Reliance & Facebook Strike Mega Deal Despite Policy Differences

Facebook has strongly opposed India’s data localisation requirements while Reliance Jio has backed it strongly.

On Wednesday, 22 April, Reliance Jio and Facebook announced their mega deal worth Rs 43,574 crore where Mark Zuckerberg’s company picked up a 9.99 percent stake in Jio platforms. The strategic partnership, according to industry analysts, is aimed as operationalising e-commerce and digital payments services.

However, in the last three years, Reliance Jio and Facebook have found themselves on different pages on two critical policy issues pertaining to India’s digital economy –

1. data localisation
2. end-to-end encryption

It remains to be seen how these issues, on which the two behemoths hold contradictory positions are sorted out.

However, it is worth stressing that this non exclusive deal is limited largely to e-commerce and likely digital payments.

While the issue of storage of data in these spheres may have to be sorted out between the two, they remain free to pursue their own policies outside of the realm of this strategic but limited partnership.

While Facebook has opposed any imposition of data localisation measures and the flow of data across borders, Jio’s policy filings and submissions have spoken in favour of storing data within the country.

As the thrust of the strategic partnership between Facebook and Reliance Jio will be on digital payments and e-commerce, both are areas where the issue of data localisation has reared its head.

However, as a beta trial, in February 2020, NPCI gave its approval to go live with 10 million users out of WhatsApp’s 400-million user base in India.

Data Localisation

Data Localisation is the requirement to store a copy of all citizen data in servers located within India. According to Centre for Internet and Society, data localisation can be defined as ‘any legal limitation on data moving globally and compelling it to remain locally.’

This has raised concerns of state surveillance and is seen as a measure that can hamper innovation in blockchain and AI technologies by restricting the free flow of data across borders.

FACEBOOK’s POSITION:

Facebook CEO Mark Zuckerberg, however, has iterated on several occassions recently that Facebook will refuse to comply with laws of setting up local data centres in authoritarian countries where that data could be snatched.

In a conversation with Sapiens author Yuval Noah Harari in April 2019, Zuckerberg had said India's data localisation demands are understandable but allowing it for one nation can trigger a demand from countries which are much more authoritarian and can misuse the citizens' data.

“Our stance on data localisation is a risk. That is, if we get blocked in a major country, that will hurt our community and our business. But our principles on data localisation aren’t new and this has always been a risk.”

RELIANCE JIO’s POSITION:

Reliance Jio, however, has strongly supported measures for local storage of data since its formation in 2016. It has made its position evident in its policy filings, submissions to the government, TRAI as well as in its annual reports.

In its ‘Integrated Annual Report 2018-19, Reliance stated “Data localisation will also spur investment in creating server and cloud capacity in India, incentivising research and development and creating employment in line with the Government of India’s 'Make in India' initiative.”

“Jio has been a strong supporter of local storage of data, which is critical for national interest and security given the increasing sophistication of cyber-attacks.”

Integrated Annual Report 2018-19

What Is India’s Policy?

Meanwhile, India has four regulations that mandate storing data on servers within its borders:

1. Draft Disha Act wants healthcare data;
2. RBI wants all financial data;
3. The e-commerce policy wants all e-commerce data; and
4. The Draft Personal Data Protection Bill says that at least one live, serving copy of all personal data should be stored in India and critical personal data should be stored ONLY in India.

Facebook as well as its subsidiary WhatsApp have been impacted by three of the four policies.

While RBI’s ‘Storage of Payment System Data’ mandating local storage has dealt a blow to WhatsApp Payments, the Personal Data Protection Bill, currently tabled in the Parliament and referred to a Joint Parliamentary Committee, requires copies of sensitive personal data to be mirrored in India.

Owing to regulatory roadblocks around data localisation, WhatsApp Pay has remained in the beta version.

The argument in favour of data localisation is that data stored in servers within the country can be mined, merged and monetised as a national resource to boost the digital economy, something hinted at in the government’s Economic Survey.

Encryption: Another Bone of Contention

Moreover, encryption has emerged as another policy issue on which the two giants hold opposing positions.

While end-to-end encryption is at the core of WhatsApp’s design and architecture, enabling users to communicate securely, this privacy protecting measure has come under severe attack by the government over the last few years on the ground that it is misused by hate speech and fake news peddlers.

The Ministry of Electronics & IT (MeitY) has held that traceability of messages to identify the origin of a forward is vital to battling the menace of fake news, and Facebook-owned WhatsApp has resisted such pressure. This has escalated to the Supreme Court where the issue of traceability is currently pending.

However, responding to a consultation paper on the subject in February 2019, Reliance Jio in a submission in February 2019, had told MeitY that the government must take all steps to “address the emergent need to prevent reckless use of such technologies and platforms”.