Facebook's Free Basics internet service barred by net neutrality rules in India

India introduced ruleson Monday to prevent internet service providers from havingdifferent pricing policies for accessing different parts of the web, in a setback to Facebook Inc's plan to roll out apared-back free internet service to the masses.

The new rules came after a two-month long consultationprocess that saw Facebook launching a big advertisement
campaign in support of its Free Basics programme, which runs inmore than 35 developing countries.

The programme offers pared-down internet services on mobilephones, along with access to the company's own social networkand messaging services, without charge.

The service, earlier known as internet.org, has also runinto trouble in other countries that have accused Facebook of
infringing the principle of net neutrality the concept thatall websites and data on the internet are treated equally.

Critics and internet activists argue that allowing access toa select few apps and web services for free would put small
content providers and start-ups that don't participate at adisadvantage.

Facebook'disappointed'

"While disappointed with the outcome, we will continue ourefforts to eliminate barriers and give the unconnected an easierpath to the internet and the opportunities it brings," Facebooksaid in an emailed statement.

On Monday, the Telecom Regulatory Authority of India(TRAI), which had suspended the free Facebook service pending apolicy decision, said internet service providers would not beallowed to discriminate on pricing for different web services.

"Essentially everything on the internet is agnostic in thesense that it cannot be priced differently," TRAI chairman RamSevak Sharma said at a news conference.

Although the new rules will also have implications for plansby Indian telecom operators to make money from rapidly surging web traffic through differential pricing, Facebook's campaignturned the spotlight on the social networking giant.

Free Basics is part Facebook's ambition to expand in itslargest market outside the United States. Only 252 million out
of India's 1.3 billion people have internet access.

"We are delighted by the regulator's recognition of theirreversible damage that stands to be done to the open Internet
by allowing differential pricing," said Mishi Choudhary, a NewYork-based lawyer who led an online campaign against Facebook.

Facebook shares were down 2.7 per cent at $101.30 US in earlytrading on the Nasdaq amid broad weakness in U.S. markets.

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