governance, political economy, institutional development and economic regulation

Posts tagged ‘ersatz socialism’

Secrecy, privacy and property rights

access denied

Rahul Gandhi alleged, during last week’s doomed-from the-start no-confidence motion in Parliament, that corruption in the 2016 agreement signed by the Narendra Modi government to purchase 36 Rafale fighter jets from France had forced defence minister Nirmala Sitharaman to backtrack from her assurance to disclose details of the price of purchase.

Parliamentary subterfuge – unnecessary, if there is nothing to hide

The matter could have been ended by Ms Sitharaman admitting that being new, she had overlooked the confidentiality clause – a plausible explanation since military purchases are a tough, black box to unravel. Instead, the government chose to hit back by pinning the blame on a 2008 bilateral security agreement signed by the then UPA government with France. This needed both parties to protect classified information which could compromise the security and operational capability of the defence equipment of either.

It is quite a stretch to argue that keeping the price paid a secret meets the test of “necessity” or “proportionality” which guide how much a citizen’s right to know can be restricted. The Chinese or the Pakistanis couldn’t care less what the Indian taxpayer shelled out for the fighter jets.

They likely already know the specifications of our purchases. But at the same time corruption cannot be lightly presumed to be the reason why Ms Sithraman backtracked. Expect this unresolved debate to hang like an ominous cloud as the counter to the BJP’s allegations of corruption during the previous UPA government.

The underside of unrestrained privacy

Privacy is to individuals what secrecy is to the State.  The debate on privacy got muddied by the recent arraignment of WhatsApp for being the conduit of fake news, which incited vigilante violence and hate crimes.

WhatsApp encrypts content in its pipes end-to-end like no one else. Complete secrecy attracts 1.5 billion active monthly users and 60 million messages per day. Its end-to-end encryption cannot even be decrypted by its own administrators. This rabid commitment to secure the privacy of its users doesn’t align with the extant law and is as over-the-top as is our government’s thirst for secrecy. The fundamental right to privacy is restricted by other fundamental rights, including public order, security and those embedded in Article 21 of the Constitution of India, to which privacy was also mapped by the Supreme Court in 2017.

A fundamentalist view on the right to privacy has spawned “dark”, impenetrable means of communication, like WhatsApp. This is a precursor of what could happen if the “dark web” becomes the norm. Similarly, if crypto currencies are allowed to subvert a sovereign’s power to issue currency and bury crime-related financial transactions underground, catastrophe beckons.

WhatsApp managers initially expressed technological helplessness to regulate the unsavoury use of its technology. They are now making conciliatory noises with an eye to their bottomline. Non-compliance could jeopardise their application for adding-on a payments app in India.

Psst! I have a secret

Secrets

Why has WhatsApp been allowed to linger on and not simply told to shut shop, as is China. The bottom-up view is that encrypted communication has wide appeal across political parties and individuals. We all have secrets.

WhatsApp democratises the power to have secrets, unlike the Official Secrets Act 1923, which locates this power only within the State. WhatsApp allows everyone to have secrets. This suits freewheeling democratic India.The last word on the privacy of digital data will be from the Justice B.N. Srikrishna Committee on data protection. This committee, appointed in August 2017, has worked in unprecedented grand isolation. Presumably, things have been decided behind closed doors and the collective wisdom will be revealed in due course.

TRAI recommendations on data privacy and security mundane, at best 

But in chaotic India, surprises are routine. Days before the report was to be submitted, the Telecom Regulatory Authority of India (Trai) published, on July 16, 2018, its recommendations on privacy, security and ownership of data. The TRAI recommendations are unlikely to make the committee pause and think again. It is already broadly agreed that the individual’s ownership of data is paramount. But both the fundamental right to privacy and the right to property over data are restricted. If the necessary safeguards exist to mask sensitive and personal information, the plea of privacy loses force for denying access to data, at least to the State.

Artificial intelligence requires masses of data to train machines to think and behave better than humans. Anonymised data aggregated across a large number of individuals is more valuable than oil, in order to understand and predict contextual human behaviour.

Who is “Free riding” on data?

