The Indian telecom landscape has changed significantly in recent times. Data volumes have surged, the mix of services (call, text and data) has altered, customer expectations have risen and unit prices for telecom services have fallen. In the past two years in particular, the adoption of 4G and the convergence of disparate communication services into a single IP-based network have accelerated. The competitive environment has led to a lowering of tariffs for both data and voice services. Better data connectivity at a lo­wer price has, in turn, accelerated the adoption of over-the-top (OTT) services and fuelled demand for more data.

OTT services such as WhatsApp, Sky­pe, Hike, WeChat and Facebook Messen­ger are mainly available to consumers for free. Access to OTT services is dependent upon the availability of the internet, which is provided through the networks of telecom service providers (TSPs). While these telecom services are licensed and controlled by regulation, OTT service providers have no such obligations.

This has brought to the fore the discussion around whether there is a regulatory imbalance between OTT players and TSPs. Telecom companies in India have long been demanding that OTT players be brought under the regulatory ambit, as they offer similar services without licensing obligations, conditions and levies (such as licence fees). In addition, telecom operators have to abide by stringent service quality benchmarks and invest in networks and infrastructure. However, OTTs argue that a regulatory regime for them would stifle innovation.

To address this issue, the Telecom Regulatory Authority of India (TRAI) has recently issued a consultation paper to debate whether OTT services should be brought under the regulatory regime. The consultation paper, titled “Regulatory Framework for Over the Top Communi­cations Services”, has been long awaited and seeks to analyse and discuss the implications of the growth of OTT services, whether they can be regarded as the same or similar to the services provided by TSPs, the relationship between TSPs and OTT players, whether any change is re­quired in the current regulatory framework and the manner in which such changes should be effected. It also talks about whether the regulatory or licensing imbalance is impacting telecom network investments, especially those required for capacity expansion and technology upgradation, and how OTT service providers can participate in infusing investment in telecom networks. (The accompanying box gives a snapshot of the key issues for consultation discussed in the paper.)

Fair opportunities to all market players

A level playing field for all market players is an important requirement for any regulatory framework. It is argued that OTT players do not have licensing and regulatory obligations, while TSPs have to not only pay licence fees, but also meet regulatory obligations. OTT players may, without a licence, provide the same services as those provided by TSPs but they do not require permissions from any regulatory body or even from the TSPs whose networks they are using. There is no requirement for interconnection or commercial agreements between OTT providers and TSPs. They are also not bound by any regulatory obli­gations to address consumer concerns such as quality of service, interconnection and unsolicited communication. Currently, the­se concerns are being addressed throu­gh a self-regulatory or market-driven approach. In contrast, TSPs are bound by various licence and regulatory obligations including lawful interception, roll-out norms, caller identification, customer acquisition forms, network interconnection, merger conditions, entry/exit obligations, billing and metering, tariff protection, quality of service, unsolicited customer communication, mobile number portability, and privacy, encryption and cybersecurity obligations. Additionally, they have to pay several fees and taxes.

It is also argued that OTT players have the opportunity to earn revenue from alternative sources using the data of their subscribers, which may be prohibited for TSPs owing to regulatory constraints. A report on the internet value chain highlights that some of the largest OTT players are able to exploit scale and growing revenue streams to build stron­g­er service networks and use them to entrench their positions, leading to the survival of the largest. Since 2008, an increasing concentration of market power has been observed as many US-based OTT players set out to expand globally. The rise of big multinational OTT players has also led to concerns pertaining to the abuse of dominance.

Security concerns

OTT players are facilitating communication with encryption. At the time of subscription, they authenticate users via a one-time password (OTP). This authentication may be done only at the time of installation and service activation. No further details about the user may be available with OTT players. It has been observed that sometimes this can lead to security-related issues such as no trace of the user or interception of communication content in case of misuse.

Jurisdiction-related issues

OTT services store, process and transfer data belonging to citizens or companies of one country in another country or countries. They usually collect data pertaining to user call detail records and demographic details. This transfer of data across national borders creates issues of concern. First, it leads to ambiguity regarding the territorial application of data protection norms, that is, countries are unsure if the privacy of their citizens’ data is adequately protected when it is hosted in other countries. Second, this technology has made it difficult for law enforcement authorities to investigate or gather evidence in criminal and taxation matters, as evidence data may be hosted in a different jurisdiction from where the offence was committed. OTTs located in other jurisdictions may refuse to comply with requests for cooperation or information sharing.

Possible regulatory and market approaches

One approach could be to subject OTT players providing services that are the same/similar to those provided by TSPs to licensing/registration obligations or to bring them under a regulatory framework. This is being considered by regulators in Europe and Indonesia. Other key practices include having separate regulatory rules for communication and non-communication services (Germany and France); using price discrimination on traffic to ensure the development of broadband infrastructure (the UK and Korea); and adopting a FRAND (fair, reasonable and non-discriminatory) approach in dealing with regulatory issues concerning OTT players (Korea and the European Telecommunications Network Operators’ Association). Another approach is to relax the regime governing TSPs and make it sector-neutral instead of proposing equal regulation for OTTs. Another alternative could be to leave this issue to be resolved through market forces, without the need for any specific regulatory intervention.

Conclusion

The growth of OTT services has undeniably led to tremendous social and economic benefits such as ease of communication; access to information, entertainment and business opportunities; improved transparency and e-governance. TSP networks have served as the backbone for enabling access to OTT services. While TSPs have benefited from increased data consumption due to the proliferation of OTT services, any impact on their revenue streams on account of regulatory imbalances may require a fix.

TRAI has asked the industry to give its views on various issues raised in the consul­ta­tion paper by December 10, 2018, and co­­unter comments by Decem­ber 24, 2018.

Akanksha Mahajan Marwah