Ever since data has become cheap, telecom companies are at a great loss. Let me give you an example. About 10 years back or 12 years back, if someone in India had to call a person in America, they would have to pay international calling rates, or they would have to make a special recharge, that would be very costly because it allows you to make international calls. Now, if your friend is in U.S., Europe, Australia, what you do is you call them on WhatsApp without paying any extra money because data is extremely cheap in India and there’s a perfect voice quality even on those calls. Although it has made your life easier and it has been extremely easy on your pocket, it has resulted in a great loss of revenue for the telecom companies. Not just this, the telecom companies also used to earn a lot of money through their SMS services, but now people hardly use SMS because then you want to send a message to someone you usually use WhatsApp, Telegram and other apps because the data is available to you at a very cheap cost. This has resulted in a loss of revenue for the telecom companies in India.
Now, what exactly are the companies doing in India or abroad to expand their market?
Let’s take an example of how telecom companies such as AT&T are working with Apple. Now in the US, the number of people using iPhones, etc, is much more as compared to in India and there is a reason for that. In India, you pay 80,000- 1 lakh rupees to buy an iPhone and then you use whatever telecom service that you want like Jio, Airtel, Vodafone, etc. In the US there’s a different kind of system.
In the US, when you buy an iPhone, iPhone has a partnership with AT&T. At&t is a telecom provider in the US, just like we have Vodafone or Idea in India. So when you buy an iPhone, that iPhone already has an AT&T number. This iPhone comes as a package where you pay a monthly fee, which includes a monthly instalment for your phone also and your AT&T bill also. So for example, if I tell you in India, you can either buy an iPhone for 1 lakh rupees and then use whatever SIM card that you want. The other option that you might have is that you can pay 5000 rupees per month, the company will give you the iPhone along with an AT&T connection. The only condition is that you have to run this phone for at least two years.
Now, what would you prefer?
Mostly, people in the US prefer this kind of deal where they get a phone along with the telecom operator. They just have to pay a small sum every month for a long term agreement, and the cost of the phone is not extremely high for them as a one-time cost. In India also, Jio is now trying to come into a similar partnership with Google, but in India, that idea has not been extremely successful. The other way that telecom companies could have earned the money in India is if they have more power over how data can be used. Let me give you an example, A few years back, Airtel had this system that when you do a data recharge from Airtel, it was not like 5GB of data and you can use it for anything. The data recharge used to be something like this that you can buy 1GB of data, which can only be used on YouTube, let’s say for 100 rupees. Then you can buy 1GB of data, which can only be used on WhatsApp and this is for 500 rupees. Why? Because a company also knows that with WhatsApp, you can do the international calling, so we will charge you more for that. So Airtel started this concept where the company will decide how you will use your data. You can use data for a certain app only.
This became very controversial, and people started to say that this is against the concept of net neutrality. Net neutrality means that telecom companies should not decide how you use your data. The telecom company should just give you data 4GB, 5GB or 10GB, then it depends upon the user how they want to use that data because, in this method, the telecom company is telling you how to use your data, which goes against this concept. Because tomorrow Airtel can also say that I will sell you 5GB of data, but that data can only be used for three apps like Facebook, Whatsapp and YouTube. Then Telegram will feel very bad because people cannot use their data on Telegram, they will only have to use their data on WhatsApp or they cannot use their data on Instagram, etc. They can only use Facebook, so that will be against those companies and against the market competition. So the government stepped in and the government decided that we have to have net neutrality, and Airtel and other companies were told that you cannot have these kinds of plans, so Airtel and other companies had to stop these plans. So since then, the data plans these companies sell are just for data, and they don’t decide how you use your data, that is net neutrality.
Now, we can say that net neutrality is very good, but at the same time, there is also a need to have search neutrality.
Now, what exactly do we mean by search neutrality?
See, today, if you have to go to a website, 90% of the time you might not know the name of the website, you will just search on Google. For example, what if in California, there are 100 companies that make birthday cakes. Out of these 100 companies, let’s assume 5 companies have paid money to Google. So whenever you do a Google search about the best birthday cakes in California, Google will only show you these 5 companies and it will hide the other 95. Why?