The debate on free riding on data has focused on how aggregators free ride on individuals data. However, if an aggregator “pays” explicitly for using individual data, ownership over data should stand transferred to the aggregator. Consider that in touristy locations across the world, locals demand a fee to be photographed. Such contracts, for non-anonymised data, with adequate safeguards, should be encouraged not pushed underground.

With respect to strictly anonymised data the right to deny or withdraw access to, despite adequate masking safeguards, can be viewed as anti-development and also at a stretch anti-national. At the very least, denying or withdrawing access to anonymised data should attract a cost to be paid, since it amounts to “free riding” on the technological benefits gained by others providing their anonymised data.

TRAI has passed up an opportunity to assert that the ownership of anonymised aggregate data should vest with the entity doing the aggregation if a specific contract exists with the data generator (app user). This needs to be clarified to retain the value proposition in data aggregation.

A market for anonymised data

Conversely, TRAI has ignored the need for a market to price data. A market exists even today. But it is an informal and non-transparent market which hurts the commercial interests of the individual data owner and puts the controller or processor of data in the driver’s seat. This information asymmetry can be removed through innovative institutional development to ensure that individuals are not shortchanged and have to sell their data cheap – much like innocent tribals selling their land for peanuts. If data is the new oil, it must priced accordingly.

Restore property as a fundamental right 

demolition

We have grossly neglected property rights in general and specifically in the context of  data management. Civil society mostly focuses on safeguarding the privacy aspect of data management. There is a reason for this. Unlike privacy, the right to property stopped being a fundamental right in India in 1978. This makes it difficult to challenge laws infringing on property rights.

Conversely, the higher judiciary has been indulgent in admitting public interest litigation  (writs) challenging laws threatening fundamental rights generally, so privacy gets privileged legally over property. Privacy rights also align with the need to decriminalise gay sex. It is an emotive issue. In comparison, a right to property seems almost crass, where 60 per cent of people own no land or electric consumer durables; 40 per cent of households live in just one room and can fit their possessions into a gunny sack.

But make no mistake. Socialism erred in hiving-off the right to property from human rights. Property is intrinsic to the right to privacy and liberty. But we will have to keep arguing till we fix this error, eventually.

Adapted from the author’s opinion piece in The Asian Age, July 24, 2017 http://www.asianage.com/opinion/oped/230718/whatsapp-row-on-secrecy-privacy-property.html

Don’t demonise air travel

 

solar plane

Solar Impulse 2 touches down in Spain completing a historic trans Atlantic flight. photo credit: dispatch.com

Air India recently made headlines by offering last-minute unsold seats at the price of AC rail tickets. It makes a lot of business sense for the national carrier: every marginal rupee it earns adds to its bottom line. More important, the fact that its bottom line is attracting leadership-level eyeballs is welcome for a state-owned company that budgeted for government support of Rs 19,900 crores over the 2012-16 period.

This new initiative could bomb if it makes regular air travelers, who are time flexible,wait till the last minute to book tickets. This would squeeze revenues further. But if it induces rail travelers to fly instead, it will be a win-win. This is a calculated risk that must be tested. What is more significant is that it signals the Maharaja’s changed can-do business-oriented approach.

air india2

Disruptive pricing or funded wars for market-share

Disruptive price innovation in passenger travel as a whole is a welcome move to squeeze out hidden value. This should be distinguished from the price war unleashed by private low-cost airlines a decade ago, and again in 2014, to gain market share within aviation. As the e-commerce market has found, funding losses to push out the competition quickly reaches the endpoint. Air India, a full-service airline, unlike some private carriers which levy hidden costs for baggage, seat allocation and food, should be encouraged to go further and explore all commercial options for expanding the air travel pie. Pulling away rail travelers, willing to pay AC fares, to fly instead is a good one.

Less than one per cent or 60 million inter-city travelers choose to fly. For most, the higher cost is the barrier. But for significant numbers easy connectivity is also an issue. Civil aviation is the neglected child of the ersatz socialism we have long practised. So deep is the association of private enterprise and markets with the rich that even this government, with its massive mandate, has to battle populist urges to stay on course with its reform agenda.

