The Department of Telecommunications’ (DoT) internal panel’s report on net neutrality calls for a debate on the possible implications of partial regulation of over-the-top (OTT) services. While the report recommends non-regulation of non-voice OTT services, it has suggested that domestic voice over IP (VoIP) services be treated in the same manner as the communication services provided by telephone service providers (TSPs), from a regulatory perspective. These recommendations, if implemented, can impact the market dynamics for both operators and OTT service providers. The report further recommends prohibiting TSPs, internet service providers (ISPs) and content providers from collaborating on zero rating plans, which has drawn severe criticism from the industry due to its possible negative implications on the provisioning of mobile services in rural areas. Industry experts share their views on the DoT panel’s report, its shortcomings and the likely impact on building a policy framework geared towards net neutrality…

What is your view on the DoT panel’s report on net neutrality? What are the issues that remain unaddressed?

Hemant Joshi

DoT’s report has appropriately defined the principles of net neutrality. It bans the blocking, throttling and paid prioritisation of internet services. The primary goal of the net neutrality policy is well defined and aims to provide affordable and universal broadband to the public. At the same time, the report raises questions DoT’s approach towards OTT services, which are not covered under any regulatory framework. DoT should be more specific about the exceptions that are not to be permitted. Search neutrality recommendations should also be included, as big search engines have been blamed for biased behaviour in the recent past.

The European Union’s proposal on fast lanes for providing specialised services such as health care should also be considered for incorporation in the policy.

Inderpreet Kaur

While DoT has made its views on net neutrality clear through the recommendations (or guidelines), there is less clarity on how these objectives would be achieved. It has not come up with solutions that would help in ensuring effective adherence to neutrality principles. For framing its recommendation on VoIP, DoT has cited the European Commission’s proposal for a need to review telecom rules in order to ensure a level playing field. However, in our opinion, this may be an opportunity for national regulatory agencies to introduce some level of deregulation in the highly regulated traditional telecom services market, rather than imposing stiff conditions on emerging OTT service providers. However, challenges related to deciding how zero rating should be treated remain.

Rajan S. Mathews

We are studying the DoT panel’s report closely. There are a few issues that may need to be addressed. We will provide a detailed submission to DoT on the same. Generally, there appear to be a lot of misconceptions regarding the concept of net neutrality. The industry has been mistakenly seen as opposing net neutrality; the reality is that we support the idea of net neutrality as much as anyone else and firmly believe that access should be made available to all. The real debate here needs to shift from net neutrality to include net equality. Net equality essentially means:

• Access to all content and applications without discrimination.
• To bring everyone on the internet, not just a privileged few.
• The same rules for the same services.

We fully support an open internet that enables consumers and business customers to access the content and services of their choice in ways that provide all of them with the best possible experience and services without discrimination. We hope our position and submissions will hold merit with the government and will be considered for the finalisation of the policy on this issue.

Pankaj Sharma

The DoT committee has rightfully acknowledged and analysed the inputs from a multitude of stakeholders and brought out the issues and concerns on the issue of net neutrality. The committee has rightly found that net neutrality has not been conclusively defined globally due to the numerous dimensions and different approaches to it. Different countries have adopted different ways to define it and there is no “one size fits all” kind of definition. The committee has further concluded that, since there is no standard definition of net neutrality, there is no need to hard-wire a definition and the focus should be on “assimilating the core principles of net neutrality and shaping the actions around them” in the Indian context.

We suggest that India adopt a definition of net neutrality that is future-proof and suits the Indian context through public consultation. Investment in infrastructure is of particular importance in the context of the Indian telecom market.

Dr Mahesh Uppal

DoT’s report on net neutrality is relatively general in nature and is heavily opinionated. It lacks robust analysis, especially of the unique structure of India’s telecom market, with its predominant reliance on wireless technology and an unusually high number of players. These characteristics have a massive bearing on the nature and scope of net neutrality appropriate for the country, which has not been comprehensively discussed in the report.

What would be the impact of the panel’s suggestion to not regulate non-voice OTT services on the business model of telecom operators?

Hemant Joshi

The direct impact would be felt by telecom operators who have a higher tariff as compared to non-voice OTT players. The debt burden of telecom operators is significantly high and the ARPU is quite low in India. Voice ARPUs are declining, since VoIP services are providing packet-based data services, which do not charge customers directly. There is a chance of data usage and data tariffs increasing to compensate for the downward trend in voice tariffs. revenue from SMS has also declined significantly and the falling voice market could leave operators entirely dependent on data.

Telecom acts as an enabler of several other vertical services and hence needs to be nurtured. It would be prudent to regulate OTT services on the principle of the same rules for the same services. This is also important from the security perspective.

