When regulation is too tight or ham-handed, it stifles innovation. On the other hand, when firms are left unchecked, they can transition into being one or more of the following: anti-competitive, anti-privacy, unsafe or undemocratic.
In the last few days, several developments around tech regulation—including payments and over the top content— have taken place. Today’s newsletter covers a byte-sized analysis of 2 such stories followed by an essay on tech-policy and the need for balancing regulation and innovation for you to read over the weekend. We invite comments and points of view, write to us and we’ll include some of them in the next newsletter.
1. RBI wants to create a New Umbrella Entity to regulate retail payments
News: India’s central bank has wants to set up a new countrywide entity which will set up, manage and operate new retail payment systems including ATMs, White Label PoS, Aadhaar based payments and remittance services.
Get Smart: This would mean that payment gateways such as Paytm, Razorpay, Bharat Bill Pay and so on would have to adhere to additional RBI guidelines as many financial entities have to. The debate here is if new startups and payments companies can adhere to the same level of regulatory oversight as larger entities do, with the limited amount of resources they have and if such regulations will limit the entry of new players. However, such payment gateways can be expected to become more transparent and accountable.
Get Smarter! If you run a white-label POS startup, you can submit your comments/ views to the RBI before Feb 25. Participate in the system! Do it here!
2. OTT content providers are trying really hard to self-regulate
Context: There are about 35 Over-the-top (OTT) media services in India tapping a market size of ~ ₹3500 cr as of last year. For comparison, India’s gaming industry was ~ ₹6200 cr for 2019. The OTT industry might be half the size of gaming, but its regulatory hurdles with the government are no less. Last year, the players made a smart move to avoid being regulated by the Ministry of Information and Broadcasting by setting up the first layer of defence- adopting a self-regulatory code of conduct under the aegis of the Internet and Mobile Association of India (IAMAI). This is a good model that all sectors of the technology industry could replicate.
News: Last week, four video streaming platforms including Hotstar, VOOT, SonyLIV and Reliance Jio added another said layer of defence as they agreed to come together and create a Digital Curated Content Complaints Council (DCCCC) under IAMAI. The body will be chaired by retired Justice A.P. Shah. However, note that many other non-broadcaster owned OTTs didn’t sign up to this council. What’s cooking there? Wonder if the industry can come together as it did before.
Get Smart: The goal of regulation is to make platforms accountable. A self-regulatory system works well for everyone if it respects the principles set in place and allows the boundaries for creative freedom to be pushed. Imagine if the censor board had to screen Sacred Games? On a related note, this morning Adithya tweeted a thread with pictures showing how a popular live streaming platform owned by a multibillion-dollar listed company is being used to abet prostitution. I mention this point to illustrate the difference between user-generated (pull) and curated (push) content. While everyone is obsessed with censoring curated content, not enough attention is paid to enforcing ethical practices on user-generated platforms, especially live streaming ones.
Subscribe to receive more such updates and news analyses, alongside our weekly podcast and deep dives from some of the best CXOs and founders from the world of technology and startups in India.
Weekend Essay: Pessimism against new technologies among policymakers stifles innovation!
Please allow me to begin with a story.
By the year 1945, New York was a bustling city – the centre of business, a hub of sprawling skyscrapers and which perhaps John Galt, the fictional character from Ayn Rand’s Atlas Shrugged, would have called home. Then, in that year, all the elevator operators in the city went on a strike. Offices shut down and cost the city millions of dollars. Why? Because people were too scared to enter these lifts without an operator!
Not wanting to give in to the demands of the operator unions and at the same time hoping to encourage people to use the lifts on their own, the manufacturing companies started using various techniques to make people feel safe inside lifts. That’s why we have the calming jazz music, the red stop button (which back then didn’t actually work) and sometimes even a telephone for emergencies.
Fast forward to 2020 and we have come a long way from once being afraid of elevators to now fearing driverless cars. The lift was first invented in the early 1900s. It took us five decades to commercialise, appreciate and adopt it fully.
As I often ask myself this question, I deem it fit to pose the same to the readers of this passage here– do we want our society to wait another 50 years for something that would improve our lives and make it more meaningful? The answer is obvious.
In the study of technology policy today, there is a growing sense of pessimism, which often is in stark contrast to the optimism seen among the creators of the technologies in question. Attend a policy round table in Delhi with a room full of lawyers, journalists and civil society representatives and then attend a networking event in Bangalore with engineers and investors in the room. The tone and the conversations could not be more contrasting. Take the case of Aadhaar as an example: when it was introduced, dozens of arguments were presented against such a universal identity system, most of them legitimate. The startup world, however, benefited immensely from an Aadhaar based e-verification system which led to several new forms of businesses cropping up (ex: it plays a huge role in Neo-banking and lending).
So where should the contours of a useful policy debate around technology and society lie and how should an institution that aims to influence such policy look at the subject? In my opinion, the heart of it lies in believing that technology and innovation have generally been the principal drivers of economic growth. It lies in believing that technology is not perfect, it has several flaws – but it is good. It is in believing that it can be used both as an Astra as well as Shastra but it does not mean that it should not be built. However, it’s also important for technology to be humane and grounded in the realities of the people. The mandarins of technology err on the side of being overly optimistic and often overlook the human cost to it.
I would define such a culture of thinking as that of a rational techno-optimist. To take an example, a rational techno-optimist would agree that industrialisation has been bad for the climate, but would not do so without acknowledging that industrial development has been the fastest driver of economic growth in our shared history. Defining the appropriate contours to industrialisation would then include setting the right economic, social and governance metrics for businesses and investors and encouraging supportive tax structures for green technologies.
As a society, we have come up with such contours for old technologies, because we recognise their significance. But are we looking at the new emerging technologies from a similar lens? A techno-pessimist would complain about the violation of personal privacy in the digital age, a rational techno-optimist would advocate for investors in the VC industry to look at privacy metrics in new tech startups before investing in them (just as PE investors have begun looking at ESG metrics). A techno-pessimist would call Bitcoin a failure as a tool for exchange of value, a rational techno-optimist would recognise the importance of the technology behind Bitcoin and even in the ability of Bitcoin as an alternative storehouse of value.
I am reminded of a Tweet by the economist Arindrajit Dube, a screenshot of which is herein:
Sitting just at this line that he mentions, is the rational techno-optimist who can play an influential role in deciding whether as a society we end up signalling a better world or jamming signals altogether.
I personally hope to do the former.
What do you think? We’d love to hear your thoughts, leave a comment or email us!
Here are some other interesting podcasts and reports that came out in the last few days and I highly recommend them:
Mark Zuckerberg (CEO, Facebook) interviews Patrick Collison (CEO, Stripe) and Tyler Cowen (Economist, Mercatus Center) on technology and the need for regulation on the Conversations with Tyler Podcast.
On the HBR Exponential View podcast, Judy Smith interviews Azeem Azhar exploring why large tech companies seem to devolve into crisis as they grow and what should an appropriate response from founders be.
Given the global “techlash”, Omidyar Network released their POV on curbing unregulated big-tech in this issue titled, “Unchecked Power: The root of big tech issues”.
That’s all for now. We’ll catch you next week.
Ravish Bhatia
Tech Regulation in India - Updates and an Essay
Let me offer an alternative answer to the question you posed upfront, advocating a balance between no regulation and tight-fisted control: in a situation with low state capacity facing immense challenges, we're better off in opting for the "no regulation" approach even if it might lead to the consequences you mentioned. See this paper for the line of reasoning, with examples: https://www.independent.org/pdf/tir/tir_24_2_01_rajagopalan.pdf