Don't kill the golden goose – The Financial Express

The Financial Express
Internet applications, somewhat inappropriately termed as OTTs, are seemingly a subject of undying interest. A telecom association is yet again attempting to resurrect various settled matters relating to these products that are proving to be indispensable to modern living and contributing significantly to socio-economic welfare. A network fee is being demanded for telcos from OTTs—the latter are more appropriately referred to as CAPs (content and application providers).
The concerned lobby does not seem to have realised the serious adverse implications of its stance for its own members. It is acknowledged by all that a major chunk of the traffic on the mobile networks is due to the usage of OTT apps by customers. Granted this, if a network usage fee demand is raised, wouldn’t it be perfectly reasonable to expect CAPs to demand a symmetric sharing of the revenues to the telecom/internet operator from the traffic due to the apps? This is an arguable case for any court of law and surely, level playing field conditions would dictate payments by both contesting parties. Telcos could end up with more costs than benefits.
A court would also surely consider that it is the customer or end user who is wanting the app on their device and is causing the increased traffic. Moreover, telcos are charging the customers for the data traffic and these tariffs are left to free market forces, i.e., under tariff forbearance by TRAI. In such a situation, it is indeed bewildering to find the raising of an argument which would merely serve to harm the telcos’ interest.
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Examining the official views on the subject, one notes a strong consistency in the views of both DoT and TRAI over the past years. In 2015, DoT found no case for prescribing regulatory oversight for OTTs, similar to communication services. They found that OTTs enhance consumer welfare and productivity. TRAI, in 2015, noted that OTT neither operate a network nor leases network capacity from a network operator. In 2017, TRAI clearly noted the separation of network and service layer. Its recommendation on OTTs in 2020 stated that market forces may be allow without prescribing any regulatory intervention.
This is in harmony with the fact that OTT apps, being internet-based, should reasonably come under the purview of the electronics and IT ministry (MeitY). In fact, these apps have always been regulated under the IT Act. Therefore, it is quite strange that an attempt now is being made to raise a matter that has not only been settled by telecom authorities and the regulator but is also one falling under the jurisdiction of a different government department.
Importantly, the global apex body, the International Telecommunication Union (ITU), in the 2022 Plenipotentiary Conference, overwhelmingly rejected proposals to regulate OTT apps like telecommunication services. ITU had a study in 2020 that had highlighted the symbiotic relationship between OTTs and telecommunication operators and the potential negative impact of regulating OTTs. It also issued a recommendation acknowledging the distinction between OTTs and telcos when considering policies and legal frameworks—“Member States should consider the fundamental differences between traditional international telecommunication services and OTTs, including the cross border nature of OTTs, low barriers to entry for OTTs and integration of markets amongst other factors.”
The European Electronic Communication Code (EECC) indicates the regulatory framework applicable to Electronic Communication Services (ECS) across the EU and it explicitly treats OTT apps and interconnected PSTN services differently. The European regulators group called BEREC had studied the matter deeply and found in October 2022 that “there is no evidence of free riding by OTTs” and that “ultimately, it is a success of the CAPs which lies at the heart of the recent increases in demand for broadband access or, from a different perspective, traffic growth beneficial to ISPs.”
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India represents one of the fastest-growing OTTs/CAPs markets in the world thanks to the facilitating nature of policy and regulation. We need to ensure that this vibrant sector is not stifled. In particular, rural India has a big role in OTT consumption and constitutes over 70% of the video consumption, despite rural net connectivity being only about 40%. Regulation must nurture this aspect for the benefit of the public at large.
Recently, three eminent professors from IIM-Ahmedabad researched the subject and per their finding in a report which is to be released shortly, by 2030, the spend on apps is likely to be around $800 billion. Given that the Indian economy likely to be around $6,600 billion, the app spend is likely to be around 12% of the economy. They further estimate that the growth in app economy is around 32%, more than four times the GDP growth.
The revival of the settled matter of OTTs is, to quote the words of the Electronic Frontier Foundation, merely “a ploy by the largest ISPs to extract monopolistic rents, kill competition and entrench their monopolistic power”. Such harmful moves need to be resisted forcefully in customer interest.
The writer is Honorary Fellow, IET (London), and president, Broadband India Forum
Views are personal
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