The socialist bias against air travel

Till just two years back, the thought of air travel competing with trains was a fantasy. Seen through the binary vision of poor versus non-poor, air travel is a luxury used mostly by the non-poor. Imposing penal taxes on air travel is therefore only a natural corollary of this bias.

The good news is that such mindsets are changing. The Union government has worked quietly but effectively since 2014 to convince state governments not to levy penal taxes on air turbine fuel, which cripple expansion of this sector. The fuel cost is 50 per cent of an airline’s total costs. State governments earlier saw air travel as a cash cow and levied VAT at penal rates of up to 29 per cent.

Government intervenes to correct the tax disincentives

But now several states, most affected by poor connectivity, wisely responded to the Union government’s efforts to de-demonise air travel. Orissa, Madhya Pradesh, Chhattisgarh, Jharkhand and West Bengal slashed VAT to nominal levels in late 2014. Even CPI(M)-ruled Tripura was persuaded to reduce VAT to 18 per cent. Around 50 per cent of air traffic today and the bulk of profits are from flights linking the seven large metros. The need for better regional connectivity is obvious in a country of India’s size, that is also saddled with our dodgy surface transport infrastructure. Travelling from Kanyakumari, on the Indian Ocean, to Jammu, just below the Himalayas, or from Dwarka, on the Arabian Sea,K to Dibrugarh in Assam takes at least three days by train and even longer by road.

The Centre has launched a parallel scheme to improve air connectivity by creating a special fund to finance the gap in financial viability for linking Tier-2 and Tier-3 cities by air. There are around 50 of these. The pity is that this initiative is seen as fulfilling a social objective. This is an effective way to kill the long-term sustainability of air operations on these routes.

Regional air travel a wooly “social” objective  or just good economics?

Regional connectivity shouldn’t be branded as a populist goody. Air connectivity drives and contributes to growth and decent jobs. Globally, every job created directly in civil aviation leads to an additional six jobs indirectly. Only a link with growth will induce serious air operators to see the proposed subsidy as an initial sweetener rather than a perpetual crutch. Faster and better passenger trains are an option too. But it will take at least two decades to build upgraded rail tracks and the appropriate rolling stock. Our fastest passenger trains run at an average speed of only 80 km/hour. High-speed trains of the type envisaged between Mumbai and Ahmedabad and later between New Delhi and Varanasi can be viable only on high-density routes. These also cost a packet. The intrepid Elon Musk of the SpaceX rocket venture; Tesla Solar Wall and automated electric car, envisages a disruptive technology – travel by Hyperloop — an elevated tube mounted on pylons with passenger pods pushed through at hyper-speeds using electro-magnetic waves.

hyper loophyper loop2

The ball park estimate is a capital cost at $6 billion, just a fraction of the $68 billion, planned to be spent on the high-speed rail link between Los Angeles and San Francisco. Musk concedes that beyond 1,500 km, air travel would still be cheaper.But this innovation in transportation is yet to be piloted and tested. Commercialization is unlikely before 2030 though Musk is pushing for 2020.

Air travel also more safe and easy to secure than surface transport

In lightly-policed countries like ours, the security and safety of ultra high-speed inter-city passenger trains is a matter of some concern. Air travel is more difficult to cripple and offers higher security levels as it is off the ground. It is suitable for connecting urban growth hubs at distances beyond 500 km under our “enclaved pattern” of development

The Maharaja has kicked-off its strategy to meet the competition in a fiscally sustainable and affordable manner. More power to the elbow of the civil aviation leadership to grow the pie of the air travel business.

air india

Adapted from the authors article in the Asian Age, July 18, 2016 http://www.asianage.com/columnists/incentivise-air-travel-new-links-will-boost-growth-825

 

TRAI’s ersatz socialism kills innovation

TRAI

R.S. Sharma the new TRAI chairperson and  architect of “ersatz socialism” in the www. Photo credit: economic times.com

By ruling against Facebook’s Free Basics type of innovation, which offers, hitherto undreamed of, free but limited access to data services, Telecom Regulatory Authority of India (TRAI) has regressed to a version of “ersatz Nehruvian socialism”, which persist long after Panditji. It would have astounded him that his thoughts are still evoked to preserve the privileges of a thin crust of 250 million elite Indians whilst doing little for the 700 million poor Indians. Consumer benefit has been sacrificed yet again for ideology.

