NASSCOM suggests reducing telecom regulation, not adding new rules for communication platforms in response to TRAI’s OTT regulation consultation

“Instead of increasing the telecom-led regulatory burden on the communication OTTs [over the top platforms], we submit that the government should explore options to reduce some of the regulatory burden on the heavily regulated TSPs [telecom service providers] under the licensing framework,” said the National Association of Software and Service Companies (NASSCOM). This is NASSCOM’s response to the Telecom Regulatory Authority of India’s (TRAI) consultation on the regulation and selective banning of OTT communication platforms like WhatsApp and Telegram. 

It argues that OTT platforms are sufficiently regulated in India and that any additional regulation will “impede the virtuous cycle OTTs have contributed to in the data economy.” It illustrates this by pointing out that between 2013 and 2022, the TSPs’ average revenue per user (ARPU) from data usage increased more than 10 times, from 8% to 85%. It also explains that as of 2020, the average user spends 70 minutes per day on OTT platforms, with each session lasting 40 minutes. “Given this position, it is clear that OTT services have had an overall positive impact on the revenues of TSPs,” NASSCOM argues.

Some context: 

TRAI’s consultation paper on the regulation of OTT communication services and the selective banning of apps focuses on the following broad themes—

• Revenue share agreements between OTTs and telcos (referred to as collaborative frameworks in the consultation, it means that OTTs should pay telcos for using their infrastructure).
• Licensing and regulatory requirements for OTTs.
• The selective banning of OTT services in periods of unrest (i.e., banning specific apps instead of shutting down the internet during periods of unrest).

We have summed up the organization’s arguments on these themes below.

Defining OTT communication services:

NASSCOM says that defining OTT services, “essentially “freezes” the meaning to the time and context in which the definition is made. Such a definition does not and cannot account for changes in how technology and services are used.” It explains that an attempt to contain all OTTs, digital services, and apps in a single definition will result in a classification that is simply “too broad to be meaningful for any regulatory purpose.” 

Going into the classification of OTT services, it says that apps can have multiple functionalities that are inextricably interlinked. It argues that any attempt to delineate the features of an app— like separating communication services from cab/food delivery services— could lead to market fragmentation. 

No need for a regulatory framework for OTT platforms:

Differences between telcos and OTTs: One of the points raised by Airtel in its response to TRAI’s consultation paper was that OTT platforms act as substitutes for telecom services. Highlighting the differences between OTT platforms and telcos, NASSCOM also mentioned that OTT platforms provide device synchronicity, they can be accessed through multiple internet-enabled devices simultaneously. TSPs cannot do the same because a SIM card is required to avail of a telco’s services. “Given the rapid pace at which OTT platforms innovate and grow, these differences between OTTs and TSPs will only increase in the future,” it says. As such, it argues that OTTs and telcos are neither the same nor similar services, which are substitutable in nature.

NASSCOM says that certain regulations imposed on telcos are a result of the fact that they exclusively own spectrum and numbering resources. Thus, “comparing such obligations between TSPs and OTTs would be inaccurate.” It says that a correct depiction of regulatory requirements would be to “show the kind of activities both TSPs and OTTs undertake along with the corresponding obligations.” 

Existing regulation: NASSCOM mentions that OTT services (including communication services) are regulated under the IT Act & Rules. These include the following — (note: these are some of the many regulations highlighted in NASSCOM’s response) 

• Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules 2011 (SPDI rules): Section 43A of this act stipulates the various reasonable security practices that an entity (such as an OTT service provider) should implement.
• Section 69 of the IT Act, when read with rules for interception, allows the government to issue interception, monitoring, and decryption directions for any information generated, transmitted, received, or stored in any computer resource. 
• Section 69A, read with the Rules for Blocking, empowers the government to issue blocking orders for information stored, received, transmitted, or generated using a computer resource. 

It also said that OTTs are subject to grievance redressal requirements under existing frameworks such as the Consumer Protection Act, 2019 and intermediary rules, and under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021. 

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• Open Letter From Start-Ups Warning Of Overregulation Of Internet Services In The TRAI Consultation Paper
• Revenue Share Agreements Will Violate Net Neutrality: IAMAI On TRAI’s OTT Regulation Consultation

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On maintaining service quality: It further argues that OTT platforms are delivered over the public internet, and as such, their quality of service (QoS) depends on the underlying network infrastructure. Moreover, OTT services operate in a highly competitive market, NASSCOM says, wherein customers can easily switch between one platform and another. “This has ensured that OTT service providers maintain a high QoS,” it adds, pointing out that OTT communication platforms take frequent feedback from customers on the quality of voice calls, etc.

