The Progressive Policy Institute released a March 2015 policy memo by Diana Carew entitled “Zero-Rating: Kick–Starting Internet Ecosystems in Developing Countries.” “Zero-rating” is when a consumer can access specific websites or applications for “free” (or without the data accessed counting towards the consumer’s data cap) because of an agreement between a content provider and mobile broadband provider. In her policy memo, Ms. Carew argues that zero-rating plans could play a huge role towards increasing connectivity in developing countries.
Ninety percent of the world’s unconnected individuals live in developing countries. Thus, there is little incentive for these individuals to spend the small amount of money that they have on an Internet connection if very few people around them are connected. Mobile data plans in the Philippines, for example, cost almost 10 percent of the per capita monthly national income, according to the ITU.
Less than 30 percent of Africa’s 1.1 billion people were connected to the Internet in 2014. Ms. Carew says that zero-rating plans could be the key towards transitioning a community from low-connectivity to high-connectivity:
The power of zero-rating to nourish an Internet ecosystem in poor and developing countries comes from its potential to increase connectivity by both people and businesses quickly and at low-cost. First, free access to popular sites like Google, Twitter, Wikipedia, and Facebook encourages more people to sign up for data plans, and enables greater data freedom to explore local content. Second, the increase in demand for local content spurs local businesses and entrepreneurs to create new online products and services—for example, information on Ebola outbreaks, typhoon warnings, or even wait times at local stores and government offices. Moreover, the higher share of population online justifies efforts of government agencies to go digital, which in turn encourages more business and individuals to join the internet ecosystem. Taken together, zero-rating can effectively jump start a virtuous feedback loop that moves the local economy into a high-connectivity equilibrium.
The economics is simple. If ISPs subsidize data for consumers in developing countries in order to increase the number of subscribers, this will increase the demand for more content. In other words, if an ISP provides “free” access to Google, Facebook, or Wikipedia, it may incentivize individuals to connect. Then, as individuals increasingly want to access more applications, they may be willing to switch to broader data plans which offer access to the entire Internet. This is not a new idea either. ISPs have often subsidized broadband plans in order to attract low-income consumers.
Granted, connecting the developing world will not be an overnight process. However, 45 percent of the world’s mobile providers already offer some form of zero-rating. If these providers (and additional providers) can find a way to market these plans to individuals in developing countries and/or develop more attractive plans, we may be on our way.
Although zero-rating plans have been criticized by Title II advocates, Ms. Carew argues that it is bad policy to simply prohibit them. In the United States, some consumers may not find zero-rating plans attractive, but many low-income consumers who only use mobile data to access a handful of applications could benefit from existing and/or emerging zero-rating plans.