TRAI has recently reinitiated its consultation process for analysing the need to regulate over-the-top (OTT) companies that offer services similar to those provided by licensed telecom operators. While this debate first started in 2015 in India, not much headway could be made at the time as there was no regulatory clarity around related issues such as net neutrality and differential pricing.
Fast-forward to the present, TRAI has lent its weight to the practice of net neutrality in India, which has helped catapult the country to the list of progressive markets for internet businesses. The time is, thus, right for TRAI to revisit the old but ongoing debate on whether OTT players should be brought under the regulatory ambit.
Operators in India have always been very vocal about how OTT services are jeopardising their service revenues by riding on their networks for free. According to industry estimates, telcos lose around 15 per cent of their revenues to OTT providers on average. Operators also face the risk of being reduced to “dumb pipes”, whose key role would be to serve the unregulated and free OTT service providers in the future.
Their fears are not totally unfounded given the exploding data consumption, most of which comes on the back of OTT services. With the increasing affordability of smartphones and mass commercialisation of 4G, the country’s appetite for mobile data will only grow in future. This high data demand creates a compelling need for telcos to ramp up their digital infrastructure. Given their precarious financial position and the many levies and taxes that they are subject to, telcos can only push the envelope to a certain extent. In contrast, OTTs are not required to bear any capex for infrastructure creation.
In their defence, OTT players have argued that imposing licensing regulations on them would dampen the spirit of innovation and bring the creation of disruptive services to a halt. Moreover, by virtue of their licences, operators have exclusive rights to spectrum, numbering plans and interconnection, which OTTs lack access to.
Given the rapidly evolving technology landscape, there is an urgent need to ensure a level-playing field between the new and the legacy players, without stifling innovation. To this end, it is important to look at a possible regulatory arbitrage between the communication services offered by telcos and similar services offered by OTT companies. With issues of net neutrality and differential pricing ironed out, it would be interesting to see how the industry responds to TRAI’s consultation this time round.
