Bryan Pon

NexThough Monday –’s Budding ‘Walled Garden’: What it could mean for Internet consumers, developers in emerging markets

Facebook launched in 2013 to make free Internet access available everywhere, via pared-down web services focused on job listings, and agricultural, health care and education information – along with Facebook’s own social network and messaging services. Until recently, users could only access a few select websites, and Facebook determined which sites made the cut. But early this month, Facebook opened the service to any developers that meet its criteria, stirring a new wave of debate and criticism about the initiative, which has been billed as a way to provide web access in low-income markets around the world. This new move is largely a response to the growing backlash from net neutrality supporters, especially in India, where some content partners pulled out of participating in due to public outcry. (A good background article can be found here).

Critics complained that not only was “zero-rating” (in which telecom providers agree to absorb the costs of handling the data traffic so that consumers can receive services for free) fundamentally against net neutrality principles, but that Facebook would control which services (including which web sites) were offered for free as part of the portfolio, creating a classic walled garden model. Given the expected advantages of a service on versus a competitor not on, Facebook would essentially be picking the winners and losers for these markets.

By opening to all developers, Facebook is addressing this second criticism. Facebook VP Chris Daniels stated clearly that its intent with is not to create another walled garden. If we leave aside the fundamental conflict between zero-rating and net neutrality, the underlying strategic intent and potential implications of this move are important to consider. Because while Facebook is only creating the rules for, if the platform becomes a significant part of the mobile Internet landscape in emerging markets, the model that it establishes may become the de facto standard – just as Apple’s iTunes and App Store model set the standard for the first wave of the mobile app ecosystem, including the now-universal 30 percent margin that the platform owners take on apps.

The platform will be open to any developer, but not any app, as there are three eligibility requirements all apps must meet: First, the app/service has to encourage users to “explore the broader internet” by limiting what is available for free through the app; in essence, Facebook is encouraging a freemium model. Second, the service has to be efficient with data, and work well on more basic phones, which means more text and fewer images. Third, the service has to comply with a set of technical requirements, including not encrypting traffic via HTTPS, or using JavaScript, Flash or SSL. The lack of encryption has generated criticism of how Facebook is handling privacy, especially given that all traffic will be served through Facebook’s proxy servers.

While on the surface Facebook seems to be creating another app store similar to Apple’s and Google’s, there are a few structural differences that are important to call out. First, this would be a mobile app store based not on an operating system, but on a service, signalling the increasingly powerful role that services – especially those like Facebook that capture user data – are taking in the mobile industry. Traditionally it has been Apple, Google and Microsoft that have been able to establish power through their respective platform ecosystems and app stores, all of which are based on an operating system. But the OS is losing its importance as the critical asset, in part because cross-platform interoperability is easier and cheaper, but especially because we are increasingly relying on cloud-based services – accessed through an app – and it is these services that are able to lock-in users. Simply put, most people who are heavy users of Facebook, Gmail, Dropbox and so on would rather switch to a different operating system/device than switch to a competing service; we are locked in by our personal data and will follow it.

Perhaps even more importantly, this new app store structure would reframe Internet and web access for the millions of people in the developing world who are its potential users. In the industrialized countries, mobile Internet usage has been steadily shifting away from the web and mobile browser, and toward apps, mostly because they’re purpose-made for specific tasks or entertainment functions, making them easier and faster to use. Compared to the open web, which is unrestricted and free-to-use, apps are more directly controlled (via the app store owner, who can determine access to the store) and monetized (via the app developer and the app store owner).

This gets flipped on its head in the new platform, where the open and unrestricted web costs money, and it’s the directly controlled apps that are free-to-use. Given these options, how many new users are going to choose the open web?

Of course, this restructuring of controlled apps vs. open web affects producers as well. New firms seeking to enter the space will have to abide by Facebook’s terms of service and eligibility requirements, limiting the scope of innovation. For one, all apps/services on the platform must agree to sharing user data with Facebook, which in turn will share it with mobile operators. More constraining is the “freemium” requirement, which, according to Facebook VP Daniels, encourages those services that “simplify features of their applications such that in order to access the entirety of their websites or their applications, one has to pay for it.”

Would a new form of Wikipedia be able to meet this requirement? How about Facebook itself? Facebook enjoyed tremendous user growth as a standalone website on the open web, with no requirement to limit its functionality or force users to pay for key features (it mostly sold ads). And when users signed up, there was no third-party entity above Facebook that was collecting data and sharing it with the user’s Internet service provider.

So it’s with some irony that Facebook is now using its dominant market position to push free access to, and thereby directly weakening the role of the open web–the same innovative and unrestricted environment that helped it grow into a $200 billion company–in favor of a tightly managed ecosystem that it controls and mines data from.

Opening to developers will probably improve public opinion of the initiative, and may have been a step that Facebook had planned all along. Because while the perception is that this opens the gates to the walled garden, Facebook remains firmly in control of regulating participation – and thus innovation – only now at a larger scale. But the more insiduous issue is that the new will continue to position the open web as costly, and controlled apps as free, using affordability as a form of platform lock-in to a limited Internet experience with real data-privacy trade-offs.

This garden has real dangers, and taking down the walls may only encourage more people to enter.

Bryan Pon is Research Director for Caribou Digital, an organization dedicated to helping build more inclusive digital economies in emerging markets.