Should over-the-top (OTT) service providers pay a network fee, or some other charge to telecom service pro­viders? Can net neutrality be maintained and, indeed, should it be maintained in the networks of the future? Should regulations governing telecom service providers also bring OTT players under their ambit?

Regulators everywhere are divided on the answers to these questions and their decisions will shape the digital future. It is possible to make a case logically for different regulatory models. It is also likely that most of the world’s regulators will fall in line with whatever decisions are made by policymakers in the European Union (EU) and in the US.

But India is one of the world’s largest telecom markets, and in many ways, it is unique in the evolution of its telecom networks and data usage. So, it should not si­mply “copy-paste” regulations formulated for the EU or the US.

India is, in per capita terms as well as in aggregate, the largest data user in the world and data usage is growing rapidly as smartphone penetration improves and mobile broadband networks including 5G networks roll out. Indeed, India is the only na­tion that could be defined as “data-rich” be­fore becoming economically prosperous.

India has also stacked up an innovative digital public infrastructure (DPI), which drives the economy, with public services and thousands of businesses using DPI and riding the telecom networks. All sorts of bu­sinesses utilise that infrastructure, generating activity and employment. This DPI has enabled the delivery of many government services as well as rapid provision of formal banking services, and digital pay­ments to a huge population.

It is vitally important that India finds answers to these questions quickly. Those answers also have to be designed to create an equitable environment where every sort of digital business and service can continue to operate without excessive regulatory ba­rriers, or incurring prohibitive costs.

While OTT players have to get a reasonable ride, telecom service providers have to be compensated for the utilisation of their networks.  Amidst all this, consu­mers need to be given the best possible deals in terms of safe, secure transactions, at reasonable costs, with the highest possible convenience.

According to the Cellular Operators Association of India (COAI), India should, as one of the world’s largest markets, take the lead in formulating rules and regulations for OTT players rather than following any global benchmark.

The Department of Telecommunica­tions (DoT), Telecom Regulatory Autho­rity of India (TRAI) and the legislators will have to find ways to do this without disadvantaging any of the stakeholders, be it OTT players, telecom service provi­ders, or consumers.

As of now, OTT players fall into a grey area where they do not face regulations. DoT has removed OTT players and applications from the definition of telecommunication services under the Draft Indian Telecommunication Bill. This exempts communication providers such as Whats­App, Signal and Telegram, which will re­ma­in out of telecom regulation. In July, TRAI released a consultation paper on the possible “Regulatory Mechanism for Over-The-Top Communication Services, and Selective Banning of OTT Services”.

The combination of the draft bill and the consultation paper has ignited a fierce debate where telecom service providers and OTT players are on different sides of the regulatory fence.

COAI says telecom service providers (TSPs) have carried the investment burden for deploying networks and delivering connectivity. Meanwhile, OTT players of­fer bandwidth-heavy services and generate disproportionately high traffic, compelling capacity enhancement of networks without contributing to network expenses. Th­is leads to increased demand for data services and bandwidth.

COAI has proposed that smaller players with low usage need not be required to pay the usage charge. This way, innovation and entrepreneurship would not get affected. In its submission to TRAI, Re­liance Jio has urged the regulator to recommend that significant OTT players – those that generate the maximum data tra­ffic – contribute to network costs. Bharti Airtel and Vodafone Idea Limited have backed Jio, asking for “fair share contribution” from large OTT players.

While that is a reasonable statement of the TSP stance, Lt General Dr S.P. Ko­ch­har, director general, COAI, says the focus of the TSPs is on networks, applications and innovative services, which include OTTs. A collaborative effort is necessary by all stakeholders involved to ensure the sustainability and advancement of operations.

One of the models proposed by the telecom industry to facilitate revenue sharing between OTTs and telcos is a “fair share” contribution from OTTs, which wo­uld be a business-to-business arrangement. The TSPs point out that OTT players have alternative revenue streams, in­cluding advertisers and consumers. The Indian Co­uncil for Research on Interna­tional Eco­nomic Relations (ICRIER) also says there is a need for OTTs to contribute towards telecom network costs. The TSPs have, moreover, raised concerns about na­tional security, the creation of a level playing field, and recompense for huge in­ve­stments in network creation. They have raised the issue that unregulated OTT platforms may fuel cyber fraud.

The only major digital economy to implement a network usage fee for OTTs is South Korea. But many analysts say South Korea networks have become slower and the user experience is poorer since the levying of network usage fees.

There is a symbiotic relationship bet­ween TSPs and OTT players. OTT services drive enhanced data usage, for example. In 2020, TRAI had recommended a light touch regime without regulatory intervention for OTT platforms, which may not be comparable to TSPs.

So, there are alternate views that suggest OTTs should not be charged. TRAI’s consultation paper cites the example of the Body of European Regulators for Electro­nic Communications (BEREC), set up by the European Commission. BEREC found no evidence that OTTs are free-riders, saying that OTT traffic is caused, and paid for, by users. It also noted that a proposal to charge OTT players could present various risks for the internet ecosystem.

The Broadband India Forum (BIF), in its response to the paper, emphasises the success of OTTs in boosting India’s app economy and asserts that OTTs are adequately regulated under the existing Infor­mation Technology Act, 2000, and other associated acts and rules. The BIF says, “OTTs have significantly enhanced accessibility to digital tools and amenities… This has resulted in massive economic spill-over effects, contributing to the na­tion’s prosperity. We hope that the regulator and the government will allow market forces to operate freely. Telecommuni­ca­tion service providers can compete freely, and OTTs should not face restrictions in favour of TSPs.”

As many as 11 consumer groups, inclu­ding the Consumer Unity & Trust Society, the Consumer Guidance Society and the Consumer Guild, have said that the proposal for selective banning, coupled with regulating carriage and content, would lead to overregulation and would create regulatory uncertainty in the Indian market.

One of the concerns cited by these organisations is that OTT service providers are already regulated under the Informa­tion Technology Act, 2000, which will be replaced by the upcoming Digital India Act (DIA). Therefore, such consultations sh­ould form a part of the DIA and additional consultations by the regulators would lead to an overlap of the regulatory structure.

Internet services and telecommunication services cannot be equated since they are distinguishable on structural, functional and technical levels. A licensing re­gime could stifle innovation by imposing high compliance costs, impeding the gro­wth of start-ups. Given the rapid evolution of OTT services, a static regulatory regime could severely hamper progress. Im­posing a network usage fee would se­verely impact the operational costs of OTT services and pose a potential threat to net neutrality. Additionally, consumers would bear the brunt of this fee, as it would be passed on to them. OTT services are integral in today’s digital world, supporting activities such as remote work, education, and business.

The Internet Freedom Foundation says selective banning of OTT apps might not only prompt malicious actors to find workarounds, but also lead to unjust criminalisation of those OTT players who explore alternative solutions without any mal-intent.

So, that’s the other side of the argument. A system where TSPs demand compensation from OTT service providers in the form of revenue sharing or network usage fees may lead to TSPs creating revenue sharing exemptions for their own OTT services (most TSPs have ventured into the OTT space) and this can lead to concerns under both the principle of net neutrality, as well as competition law.

Summing up, there is a certain amount of logic on both sides. The TSPs have invested huge amounts on developing networks. OTT players create demand for data and provide a wide range of services. Consumers benefit maximally where there is a liberal, competitive ecosystem, where start-ups can enter easily. TSPs would like a new revenue stream to help them defray those costs. Can such a revenue stream be developed by charging OTT players without throttling the beneficial impact of the OTT segment on the macro economy? TRAI will have to walk a tightrope in finding the answers that optimise the positive externalities of this system.

Devangshu Datta