Inderpreet Kaur

What we have seen in recent times is that partnerships between OTT service providers (such as Deezer, Spotify, WhatsApp, Facebook) and telecom operators have become common, benefiting both parties. Globally, regulators have not interfered with such arrangements as they do not pose any potential competition issues. In fact, these partnerships have been cited as successful practices that have helped in driving data consumption, or attracting subscribers to data services. Also, diversification is essential for communication service providers  if they are to reverse revenue stagnation and any cannibalisation of their communication service revenues by internet companies.

Rajan S. Mathews

In the past two to three years, the principal impact of non-voice OTT services has been on the messaging revenues of telecom operators. The Telecom Regulatory Authority of India (TRAI), in its consultation paper dated March 27, 2015, has noted the impact of OTT services on SMS revenues to be to the tune of Rs 40 billion per annum.

Pankaj Sharma

The committee has acknowledged that there is a regulatory and financial arbitrage between TSPs and OTT communication services due to their inherent business models. This inequality can be done away with by implementing the “same service, same rules” principle, and developing a baseline set of rules. At the very minimum, DoT may bring all communication service providers (licensed TSPs and OTT) under uniform obligations for consumer protection, lawful interception, data protection, retention and privacy, service security, reliability, emergency services and local taxes. Beyond these measures, it would be best left to market forces.

Dr Mahesh Uppal

While OTT services cannibalise some amount of operator revenues, they also help expand opportunities for revenues through the expansion of data services. Thus, there is likely to be a limited impact of this proposal on operator revenues. It is also important to note that this is no different from the current practice of not regulating the prices of data services. Voice services, on the other hand, hog spectrum and can hurt other services.

What are the likely repercussions of regulating domestic VoIP services?

Hemant Joshi

Regulating domestic VoIP services will help the domestic voice call market, which is declining rapidly. As mentioned above, messenger applications are eating into the revenue generated by SMSs. A similar trend is emerging in the voice market. Hence, regulating domestic VoIP might be positive for telecom operators. However, technically, it needs to be worked out very carefully so that there is no security or privacy breach.

Inderpreet Kaur

DoT’s view on regulating local and national VoIP calls propagates the need for creating a level playing field for operators, who have constantly complained about OTT players adversely impacting traditional telco revenues. At the same time, DoT recommends that operators and ISPs must adhere to the core principles of net neutrality. This implies that operators should not be allowed to discriminate against or throttle any traffic, or refrain from pricing data differently for voice, text, video and browsing. DoT’s report does not establish a clear action plan with regard to handling VoIP. We do not see a regulator’s role limited or constrained to protecting incumbents, especially by compromising more innovative and nimble players. In this sense, regulating VoIP would mean either levying an upfront fee for acquiring VoIP licences and a percentage of aggregate revenues as an annual fee or establishing termination charges for VoIP calls. In either case, this would amount to additional costs for VoIP providers, which will be passed on to the consumers, and will also amount to a breach of privacy, as operators will indulge in deep packet inspection to identify voice and non-voice content.

Rajan S. Mathews

VoIP calls are priced much lower than conventional calls. According to the TRAI consultation paper on OTT, telecom service providers earn 50 paise for one minute of conventional voice calling. For VoIP, the data revenue is 4 paise. On an average, the revenue earned by operators is 25 paise per MB of data. A one-hour video call on Skype consumes 24 MB, amounting to a bill of Rs 6 for the consumer. If all voice calls were priced at data rates, the loss of revenue would have to be recovered from higher data rates to retain the profitability of an already low-profit industry. Inability to raise data rates to cover the loss will result in operators being unable to invest in their networks, which would lead to low quality of services, a stagnant penetration rate, delayed roll-outs, etc., adversely affecting the objective of providing affordable and reliable broadband services across the country. Once the price arbitrage arising from regulatory costs is removed, mobile operators will be able to compete on a level playing field.

Pankaj Sharma

The DoT committee has recommended the “same service, same rules” approach for OTT communication service providers for regulating domestic VoIP services. Investments in both infrastructure as well as innovation are necessary for bridging the digital divide, and all parties should endeavour to foster future investments.

Dr Mahesh Uppal

The regulation of domestic VoIP aims to protect the domestic revenues of telecom operators. However, it would be very impractical to implement it, as it is difficult to distinguish between national and international calls on VoIP. It could also hurt the growth of data services, as the attraction to VoIP is primarily a result of its low cost. We need a clearer approach without arbitrary distinctions.

What are your views on the panel’s suggestion to prohibit collaborations between ISPs/ TSPs and content providers for the zero rating plans?

