Indian telcos killed VAS business. Now they're out to kill your business

Some of you may remember the huge hype around VAS (Value Added Services) startups in India less than a decade years ago - remember SMSing to get your horoscope for the day, or a cricket score update? The story was all about how they'd create great content for distribution on the telcos' networks and how we'd see new giant companies being formed.

Fast forward to today - the telcos' user base is ten times larger - but do you see any of those VAS companiess around?

They're all virtually dead - and the telcos killed them. And they did so with a simple weapon - they charged a toll tax of 80% or more on all revenues generated by the VAS startups on their networks.

VAS companies are long gone - the telcos killed and ate the golden geese, and golden eggs are now hard to come by. But rather than learn from this debacle - they're out there to find and kill the next golden egg.

And that's you, dear Indian internet entrepreneur. You're going to be the next victim of anti #net neutrality.

Here's their plan. First it was Facebook with its apparently goodie-goodie "Internet.org" non-profit that was to bring the internet for free to the masses. This is what Reliance launched on its network. Till one figured that it would only bring Facebook's narrow, self-serving version of the internet to the people. So you'd get Facebook for sure, because your social network is more important than your kids' education or your health. And you'd get Bing, not Google - because Microsoft has a stake in Facebook while Google is the enemy. And it'd bring Babajobs not Naukri, for whatever reason - and so on. It's advertised as "internet designed for the poor" but it increasingly seems like "Internet designed to keep you poor". Your business can't get on to that platform.

Not to be outdone, and smelling revenues where Facebook sniffed out only poor people poking each other, India's largest telco has just brought out Airtel Zero - its "zero rating" app. And other telcos are waiting silently in the wings licking their chops to bring out their own ransom apps like Zero if they see Airtel get away with it.

While the PR spin around it is the same "free internet for the poor", the truth is that it's a very expensive proposition for everybody.

Here's what Airtel Zero is - it's a collection of apps that are chosen by Airtel and offered for free surfing by the public. So if you used Airtel Zero, your bandwidth meter stops ticking for any app that's part of the plan. Before you get excited, see what it really means.

First - this isn't for use by the poor - the real users will be all of us wanting to save a dime on bandwidth costs - which Airtel and others are raising anyway though global costs are falling.

Now you've heard that Flipkart has paid a chunk of money to be the e-com store featured on Airtel Zero. That means Airtel gets the money for the bandwidth from Flipkart - and in turns keeps other stores including yours out of this very select set. So if you're an e-com entrepreneur or a VC funding e-com companies, then tough luck - because you've just been locked out of the free internet that up to 200 million people will use in India. Airtel is busy striking expensive deals with others to be the exclusive real estate / matrimony etc type providers on this service.

It's horrible from the consumer point of view too. We go from the open internet to the closed internet. Flipkart has paid through its nose for their spot and if you're in front of it, there's no competition on this free channel. They'll raise their prices on their products not just because they can, because you can't compare here - but because they have to, so that they can pay Airtel the ransom demanded.

And given that Airtel revenues are in the billions of dollars, you can be assured they wouldn't touch a thing unless it could mean another billion to them. So if you had a few dozens of crores of rupees - that is, a few dozen million dollars every year - lying around, you might have a chance of getting on to the free bus. If you don't, too bad, you're going to wither away and die. The Indian Internet dream will become a Sunil Bharti Mittal fiefdom. Oh, you can be sure that Sunil's son's little company, Hike Messenger, will be part of Airtel Zero - what's life without nepotism?

This is no longer the open internet - this is the closed network, where Airtel is the toll-tax collector. Airtel is the goonda asking for collection money to put your app in front of people. This is the old Airtel - the killer of VAS, back in full form.

What is truly terrifying is that the firms you'd expect to stand up for the open internet - Google and Twitter - have bought into this terrifying plan. They're on Airtel Zero - but Airtel gave them a free pass for now. Their logic is "Well, we're not paying, so who cares". Shame on you two and your shameful Indian managements who signed these deals - I'm sure if your owners and management in Silicon Valley knew the full impact of your decisions, you guys would be boarded out in a hurry.

