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India's telecom regulator on Monday dealt a blow to Facebook's plans to offer free mobile Internet through its controversial Free Basics service, by outlawing differential pricing for data packages.
Facebook has suffered a fierce backlash in India from "net neutrality" advocates.
They say that because Free Basics only allows access to selected websites, albeit free, it violates the principle that the entire Internet should be available to everyone on equal terms.
Responding to the decision, Facebook chief executive Mark Zuckerberg said the world's biggest social network still sees value in the program
"While we're disappointed with today's decision, I want to personally communicate that we are committed to keep working to break down barriers to connectivity in India and around the world," Zuckerberg said on his Facebook page.
"Connecting India is an important goal we won't give up on, because more than a billion people in India don't have access to the Internet."
While not ruling explicitly on net neutrality, the Telecom Regulatory Authority of India (TRAI) decided not to allow what it called "discriminatory pricing" for different data platforms or content.
- No Free Basics -
The regulator's ruling suggests that Free Basics, which was aimed mainly at millions of people in India's poor rural areas, will not be allowed to continue in its current form.
"Today we have come out with a regulation which essentially mandates that no service provider shall charge differential pricing on the basis of application, platforms or websites or sources," Ram Sewak Sharma, chairman of TRAI, told reporters.
"Anything on the Internet cannot be differentially priced, that's the broad point we've made in the regulation and that's where it stands," he said.
On a visit to New Delhi in October, Zuckerberg spoke of his desire to help "the next billion" -- the approximate number of Indians without the Internet -- get online.
The technology giant had mounted a campaign via newspapers and text messages in India, asking people to lobby the regulator not to bar Free Basics.
India's 1.2 billion people make it a vitally important market for Facebook, which is still locked out of China.
Critics of Free Basics, which had been suspended while the regulator's consultation was continuing, include many of India's leading technology entrepreneurs, with activists describing it as a "poor Internet for poor people".
The TRAI's ruling was a clear victory for net neutrality advocates, who seek to prevent companies from restricting access to the Internet, with the regulator saying it had been "guided by the principles of net neutrality".
It added that it sought "to ensure that consumers get unhindered and non-discriminatory access to the Internet".
There may be exemptions to the ruling allowing for free or cheaper data packages in case of emergencies, TRAI said, adding that the policy may be reviewed every two years or sooner.
A spokesman for mobile operator Reliance Communications, Facebook's partner for Free Basics, declined to comment.