Because Google is getting paid by these companies. This, again, is very similar to net neutrality. So Google has a responsibility, just like other telecom companies, to provide equal access to all the businesses. Google should not be allowed to display whatever search results that they want, because as a consumer when I am searching on Google, I am assuming that Google is treating every website equally, but that is not the case, there is no search neutrality. If Google tomorrow starts showing me some bad results, there is nothing I can do against Google. I’m not paying anything to Google, right? But Google is getting paid from the side of the business. So we can say that there should be an equal playing field for telecom companies, which are in a very bad position right now and for internet companies, just like we have a policy of net neutrality for telecom companies that they cannot differentiate. Similarly, for internet companies like Google, we must have a policy of search neutrality so that they can also not differentiate.
Now specifically about Google and other internet companies, they have been having a lot of issues with governments across the world, including India. So in India, Google is the largest advertiser. When you go to a certain website, you will see there are ads on the sides of the website or below the website, those are usually Google ads. If you click on them, Google will pay some money to the website and an advertiser will pay money to Google. For example, when you open the Washington Post website, you will see there are ads for different cars or bikes or medical insurance that you can buy. These advertisers have paid Google to put their ads on the website.
Now, Google earns most of its money through those ads, but the problem is when the Indian government tells Google to pay tax on that money that they are earning, Google says that we are not an Indian company. Why do we pay taxes to you? We are an American company. We have Indian clients, that is fine, but our company is in the US, so we will only pay money to the US government or some other government. Why would we pay you the money?
Although most of Google India’s client base is in India only, they are earning so much money from India, but they refused to pay taxes. Same with Facebook, Facebook also earns all its money from ads, but when the Indian government asked them to pay some taxes here, they said, Why do we have to pay taxes? We are an American company and countries across the world are facing this problem. So in 2016 in India, the government started a system of equalisation levy specifically for these companies like Google, Facebook, etc. that provide online advertisements. The law says that now these companies who are earning over 1 lakh rupees from Indian clients will have to pay a 6% tax to the Indian government, no matter what. They can’t escape this, and it is not just India, many countries across the world have started this system because what Google does is they will set up their headquarter in a country that has very little taxes. Usually, you will see most of these big companies have their headquarters in Ireland. So Ireland is a nation that charges very low corporate tax, so Google will tell everyone that we will pay taxes in Ireland because our headquarter is in Ireland. Ireland government says for corporate tax, OK, only give us 5%, so Google is very happy. They only have to pay a 5% tax in Ireland and in other countries, they will say No, no, no, we are already paying tax in Ireland. So how do we pay you?
This is why other countries have now started making their own policies, such as India has done with equalisation levy. There’s also a recent example of what happened in Australia with Google. So media companies across the world have a big problem with Google.
What is that problem?
Let’s take an example of Times of India, The Hindu or Hindustan Times, etc. When you go to their website, you see certain ads, these ads are put there by Google. The advertiser pays Google and out of that money, Google will pay a very small amount to the Hindu or Times of India, where they are displaying the ad. So the Hindu website is selling its website space to Google, let’s say, for 5 rupees, Google will charge 100 rupees from the advertiser. So Google will take 95 rupees cut and 5 rupees they will give to the Hindu or times of India. The problem here is in this entire system, Google does not even produce one single line of content. All the content that you read, all the content that you consume is made by the media companies. They are working hard, they are paying their news writers, they are paying their journalists. Google will just put an ad and take 90% of the money and not even pay taxes there.
So media companies across the world are very angry. So in Australia, specifically, these media companies approach their government and say, Please ask Google to pay us some money. Google first said, No, no, no, we can’t pay you any money because our policy is not this. We are based in Ireland, we will pay the taxes there. But Australia forces Google by saying that if you don’t pay a fair share of your profit to the media companies who are working very hard, then we will not allow you to operate in Australia. This went on for many months and now recently Google has decided that OK, we will pay a share of our profit to the media companies who are making all the content. This is seen as a big win for Australia and many other nations across the world, including India, France etc are now also planning to do the same where media companies are coming together, asking the government to force Google to share their profits with the media companies who are actually producing all the content. So don’t be surprised if you see such kind of a law coming up in India or in the US also very soon.