Net Neutrality: COAI builds a case for regulatory neutrality

Growth of OTT is impacting the traditional revenue stream of TSPs, the imbalance needs to be corrected. Implement same service, same rules, says COAI.

The growth of OTT communication services is impacting the traditional revenue streams of the TSPs. The growth in data revenues is insufficient to address this erosion.

According to COAI, going forward, with the increasing penetration of smartphones, this trend will only accelerate, thus further adversely impacting the financial viability and business sus-tainability of the TSPs.

The implication of the revenue will be largely due to substitution of voice and messaging service.

Messaging Substitution

Instant messaging services and other social networking tools are affecting SMS revenues, and SMS is becoming less important for many consumers. In comparison to SMS traffic, which is likely to witness limited growth, OTT is ex-pected to grow rapidly to 20.2 trillion messages. The success of the standalone messaging app is remarkable due to one simple factor: it is ‘free’.

The attraction of such services is bound to grow as integration improves. As mobile Internet is steadily growing as a key revenue generator, SMS is slowly declining as a significant reve-nue opportunity. According to research firm Ovum, the Indian telecom industry lost close to $781 million in 2012 in SMS revenues due to the emergence of social messaging apps and OTT. Indian telecom operators may lose $3.1 billion in SMS revenues by 2016.

Voice Substitution

Voice revenues are expected to suffer because of VoIP-based OTT offerings. Several OTT players have already had an impact on mobile VoIP growth and on the total voice market.

In India, 81.9% of revenues are generated by voice. So far, the impact of the stand-alone ‘free’ voice apps has been limited due to poor convenience and poor integration into the rest of the communications platform; within the next 2-4 years both would improve. Adoption will be further spurred by improvements in network quality that will sup-port the user experience of these services.

Data revenues do not compensate for fall in revenues from OTT services. According to an industry research, the number of mobile operators generating revenues from OTT services by charging for data is falling year-on-year. TRAI has itself highlighted the fact increased data usage fails to compensate for loss of revenues to TSPs arising due to OTT services. Further, these services also put strain on the network, thus requiring further investments.

Further, these services demand high speed networks that require substantial investment in infrastructure, par-ticularly for the development of our broadband infrastructure both from the fixed and mobile perspective.

It may also be noted that India is a market where 80% of the population still does not have the benefit of broadband coverage and only 7% of the subscribers are availing mobile broadband services as of February 2015.

The immediate priority in India, thus is to roll out broadband networks and significant investments would be required to be made by the mobile operators on spectrum, network and IT infrastructure and development of platforms and services over the next several years. Without a parallel revenue stream to support these investments, the business model will become unsustainable for telcos in the long run.

Thus, COAI is of the view that there is need for making the telecom industry financially sustainable. Industry should be able to invest in growth of networks for fulfilling the digital India dream.

COAI advocates for the Open and Pro-innovation Environment wherein pricing flexibility is provided to the op-erators and the choice is provided to the customers. Thus, TSPs should be given the freedom to negotiate commercial arrangements with OTT players. The operators should be allowed to engage with the OTT players to get into the bilateral arrangements providing adequate measures for consumer protection.

According to COAI, this will not only provide sustainable environment for the TSPs and OTT players, but will also help government in its various priorities and goals for Communication Services such as:
a. Digital India
b. Broadband for All
c. National Optic Fibre Network (NOFN)
d. 100 Smart Cities
e. M- Governance – Sabka Vikas
f. Make in India -There are regulatory imbalances which need to be addressed and the same were highlighted in COAI submission to TRAI.

These are:

Level-Playing Field:

The services that are offered by the OTT communication players such as messaging/instant messag-ing and VOIP telephony are near perfect substitutes of the services that can be offered by the telcos under UASL/UL. There is a need to ensure a level playing field for all the players in the eco-system offering communication services. Licensing Compliances: Presently, for OTT communication players in India, in respect of VOIP services, Internet telepho-ny in India is governed by the ISP license. The license does not allow having PSTN/PLMN connectivity in India.

Voice communication to and from a telephone connected to the PSTN / PLMN and following E.164 numbering is prohibited in India. OTTs are not required to acquire a license or register in India and have no obligation to provide any LI facility, QoS and emergency calling. We understand that the Home Ministry has decided that any service provider, which provides communication services in India via any media through VoIP should be mandated to be registered in India, having its office, server located in the country and therefore subject to Indian laws.

Necessary provisions may be incorporated through amendment in the Indian Telegraph Act 1885 and IT ACT 2000.

Telemarketing issues:

OTT apps are increasingly being used for tele-marketing activities flouting the guidelines and Reg-ulations laid down by TRAI. TSPs have made significant investments in putting in place “Signature Verification” solutions to address the issue of telemarketing SMS.

However, the telemarketers are now increasingly using OTT apps to send messages to subscribers. This is a clear breach of the TRAI Regulations and needs to be addressed. Regulatory Costs: OTT communication players are not subject to any of the regulatory costs/taxes that have to be borne by the telcos.

The telcos pay multiple levels, including regulatory levies, duties and taxes of over 30% of the Adjusted Gross Revenues as compared to just 5% for other Asian economies. The OTT players are able to ride on TSP’s network without being subject to any regulatory/license payments/restrictions. It is unclear what levies and taxes the OTT play-ers pay, if any, in India, as compared to the licensed telecom players here.

Quality of service norms:

Quality of services is becoming a major issue for OTTs as the network is choked with high bandwidth services such as HD videos, movie streaming, high quality web conferencing, etc.

This is creating a challenge for both OTTs and operators, as operators are struggling to add capacity to their network and OTTs are falling short of user expectations on quality of service. These regulatory imbalances need to be addressed on priority and the principle of same service same rules should be applied in respect of OTT communication services and traditional telephony services.

The services that are offered by the OTT communication players such as messaging/instant messaging and VOIP teleph-ony are near perfect substitutes of the services that can be offered by the telcos under UASL/UL.

Leave a Reply

Your email address will not be published. Required fields are marked *