Zero-Rated Apps Can Jump Start Internet Access in Developing Regions

Zero-rated apps--where a consumer can use an application without buying a mobile Internet access plan, or where usage of an app does not count against a bucket of usage, are important methods whereby potential users in many parts of the developing world can get access to key Internet apps.

In fact, zero-rated apps, along with low-cost smartphones, are key ways of jumpstarting the Internet  ecosystem in areas where end user discretionary income is low and people are unfamiliar with the value provided by Internet access.

In a low-connectivity equilibrium, a sort of vicious cycle operates. People and businesses have little incentive to get Internet access, because few potential apps, services or customers can be found online.

Consumers have little incentive to spend scarce cash when they perceive there are few compelling apps. But developers might not create those apps if there is no audience. Difficult sustainable revenue models mean Internet service providers cannot justify extending networks and offering low-cost service. Without the possibility of access, few consumers can buy.

In the Philippines, a mobile Internet access subscription might cost the equivalent of $17 a month, about 10 percent of monthly per capita income.

So the logic of providing no-incremental-cost access (zero rating) is widely viewed as a key promotional strategy. A recent study found that 45 percent of global mobile operators offer some form of zero rating, for example, according to the Progressive Policy Institute.

Globe Telecom in the Philippines found it doubled the number of mobile data users after it offered zero-rated app access.

Nevertheless, some policy advocates favor complete bans on zero rating.

Are zero-rated apps wrong? Are zero-rated apps a violation of network neutrality, or the principle that all consumer apps should be treated equally? Some do not believe that is the case.

Facebook, through Internet.org, or example, is offering a package of zero-rated apps, in partnership with mobile service providers, in a number of countries.

But the Progressive Policy Institute believes concerns can be alleviated if just a few principles are followed.

Those principles include transparency, non-exclusivity, focus on local content and regular evaluation.

Transparency means all zero-rating offers should be public. There should be no secret agreements between any content providers and any mobile operators.

Zero rated app offers also should be non-exclusive. There should be no agreements

prohibiting multiple operators from offering the same zero-rated content. That will prevent anti-competitive behavior.

Important local content, such as local government services, local healthcare and weather alerts, should be zero rated.

Regular data collection and reporting from the mobile operators will help governments understand the effectiveness of zero-rating programs.

Zero rating is an important tool for rapidly exposing end users to the value of Internet apps. That is why some believe the principle of “treating all apps alike” is flawed. Sometimes value and goodness flow from unequal treatment.