Think a little, Google and Twitter. Sure, the first year, Airtel needs you, to get traction for their horrendous Zero product. But by year three, you'll need them. And you'll end up paying the tens of millions of dollars a year in hafta vasooli  - protection money - to India's most thuggish telco. And who will you have to recover it from? The consumer again.

And who are you screwing over in the process, Google and Twitter? The consumer AND the young entrepreneur. Dear Google, you once said "Don't be evil". I don't know if you're watching - but your Indian team has just gone over to the dark side.

We're going back 30 years, to the days of the license raj, where the guy who owned the pipe could dictate what flowed through it. Can something stop this outrage, though? Can we get the open internet back?

Actually yes. The thing is that the atmosphere and airwaves this stuff goes through is ours, the people of India's. And our government licensed it to these thugs, under our terms and conditions.

There's currently a move by the telco-lovers at supposedly-independent government organisation TRAI to make things like Aritel Zero which break net neutrality legal and kosher.We have 13 more days to stop them.

As usual the Indian internet entrepreneur and VC / PE organisations like IVCA, TIE and NASSCOM are asleep at the wheel. Or clueless. Or bought. Or all of the above.

So it's up to us - the general public and the entrepreneurs - to fight back and stop this internet holocaust.

I'd written another piece a few days ago - over at 6 Stupid Reasons You Weren't Hired (Even Though You Were the Best Candidate) that gave you a broader view of the same move. Some momentum has started on this front.

We have 12 days left to fight this. Here's what you can do.

1. Sign this petition over at TRAI: Don't allow differential pricing of services on the Internet & let the consumers choose how they want to use Internet. #netneutrality and share it with your friends.

2. Write directly to TRAI at "advqos@trai.gov.in". You can write what you like - but you could have words that say something like

Dear TRAI, I am writing to express my concern against the actions that telecom carriers are taking against Net Neutrality. Zero Rating Apps are one of these neutrality-breaking moves.

I believe the internet is a vital resource - if telecom operators can determine which apps I use for free and which I cannot, because of their secret backroom deals - this creates an environment that is deeply anti-competitive and deeply anti-consumer. 

India is an inclusive country, and we cannot have such elitist structures on the internet. We have to allow the open internet, where consumers and entrepreneurs can be free to market and use any and all apps, without the burden of knowing which apps have free bandwidth pre-paid and which don't. 

I am writing to ask you to demand net neutrality from telcos and specifically disallow Zero Rating Apps from all Internet Service Providers

Regards, {Your Name}

3. (Revised on Apr 12) Go over to savetheinternet.in - a site put together by some of our friends who care deeply about this. TRAI has asked 20 questions in their so-called "Consultation Paper" - here is a set of answers you can send them for each of those questions.

4. Write to the management at Google and Twitter to get them off any and all Zero Rating apps, including Airtel, so that they don't encourage rapacious telcos.

5. If you're part of an industry organisation like FICCI, CII, Assocham, IMC or others, get them to lobby on behalf of consumers and entrepreneurs around India. Ask them to put forward a simple message - yes to net neutrality and no to zero rating apps.

6. Spread this message by sharing this piece on LinkedIn, and ironically on the culprits Facebook, Twitter & Google Plus. Let's get all their members to see how evil their apparently-friendly social networks can be.

7. Get this message to your MP, and / or to Ravi Shankar Prasad or Prime Minister Modi. Make sure they know you care deeply about net neutrality and get them to legislate that neutrality-breaking activites cannot be allowed in India.

8. If any of you are members of the press, traditional or digital, feel free to re-post this entire article on your site or media vehicle, with attribution and without any significant changes. You don't need any further permission from me.

Thank you for your continued support.

I'll keep you posted.

(Mahesh Murthy is a founding partner at Seedfund.)