Hemant Joshi

This is an important part of the report as content and application providers cannot be permitted to act as gatekeepers and use network operations to extract value in violation of the core principles of net neutrality. This will act against directing users to specific content that contributes to the personal gain of the content provider or ISP/TSP. The same principles must also apply to search engines. Differential pricing for different levels of service is a fact of life that cannot be wished away.

Inderpreet Kaur

Globally, regulators have taken different stands on the issue of zero rating – for example, Brazil has remained neutral on the issue, while Norway has taken a position against the zero rating of OTT services, and the US regulator has reserved its right to decide on a case-by-case basis. In Ovum’s opinion, decisions on zero rating must be made by taking into account the types of partnerships and the market circumstances. Importantly, zero rating for vertically integrated services should be dealt with through regulatory scrutiny or intervention.

Rajan S. Mathews

Zero rating is an innovative platform open to all consumers and content providers on a non-discriminatory basis. The practice of zero rating is in the nature of a subsidy, which is prevalent and practised in all forms of businesses. For example, MS Office, which is marketed by Microsoft, is available at different rates to different sets of consumers like homes and businesses, students, and enterprises. It is for the consumer to decide which version is to be bought, based on his/her requirement, affordability, etc. Similarly, when various consumer appliances offer attractive EMI schemes, it does not mean that it is blocking the choice of customers to buy the appliance of their choice. A telco tying up with a handset vendor to offer an attractive deal to its customers does not in any way prevent the customer from buying any other handset. The same should be applicable to telecom services as well.

Zero rating platforms, which have been tried across the globe, offer more choice to the customer to consume content as well as provide a platform to content providers. In fact, the Federal Communications Commission (USA) has kept zero rating out of the ambit of the net neutrality guidelines. We believe that innovations such as zero rating will help provide internet access to many citizens who may not be able to afford these services at regular rates. Zero rating is not price discrimination. It only implies that instead of the user being charged, the content provider is required to pay. Such arrangements increase social welfare by transferring the cost of internet access from consumers to content providers. If a content provider deems its revenues (primarily through advertising) substantial and wishes to engage in distribution arrangements with last mile access providers to subsidise access to its services, it should be allowed to do so. Zero rating should be a part of the customer’s choice.

India is currently ranked 142nd in terms of internet penetration, with only 86 million broadband customers and with 80 per cent of the population having no data connectivity and only 7 per cent of subscribers availing of mobile broadband services (as of February 2015). The immediate priority in India is to roll out broadband networks. It is high time we prioritise connectivity for all villages in India, as envisaged in the Digital India programme. Investments of nearly Rs 5,000 billion are projected to be required over the next five years to meet the targets of the Digital India programme. What better way can there be to bridge the digital divide than the industry innovating to facilitate access for the 1 billion unconnected citizens and making the internet affordable for millions of customers through business arrangements that subsidise end-usage. For developing countries like India, zero rating platforms can be an effective tool to bridge the digital divide and get millions of people on the internet. It can also help deliver governance and services to millions. In India, such innovation can only help replicate the mobile voice revolution in the data/internet space.

Pankaj Sharma

Any restrictive regulation on net neutrality will restrict the flexibility of licensed TSPs to develop and offer bundled services based on market segmentation, in order to enhance users’ options and increase the choice between different providers. Given that India is a developing country, there is a need to educate under-served/unserved customers with regard to the relevance of internet services, which can be achieved by offering relevant services free for a limited period, or by encouraging usage adoption with zero rentals, which is within the ambit of the existing regulations (no blocking of legal content, no throttling except for traffic management and no paid prioritisation or creation of fast lanes).

The US regulator, the Federal Communications Commission (FCC), through its Internet Order dated February 26, 2015, has noted that such schemes provide benefits to consumers in some instances, by increasing their choices and lowering costs. Considering this fact, FCC has decided to look at and assess such practices under the no-unreasonable interference/ disadvantage standard, based on the facts of each individual case, and then take action as necessary. Thus, such zero rating offers/sponsored data usage schemes benefit consumers and should be reviewed on a case-by-case basis.

In order to reap the benefits of technological advancements and economies of scale, it is necessary to adopt a regulatory equality approach to ensure a level playing field and access to the internet by all, instead of putting up further regulatory boundaries.

Dr Mahesh Uppal

I disagree with the prohibition of collaboration between TSPs/ISPs and content providers for zero rating plans. The Indian internet market is nascent at present, with barely 20 per cent of penetration, and it needs innovation to expand. Thus, the blanket bans on zero rating or schemes like internet.org cannot be justified.