What is Facebook's (FB) "Free Basics" for India All About?

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Ever since FacebookFB went ahead with its Free Basics promotions in India, it has been facing a whole lot of criticism. The social media giant had launched its program in 2014 to improve Internet services in a number of developing nations.

In 2015, the app was renamed 'Free Basics' with which Facebook intends to sponsor Internet in developing countries like India. However, while Facebook claimed that the initiative would allow people who cannot afford the Internet to get access to information and connect with the world, a number of people and organizations have been opposing it. This is because 'Free Basics' does not mean free access to the whole of Internet.

Are 'Free Basics' Really Free?

Facebook would only be sponsoring access to a few select sites and apps, which it deems fit (it covers topics like news, maternal health, travel, jobs, sports, communication, and government information). This 'condition' has sparked the fight for net neutrality in India and some other countries.

Critics claim that the Free Basics initiative directly contradicts the net neutrality rules, which were embraced by FCC in 2015. Net neutrality vouches for an open-Internet atmosphere, which prohibits Internet service providers, to either favor or restrict access to any web content (app or website). According to them, this would give the social media giant significant control over what sites and apps people access and would have unfavorable impact on a large number of websites and other companies especially tech-based startups. This led to widespread opposition in India from a number of telecom operators and other organizations.

The Telecom Authority of India (TRAI) last month asked Facebook's operator partner, Reliance Communications, to "put on hold" the Free Basics services in the country for now.

However, Zuckerberg has been repeatedly defending his initiative saying, "This isn't about Facebook's commercial interests - there aren't even any ads in the version of Facebook in Free Basics. If people lose access to free basic services, they will simply lose access to the opportunities offered by the internet today."

It's true that Internet does open a lot of avenues for economic growth especially for people in poverty-ridden regions. According to a World Bank report, in 2011, nearly 22% of Indians were living below the poverty line with a large percentage of rural people living in 'extreme poverty'.

Zuckerberg has started a massive public campaign in India to garner support for his initiative saying "We know that for every 10 people connected to the Internet, roughly one is lifted out of poverty".

So far, over three million people have petitioned the TRAI in Facebook's support, according to the company.

How Can Facebook Benefit from this?

While it cannot be said whether Facebook's motive is to control the Internet or not, the immense scope for growth in India is no secret. This emerging country with a population of over 1.2 billion has only about 354 million Internet users (as per Sep 2015 data). Even with low Internet penetration, India is already the second largest market for Facebook just after the U.S.

Furthermore, the rapid growth of smartphone adoption in India will undoubtedly lead to further growth. With developed nations already reaching a saturation point, Facebook is broadening its presence rapidly to boost its user growth.

Bottom Line

It seems that Indian regulators will have to choose between digital equality or access to Internet for the poorest of its poor (which might affect some of its business community). However, for now, both net neutrality and Free Basics advocates are putting in their all to get a decision in their favor.

Zacks Rank

Facebook has a Zacks Rank #2 (Buy).Some other tech stocks worth considering are Mercadolibre, Inc. MELI , MeetMe, Inc. MEET and Synacor, Inc. SYNC . All the three stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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