Sunday, May 14, 2006

Indian Postal Service and Net Neutrality

Indian postal service does not provide Internet service, so has nothing to do with net neutrality as such. But some of the strategies it implemented to discriminate content has some relevance and insights for the struggling telecom/ISPs and the ongoing net neutrality discussions.

Indian Postal Service, one of the largest postal services networks in the world, runs under the brandname 'India Post' by Govt. Of India. It provide heavy subsidies in its services to reach common man in India. (Have a look at subsidies from 10th 5year plan by the Planning Commison of India,  Page3)  Postcard has been the most common and most used mail service by Indian people. Today, one can buy a postcard at 50 paisa (0.50 Rupee, equivalent to about 1 cent in US currency). Indian postal service actually gives a subsidy of 555.39 paisa (around 10cents) to bring it down to such a low price. Indian Government funds this subsidy through budget allocations for the good of common man.

During early 1990s, television exploded in India with many more programs and introduction of many private channels. Lots of programs started conducting interactive competitions to the viewers, and viewers need to respond with answers on post cards, the cheapest form of communication. People started participating in those competitions at an alarming rate. With the explosion of use of postcards for use to respond to competitions, Postal service and inturn Indian Government has to vest in lot more money to keep the price of postcard low so that common man is not affected. This has caused huge losses and deficit in the operations of the postal service. Remember, on each card Postal service looses about 90% of the cost of the card, providing as subsidy. 

So to solve this problem, Indian Government decided to discriminate the content of the post card, ie., what the post card is used for. In 1996-97 budget, the cabinet proposed to create tiered-postcard to solve the issue. Normal Postcard can be bought at the same price as before. (15 paisa in 1997, 50 paisa now). But this card can not be used for any kind of competitions or commercial activities. A new card has been introduced, called 'Competion Postcard' priced at Rs.2.00(in 1997)without any subsidy. This card must be and the only card be used for all kinds of competitions. On this card, Postal service did not loose a paisa. Almost every year the price goes up for this card, now (2005-06) priced at Rs.10 and India Post is infact now making Rs.5 profit on each card they sell.

"Content discrimination and tiers of service explicitly based on type of content" is at the core of the strategy used by Indian Government to solve the problem of profitability while maintaining the noble cause of providing service to comman man. And it worked so well.

Now the ISPs and Telecom/wireless providers are about to take a similar path to gain more profits from the rising internet traffic.You may compare postcard to internet service, compare competitions to video/music/file sharing... heavy data, noble cause to profits... !!!

Good? Bad? Reasonable? Absurd?  Up to you, to decide.

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