Facebook (NASDAQ:FB) suffered a big setback in early February after India's telecom regulator banned its Free Basics service on grounds that it violated net neutrality. Free Basics, previously known as Internet.org, is a platform for lightweight apps which are excluded from users' data caps.
Critics claim that excluding apps from data caps, known as "zero-rating", violates net neutrality principles because zero-rated apps gain an advantage over non zero-rated ones. They also argue that the platform turns Facebook and its partners into the gatekeepers of the mobile web. Last May, 65 organizations across 31 countries signed an open letter to Facebook CEO Mark Zuckerberg stating that Internet.org "violates the principles of net neutrality, threatening freedom of expression, equality of opportunity, security, privacy, and innovation."
Zuckerberg argues that Free Basics is an altruistic effort to offer mobile app access to low income users, and that any developer is welcome to join the platform. During a presentation at MWC 2016, Zuckerberg acknowledged that the effort suffered a setback in India, but he also declared that "Facebook isn't a company that hits a roadblock and just gives up."
What's next for Internet.org?
Around 4 billion of the 7 billion people in the world still don't have Internet access. To reach those users, Facebook will launch its first solar-powered Internet drone, which can fly for months at a time, to beam Internet access to remote areas. It will also launch an Internet-beaming satellite over Africa.
Zuckerberg claims that Facebook has saved over $2 billion in data center costs over the past "few years" by designing its own servers and data center equipment. By open-sourcing that technology to telcos, Zuckerberg believes that "the savings could get passed on to consumers with cheaper data plans." Zuckerberg also criticized tech and telecom companies for focusing on 5G upgrades instead of "making sure everyone in the world gets Internet access."
As for India and zero-rating apps, Zuckerberg stated that it would "focus on different programs" in the country. He also admitted that "every country is different" in its opinion of zero-rating, indicating that the Free Basics strategy might still work in other markets.
Alphabet isn't far behind
Meanwhile, Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Google is expanding Internet access with Project Link and Project Loon. Project Link is a network of fiber optic and Wi-Fi connections for several African countries, while Project Loon uses high-altitude balloons to beam Internet access to remote areas.
In India, Google partnered with wireless carrier Airtel to distribute a limited amount of free monthly data, not limited to specific apps, to its users. It also launched offline versions of YouTube and Maps, and a lightweight version of its search engine. These moves complemented its Android One push to sell cheaper Android handsets to Indian users. Google originally planned to zero-rate certain apps, but the backlash against Facebook's Free Basics caused the company to suspend those efforts last May.
Altruism or capitalism?
Facebook and Google might be framing these projects as altruistic efforts, but these moves clearly benefit both companies by tethering more users to their ecosystems. As the largest social network and search engine in the world, Facebook and Google can rightly assume that first-time Internet users will likely be drawn to their services.
Facebook's monthly active users rose 14% annually to 1.59 billion in 2015, but there are still lingering concerns that growth will eventually peak. Therefore, investing in zero-rated platforms, drones, and satellites will pay off if a large portion of those 4 billion offline users become Facebook members.
Google must ensure that Facebook -- which has added news, search, and messaging services to its ecosystem -- doesn't become synonymous with the Internet in developing countries. If those users start depending heavily on Facebook for news and searches, Google could become a less attractive option for advertisers.
But don't assume the worst
While this clash reveals the business benefits of providing free Internet, Facebook and Google can also improve the lives of people in low income countries and remote regions.
"We've come around to thinking that a for-profit company is a good way to make changes in the world," declared Zuckerberg at MWC. "This isn't about favouring our products," a Google spokesperson recently told CBC News. "We're supportive of a free and open Internet. And when we talk about access, we mean access to the real full-speed, full-color Internet."
Looking ahead, Facebook and Google will likely face more tough questions about their true motives. In my opinion, Facebook and Google aren't planning to exert "tighter" control over the Internet in these markets, as some critics claim. Instead, both tech giants can simply assume that first-time Internet users will eventually use their services -- which will boost their user and ad numbers without any forceful prodding.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.