Indian Telecoms Regulator Effectively Bans Facebook's Free Basics Service -- Update

By Sean McLain and Joanna Sugden 

NEW DELHI--Indian telecommunications regulators on Monday effectively banned a controversial Facebook Inc. program to let people have free, but limited, use of the Internet, issuing rules requiring companies to charge the same price for access to any website.

Under the new regulations, Reliance Communications Ltd., the mobile-phone service provider that is Facebook's partner in India, can no longer offer the Menlo Park, Calif.-based company's Free Basics. It also can't offer free access to Facebook's social-media site.

"We have come to the conclusion that differential pricing is not in the interests of consumers, or of the growth of the Internet," said R.S. Sharma, chairman of the Telecom Regulatory Authority of India. The authority said its decision was "guided by the principles of Net Neutrality."

A Facebook spokesman said the company was "disappointed" by the ruling, and that Facebook would continue "efforts to eliminate barriers and give the unconnected an easier path to the Internet and the opportunities it brings."

A Reliance Communication spokesman couldn't be reached for comment.

The decision was a setback for Facebook, which had waged a vigorous and high-profile campaign to generate support for Free Basics, which it said was designed to encourage people to use the Internet. Free Basics offers Indian users free access to websites that, among other things, offer job listings and sports scores, as well as Microsoft Corp.'s Bing search engine.

For weeks, the company ran ads and encouraged backers to send letters to the regulatory authority voicing support for the program. The tactics drew a rebuke from the regulator, who accused Facebook of trying to turn a "meaningful consultative exercise...into a crudely majoritarian and orchestrated opinion poll."

Mark Zuckerberg, Facebook's chief executive, wrote an opinion piece published in a local newspaper that compared Free Basics to public education and free libraries. "Who could possibly be against this?" he asked.

But Facebook faced determined opposition from Indian startup founders, who feared they could be left at a competitive disadvantage, and net-neutrality advocates who argued that Facebook and others shouldn't be allowed to play gatekeeper roles in determining what Internet services people can access without paying.

India is a high priority for Facebook. With 1.2 billion people, India presents an important market for the social media site, especially since access to Facebook is blocked in China. India is already home to 130 million Facebook users, the second largest population after the U.S.

Cellular service companies fought for the ability to offer subsidized Internet access, but Monday's decision is unlikely to damage their business. Falling smartphone prices have driven a boom in mobile data usage in India, boosting profits.

"We are very disappointed with the ruling from the TRAI," said Rajan S. Mathews, director-general of the Cellular Operators Association of India, a trade group. Mr. Mathews said it would examine the regulations before deciding whether to fight them in court.

Write to Sean McLain at [e-mail] and Joanna Sugden at [e-mail]

(END) Dow Jones Newswires

February 08, 2016 09:03 ET (14:03 GMT)

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