Nehruvian Socialism and Net Neutrality

Remember the car you used to drive in the 1970s? Most don’t, because it was an expensive, exclusive asset owned only by the rich. Even today Indian cars remain a rich person’s trophy because of the high cost of owning and using one relative to average income. Only 10 per cent of the 230 million Indian households own a car. Ironically, the TRAI order of February 8, 2016, is driven by a similar vision — preserving notional equity and freedom within a small bubble of 250 million well-off, “Internet connected” Indians owning smartphones.

poor buy

India’s poor- ersatz socialism permanently excluded them from the bubble of shiny cars. Net neutrality similarly excludes them from the virtual world. Photo credit: bbc.co.uk

Shunning innovation in the pricing of access to the Net under the garb of Net Neutrality has precisely this bubble effect. TRAI has decided to protect the existing ecosystem which privileges platform managers, content and app developers who today have unpaid access to 250 million netizens. But it ignores the need to grow this market to include 700 million Indians who are too poor to access data services other than phone calls and SMS.

TRAI’s vision of the www is like that of an owner of an expensive mall- keep the poor out.

The net is like a Mall except that you have to pay to get in and guards are actively instructed to keep shabbily dressed people out so that rich customers can float through an air-conditioned heaven- just like in Dubai. The good news is that in the real world business serves the needs of the poor through street markets because the municipality facilitates it. in a TRAI ruled internet the poor are to shunned, exactly as in expensive Malls and no street market is to be made available for the poor. The poor are to be kept invisible – as in China or Rwanda where the strong arm of the State keeps the poor severely controlled.

It is unsurprising that the Congress which has made ersatz socialism into a family business should support “Net Neutrality”. But that this should happen under a government led by Prime Minister Narendra Modi which has vowed to “free” India from the social and economic chains of the past, shows that this government needs to put on its “thinking” cap.

TRAI order equates porn with socially relevant content

TRAI’s decision is perverse and here’s why. It throws out the baby with the bath water. Whilst banning price “discrimination” for content, it also effectively disallows “positive discrimination” or “affirmative action” for access to socially responsible content. In essence it says a consumer must pay to access content whether it is porn or wikipedia.

Consider a large Indian company which may want to subsidise a telecom service provider (TSP) for providing free access to educational sites targeted at helping poor or dalit kids crack the JIIT exam. The TRAI order disallows this effort.

Similarly, it bars a poor, pregnant woman, say on the outskirts of Patna, from availing free access to check the cost of having her baby in a decent hospital in Mumbai, where her husband works. Sorry, says the TRAI order. You must pay the TSP to access the Net.

It is hypocritical to simultaneously support free content-unhindered by state control whilst arguing against “affirmative action” for providing free access to the poor to socially relevant content, developed just for them.

It is not just about Facebook

It’s not only about Free Basics. It is the principle of killing innovation that’s the real concern. The Trai order kills innovation in developing socially relevant content for the poor because there is no way now of getting the content to them.

Free Basics is driven by commerce. Free access has to be paid for by someone. Today it is Facebook subsidising access, tomorrow it could be a Tata CSR project. In Africa, Net subscriptions of the poor are subsidised by foreign donors.

Net neutrality is bad economics

More practically, there is money at the bottom of the income pyramid. Activists, platform managers, content and app developers are being short sighted in ignoring the role of “free access” in getting them there. They lack the business vision of Hindustan Lever which innovated shampoo sachets two decades ago to give every woman an affordable taste of luxury. Or do they fear that international players with deep pockets may get there first before they get their act together? Are they using the garb of “Net Neutrality” as a fig leaf for self-preservation? Do existing Indian players, TSPs want to keep Facebook out so they can do the same once they become big enough?

Predatory pricing based on enormous private equity funding is the essence of the IT start up.