NASSCOM says that customers currently have low switching costs (cost of moving from one platform to another) and a wide variety of alternatives. It argues that if any additional regulation is imposed on OTT platforms, it could “negate these advantages.” It says that the TSP market is “an example of how burdensome regulation could result in limited consumer choice, with only two or three alternative service providers and high switching costs.”

Collaborative frameworks between telcos and OTTs:

NASSCOM points out that the ‘market driven’ collaborative frameworks that TRAI has mentioned in the consultation already exist in India. By this, NASSCOM means that telcos and OTTs already collaborate to offer plans to the customers for their benefit. It referenced a 2019 study conducted by Ovum (in India, Australia, Singapore, Thailand, and the Philippines), which found that 44% of respondents had spent more on their carrier plan because they were subscribed to an OTT media bundle.

Further, NASSCOM’s submission addressed a point we have noticed in multiple telco’s responses— OTTs operate on telcos’ infrastructure and should thus pay them for the development and maintenance of this infrastructure. To this, NASSCOM argues that OTTs make substantial investments in content delivery networks (CDNs), undersea cables, data centres, and more. “These investments help optimise the delivery of content through telecom networks, enabling cost savings and enhanced quality of service for TSPs and users,” it explains.

Net neutrality and network fees:

The statement suggests that net neutrality could be at risk if various over-the-top (OTT) services are charged different rates. This means that if well-established or popular OTT services are forced to pay a larger portion of fees or revenue to TSPs, it might violate net neutrality. Another potential violation could occur if TSPs, who have their own OTT services, are automatically exempted from sharing revenue or paying network usage fees. Such an arrangement, NASSCOM says, “may result in a situation where TSPs earn revenues from both the end-user who are paying for data access, as well as OTT service providers who reimburse TSPs for using their networks to transmit content.”

Just like telecom companies, NASSCOM also mentions the case of South Korea, where network usage fees have been imposed. However, unlike them, it argues against network fees by referencing their negative impact on internet use in the country. It explains that the imposition of network fees has led to a situation where domestic and foreign OTTs have opted to suspend or degrade their services or simply exit the market rather than pay a fee. 

On selective banning of OTTs:

“Based on the feedback from our members, we believe that there are technical challenges in selectively banning of OTT services,” it says. NASSCOM explains that for OTT apps to curb access to their services to a select area, they either need cell identification from the TSPs or the location details of all the users. It explains that both of these will not be made available to OTTs by telcos because of privacy concerns under the new data protection law. Further, as discussed in previous responses, blocking orders cannot be effectively implemented for specific IP addresses because virtual private networks (VPNs) could allow users to bypass an app ban. 

It also points out that if telcos are asked to implement a selective ban, they would require destination IPs of OTT platforms. However, sharing these IP addresses poses the risk of hacking or cybersecurity breaches, which would make OTTs resistant to sharing this information. Moreover, NASSCOM adds that the Department of Telecommunications (DoT) has already pointed out that destination IP addresses of servers used by OTT service providers are often either masked or hosted on the cloud and tend to be dynamic. To block them, telcos would have to map IP addresses in real-time, which would require them to inspect each data packet passing through their network and analyze the destination IP address of each packet. NASSCOM says that this would require major investments by telcos and could impact user experience since the increased investments would trickle down to users.

No need for a selective banning framework:

NASSCOM says that TRAI has pointed out in the consultation paper that both the unified license for telcos and the IT Act have provisions for blocking content. It mentions that the Digital Personal Data Protection Act (DPDPA) also has provisions for content blocking. Thus, it argues that there is an additional regulatory framework for selective banning of OTT services, adding that if more regulations are created, they will only overlap with existing rules and may create ambiguity.

It believes that while the Temporary Suspension of Telecom Services (Public Emergency or Public Safety) Rules, 2017 (Telecom Suspension Rules) prescribe a detailed procedure to issue orders of internet shutdowns, “the same is not being followed by State governments in letter and spirit.” NASSCOM pointed to the Indian Council for Research on International Economic Relations (ICRIER) report ‘Anatomy of an Internet Blackout’ and said that some internet shutdowns have had a counterproductive effect. “We believe that selective banning of OTT services or platforms may be counterproductive as most of the consumers are dependent on many such services for various purposes, including studying, working, watching content, etc.,” it says, arguing that even selective bans imposed for short durations can hamper the lives of consumers and their businesses.