technical" requirements that make the walled gardens implicitly closed), leading to a fractured experience/Internet for their consumers.

It is not clear to me what the business model is for ZeroRating, where the ISPs make money and provide an Open and Neutral Internet experience for their consumers. Economic issues are really the core of Network Neutrality, and nobody has explained to me how the economic model of ZeroRating remains consistent with Network Neutrality


33 comments:

  1. This comment has been removed by the author.

    ReplyDelete
  2. Good points. If ZR is meant for the unconnected, i.e. those with low purchasing power, that's the target group of little interest to advertisers.
    ISPs also lose in the long term by replacing individual customers with with bulk buyers who have higher bargaining power.

    ReplyDelete
  3. Take a look at Mozilla Position

    https://blog.lizardwrangler.com/2015/05/06/zero-rating-and-the-open-internet/

    https://blog.mozilla.org/netpolicy/2015/05/05/mozilla-view-on-zero-rating/

    ReplyDelete
    Replies
    1. Hi Anivar,

      Am aware of the Mozilla position. It is a mix of philanthropy and adhering to net neutrality principles (equal rating) and is a good approach. Aircel is making a bet with their equal rated plan that users will convert, and they are not being selective like Reliance (FreeBasics) or T-mobile. Vertical integration is the biggest danger of ISP paid zero rating and we should be watchful there.

      Delete
  4. This comment has been removed by a blog administrator.

    ReplyDelete
  5. This comment has been removed by a blog administrator.

    ReplyDelete
  6. This comment has been removed by the author.

    ReplyDelete
  7. Realistically assuming that ISP can only charge as much as market price to the consumers, it has an incentive to increase market price upto the point where it strangles all revenue out of the Content Provider. Consumers consume zero of paid content as the prices are too high and rely on zero rating.
    Such a situation though will not arise practically shows that ISP's have an incentive to increase market prices

    ReplyDelete
  8. This comment has been removed by a blog administrator.

    ReplyDelete
  9. This comment has been removed by a blog administrator.

    ReplyDelete
  10. This comment has been removed by a blog administrator.

    ReplyDelete
  11. This comment has been removed by a blog administrator.

    ReplyDelete
  12. This comment has been removed by a blog administrator.

    ReplyDelete
  13. Very good points you wrote here..Great stuff...I think you've made some truly interesting points.Keep up the good work.
    Biz Catalyst 360

    ReplyDelete
  14. If you are a natural at public speaking, then consider something along the lines of a motivational speaker. There is a high demand for people who enjoy public speaking. Enjoy what you do

    ReplyDelete
  15. Sometime it becomes very hard to find a well written and well established bog which give you correct and useful information. However, I found this blog and got some relevant information which are really helpful for me. ระบบขายของ

    ReplyDelete
  16. Do you want to be a piping designer? PWInstitute offers piping course in India at lowest fees. Reach out today.

    ReplyDelete
  17. This comment has been removed by the author.

    ReplyDelete
  18. This comment has been removed by the author.

    ReplyDelete

  19. All the contents you mentioned in post is too good and can be very useful. I will keep it in mind, thanks for sharing the information keep updating, looking forward for more posts.Thanks
    polyurea coatings

    ReplyDelete
  20. Absolutely pent subject matter, appreciate it for selective information . Business law

    ReplyDelete
  21. There is a need for a bank which will enable you to open a merchant account. It is the bank account that has been set up with a payment processor for merchant account credit card processing. A special open iq option account where the payment can be made through credit card and the money can be transferred to your own business account, is a relationship between you as a businessman and a merchant bank that enables you to accept the credit card payments from your customers. It is also called as credit card merchant account, e-check merchant account, and debit card merchant account.

    ReplyDelete
  22. You may be considering liposuction to eliminate the last few extra pounds that you have, but you Tucson Tax Preparation yourself about the process before you go in for the operation. Preparation can help you heal as soon as possible.

    ReplyDelete
  23. In this article, PEOs an Employee Perspective 103, we will review some of the additional services that Professional Employer Chronic Care Management Software provide to their clients' employees in addition to the traditional benefit packages and HR services. This article takes the perspective of the employee, and why they should get excited when their employer starts to consider working with a PEO. Be sure to check out PEOs an employee perspective 101 and 103 as well.

    ReplyDelete
  24. Wonderful post! We are linking to this great post on our website. Keep up the great writing. Good Instagram Captions

    ReplyDelete
  25. Informative Site… Hello guys here are some links that contains information that you may find useful yourselves. It’s Worth Checking out…. Father's Day Celebrations

    ReplyDelete
  26. Great post however , I was wanting to know if you could write a litte more on this subject? I’d be very thankful if you could elaborate a little bit further. Bless you! KKgamer

    ReplyDelete
  27. This is getting a bit more subjective, but I much prefer the Zune Marketplace. The interface is colorful, has more flair, and some cool features like ‘Mixview’ that let you quickly see related albums, songs, or other users related to what you’re listening to. Clicking on one of those will center on that item, and another set of “neighbors” will come into view, allowing you to navigate around exploring by similar artists, songs, or users. Speaking of users, the Zune “Social” is also great fun, letting you find others with shared tastes and becoming friends with them. You then can listen to a playlist created based on an amalgamation of what all your friends are listening to, which is also enjoyable. Those concerned with privacy will be relieved to know you can prevent the public from seeing your personal listening habits if you so choose. Father's Day Occasion Speech

    ReplyDelete
  28. Three stick candlestick patterns when added to your trading arsenal make your trading strategies more complicated and more interesting. These candlestick patterns are more of a challenge than the one stick or two stick candlestick patterns. This is due to the fact that there are several rules that each much follow in order to emerge as a valid signal. contabilidade para condominios

    ReplyDelete
  29. Crafting and Communicating your Message to Government National associations need the interest and engagement of government to advance agendas. Within the organizations, it often comes down to a small team who understands their issues very well but it is so important to ensure the issues are easily understood by others outside of the immediate core. human resource consulting ottawa

    ReplyDelete
  30. Spending significant amount of time in front of computers leads to tired and sore eyes. Eyes are one of the most important parts of human body. All those who often complain about eye health must resort to some vitamins and minerals that can take care of them. calgary optical stores

    ReplyDelete
  31. Just wanna remark on few general things, The website style is ideal, the topic matter is rattling good Happy Friendship Day Funny Jokes

    ReplyDelete
  32. superb post. Ne’er knew this, appreciate it for letting me know. laura prepon

    ReplyDelete