Facebook and Twitter had a smart idea: make deals with cell providers in Chile so that mobile customers could use their apps for free, only paying for data when they click a link that takes them off the app.
Starting on June 1, however, that arrangement will be considered illegal.
That puts the social media giants in a bit of a bind. In the U.S., Facebook and Twitter have been vocal supporters of net neutrality, the idea that Internet providers shouldn’t be allowed to charge website for faster delivery to customers. But companies that back the concept at home face a different test internationally.
Free social media deals are popular in developing markets like Chile because they allow carriers to familiarize their customers with the mobile Internet, hopefully encouraging clients to pay start paying for data once they click on an external link. And at the same time, the social media companies gain access to a large base of mobile users.
Win-win, right? Well, not if you’re a small company trying to compete in the social media world. Here’s why:
Unlike the contract-based U.S. model, mobile connectivity abroad typically relies on prepaid cards for voice and SMS. Any data-using apps are considered extra services that require more money to operate.
David Meyer of Gigaom.com caught a glimpse of what these deals look like in practice. While using Twitter (free of data charges) during a recent trip to South Africa, he got this screenshot after clicking on an external link:
“The problem with such tie-ins is that they fly in the face of net neutrality - they treat certain services differently than others in an anti-competitive way,” Meyer wrote on the blog. “If you’re a wannabe Facebook or Twitter competitor, you’re severely disadvantaged by the fact that those services are essentially offered for free, while your potential customers will need to pony up cash to even check your service out.”
Part of the motivation of companies who enter into these kinds of agreements is that they hope to get an edge on the emerging markets: if they can become the gateway to the broader Internet for many users, they can solidify their standing in the market, to the detriment of local competitors.
Fusion reached out to both Facebook and Twitter about their views on the new Chilean policy, and about their respective global policies on net neutrality laws. Neither company has responded to these requests.
Nevertheless, back in 2010, Facebook butted heads with Google and Verizon by suggesting that a proposal to exempt wireless networks from net neutrality rules was the wrong approach.
“Facebook continues to support principles of net neutrality for both landline and wireless networks," the company said in a statement. "Preserving an open Internet that is accessible to innovators — regardless of their size or wealth — will promote a vibrant and competitive marketplace where consumers have ultimate control over the content and services delivered through their Internet connections.”
The company’s actions abroad, however, aren’t in keeping with the spirit of that statement. Since Facebook is provided to users in Chile for free, it’s possible that it may be stifling the growth of local innovators. Not exactly what you’d expect from a champion of net neutrality.
Facebook in particular could lose out because of the ban, since it now owns both Instagram and the WhatsApp, a popular messaging service outside of the U.S. Both apps were also specifically mentioned by the government in a press release.
Chile's new policy could create a more competitive market, but simultaneously slow the growth of the biggest tech companies.
But while Chile is pushing back against Internet monopolies, there are signs that this type of free-data approach could be tested in the U.S.
This January, AT&T started offering comparable "sponsored data" packages that work similarly to the deals in Chile. The packages have drawn ire from net neutrality advocates who have said that it offers an unfair advantage for companies who enter into the agreements.
And so we must wonder: if the current push for the FCC to develop strong net neutrality rules ends in a failure, will "sponsored data" partnerships with big tech companies be the new normal? It's not such a far-fetched possibility. After all, they have done it before.
Daniel Rivero is a producer/reporter for Fusion who focuses on police and justice issues. He also skateboards, does a bunch of arts related things on his off time, and likes Cuban coffee.