All IT start-ups attract customers by subsidising prices. Take Uber, Flipkart or any other. The fear that they will start increasing prices once they get bigger is misplaced because unlike the bricks and mortar world entry barriers are low in the digital economy which ensures sufficient competition to keep each big player on their toes. Guarding against predatory pricing is a slippery slope for TRAI. It can result in taking the fizz out of e-commerce which is growing by out-pricing the corner mom and pop store and traditional taxis by relying on serial funding from investors, not profits to fund unheard of price discounts. In any case India has laws and the Competition Commission of India to regulate dominance and monopoly. TRAI is hardly equipped to rule on anti-trust issues.

Today’s startup is tomorrow’s business biggie

flipkart

The Bansals of Flipkart- value $ 15 billion and counting- give Amazon a run for its money. Photo credit: livemint.com

Ironically, whilst making it easy to do business for “start-ups,” we are killing commercial innovation by business biggies. Can an “innovation” friendly eco-system really be sliced and diced, such that it is a “free market” for start-ups but a stiflingly regulated environment once they become a business biggie, like Facebook? In the virtual economy startups grow on the strength of innovation not government protection. In any case, the record of ersatz socialism in growing small industry via protection is miserable. The Indian Telecom industry, the only success story of privatisation and reform, has grown from being yesterday’s “start-up” to today’s business biggie. Why discriminate against it because it has been successful?

The digital eco-system must be fair to all stakeholders, not just the software and content developers

There is a symbiotic relationship between TSPs, content providers and app developers. TSPs, represented by Cellular Operators Association of India (COAI), buy expensive spectrum from the government, install and maintain the telecom network to link-in netizens and ensure that the number of eyeballs grows. If the content available is attractive, netizens spend more time surfing, thereby boosting TSP revenues. They enrich app developers by buying an app off the Net.

To access content on Flipkart, Snapdeal, Amazon, Uber or Myntra there is no additional charge other than the Internet access cost. So are these companies just plain generous? No. Like Facebook or Google, they make their money by selling the data they gather from the netizens — demographics and preferences — to market analysts and sometimes to governments; they leverage their eyeball score to increase advertising revenue and get additional private or public equity funding. This is the money they burn to offer fantastic discounts and out-compete brick and mortar pop and mom stores.

So why does National Association of Software and Services Companies, an Indian IT lobbyist, support the Trai order? Because it is in the interest of the software developers and content providers they represent to try and hang-on to the freebie they have — the roving eyeballs of netizens for which they pay nothing.

Why do the parents of the www (US & the Brit Sir Tim Berner) support net neutrality?

Berner

Sir Tim Berner-Lee inventor of the www. Photo credit Wikipedia.com

Indian activists are fond of using the United States as an exemplar of non-discriminatory pricing access and the trenchant advocacy of Tim Berners-Lee – the inventor of the www-for net neutrality. This is their Brahmastra to clinch the argument for “Net Neutrality”.

This is unsurprising. For most netizens, the US is the mother lode of innovation, which it certainly has been. But cut-paste is bad tactics for good governance. The context in which things work is key. Activists and governments routinely overlook the difference in context in a slavish tendency to adopt best practice international templates.

Why the US is different

US poor

The poor people of the US: photo credit: rediff.com

In the US, the poverty level income is $2,000 per capita per month. Data access costs just 5 per cent of income or $100. In India, the poverty level income is $30 per capita per month. Data access costs $10 or one-third of a poor woman’s income. The cost of Internet access is not an economic barrier in the United States. The US is under no compulsion to abandon “Net Neutrality”, an ideology which sounds noble. For India, TTAI’s ideology of “Net Neutrality” means the economic exclusion of 700 million poor people.

TRAI’s technical incompetence drives the ban on differential pricing

The bottom line  is that despite its rhetoric on “net neutrality” TRAI is technically incapable to monitor data services to detect instances of blocking or preferential access for content favoured by TSPs. This why it has opted for the blunt instrument of a complete ban on commercial innovation in pricing and financing. This is the worst option driven by regulatory incompetence not by high minded adherence to principles. A sad comment on the state of regulation and of consumer protection in India.

Adapted from the authors article in Asian Age February 10, 2015 http://www.asianage.com/columnists/trai-s-socialism-kills-innovation-136

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