Zero-rating in Emerging Economies

In developing countries where nearly all users pay for their Internet on a capped and metered basis (rather than having the “all you can eat” unlimited Internet data packages on offer in many developed countries), zero-rating — where data is offered that does not count toward the user’s data cap — is a subsidy that can be important to operators, content providers and users. Social media and text-messaging applications are among the content that is commonly zero-rated.

For users, zero-rating provides an opportunity to save money because they bear no cost of the zero-rated data. For telecom operators and content providers, zero-rating is an opportunity to increase their customer base — as long as appealing content is zero-rated.

But zero-rating has proven to be hugely controversial. The debate touches upon issues of net neutrality — the concept that all content should be treated equally on the Internet — market power, privacy, security and social equity. This paper examines the spectrum of arguments for and against zero-rating. It analyzes each issue from the perspective of developing countries — countries with market conditions vastly different from those of Europe or the Americas in terms of connectivity, affordability, quality of service and availability of relevant content for users.