In August 2014, TRAI announced that TELCOs cannot charge OTT players. This announcement came as a response to the proposal submitted by TELCOs wherein they advised that OTT players must share their revenues either with the Government or with the TELCOs.
TELCOs kick-started this debate with an emphasis on the currently estimated loss that amounts to be around INR 5,000 crore annually and is expected to cross INR 16,400 crore in next two years. Argument was well encountered by the Regulator quoting “One-third of the incremental revenue of the telecom industry is coming from data services itself”.
Estimated loss primarily owes to the free Messenger and VoIP calling OTT Apps. Projected loss is in line with the projected growth in Smart Devices segment. To mitigate their losses, TELCOs are demanding connectivity charges to be imposed on OTT players for piggy riding their network.
Probably this debate didn’t start at the right note!
Let’s understand the game once more. This disruption got triggered by a change in the Service Delivery Mechanism. In short, old wine in a new bottle. And the new bottle has no price tag. That makes the game lethal for TELCOs. Is industry facing this for the first time? No. It’s postal mail V/s e-mail. It’s Skype over PC V/s Skype app over Smartphone. TELCOs are cribbing a lot about it but other businesses too are impacted by advent of OTT players. Electronic goods stores, apparel stores, local cab services are a few ones who are facing tough competition from e-portal and App avatars of Snapdeal, Flipkart, Easycab. And hence TELCOs revenue getting impacted ‘because of advent of a new Delivery Mechanism’ or ‘because of advent of Smart Devices’ does not sound like a debate.
There are more weighty factors beyond the obvious one, Revenue Loss.
Let’s understand these factors from the perspective of the four major stake-holders in the TELCO/OTT space – Regulator, Consumer, Content Provider and Network Provider.
Regulator ensures National Security, Consumer’s Privacy, Fair Play, Market Growth, Zero Revenue Leakage and Adaptation of new technologies.
- National Security is a sensitive issue. Regulator issues guidelines to TELCOs and it ensures that compliance is adhered to. TERM (Telecom Enforcement, Resource & Monitoring) Cell under DoT is authorized to do Call Analysis, Lawful Interception and monitoring of all communications passing through a licensee’s network. But National Security compliances are only partially met because OTT players are not even in radar and a huge chunk of communication cannot be scrutinized.
Regulator’s Concern – to ensure National Security!!! - Regulator ensures Consumer’s Privacy. There are well defined interfaces existing between Security Agencies and Operators. Interceptions and Monitoring, if required, are done in a lawful manner. Deviations, if any, are addressed via a legal route. This practice is followed by TELCOs. OTT players offer privacy terms & conditions at a superficial level only. There are no legal solutions for illegal handling of information by OTT players.
Regulator’s Concern - to ensure Consumer’s Privacy!!! - Regulator ensures Fair Play or Level playing Field. OTT players are free from compliance directives, TELCOs are supposed to adhere to. Play cannot be fair, if one of the players has to adhere to difficult compliances in order to get a chance to play and another player gets a free entry.
Regulator’s Concern - to ensure Level Playing Field!!! - Market growth is fuelled by investments from incumbents as well as entry of new players. In current scenario, incumbents are busy managing the costs incurred in buying Spectrum, meeting Compliances & funding USOF for good reasons. Smaller players prefer to get merged. Saturated market leaves no scope for new TELCO entrants.
Regulator’s Concern - to ensure Level Playing Field!!! - Regulator ensures Zero Revenue Loss for the Government and hence for the TELCOs. In this particular case, OTT/TELCO debate fizzled out because in totality OTT players contributed more in Data Revenue and ate less from the SMS/Voice Calls revenue.
And the question to the TELCOs is - Who else is going to generate data traffic for the TELCOs? Another big question is how to make OTT players to stick to the 2G, 3G network? Options are many – DSL Wi-fi, Wimax etc.
Consumer holds a right to QoS, Data Privacy, Fair Billing, Interconnection Reliability, Emergency Calls, National Services like MNP, Do Not Disturb etc.
- QoS levels maintained by TELCOs are inspected by the Regulator. There are penalties in case of non-compliance. OTT players are more or less free from such obligations. They maintain some levels of QoS for the fully paid or freemium services they sell but there are no obligations attached to freebies.
Consumer’s Concern – right to QoS!!! - Data-privacy becomes a tricky term with advent of DPI boxes and established processes like Lawful Interception. Only the highly encrypted payload can’t be intruded into. TELCOs are legally committed to maintain consumer’s privacy. OTT players have oceans of photos, videos, chats, and even intellectual properties like poetries, paintings and what not. Yes, I do own a locker at the bank but both the keys of the locker are with the banker only!
Consumer’s Concern - right to Privacy!!! - OTT players offer free, freemium and fully paid services. To address unfair billing situations, TELCOs have CRMs, Customer Care and Legal routes too. OTT players offer no recourse. Do we even understand our rights well in case of OTT players? Free or Freemium is just one of the many Revenue Models, an enterprise decides to go with. In no manner it should limit consumer’s right.
Consumer’s Concern – right to Fair Billing!!! - Interconnection is a concept that connects the world. TELCOs operating from any remote corner of the world are committed to follow Interconnection guidelines. This ensures that a call will land its destination no matter from where it starts and what all networks it hops. TELCOs are committed to provide a path to each single call generated over PSTN, PLMN; whereas there is no such expectation from OTT players. Skype is not bound to provide connectivity to Viber and vice-versa.
Consumer’s Concern – right to Interconnection feature!!! - Emergency Call is a great feature provided by TELCOs. Technically one can access the cell networks even without a SIM card. Emergency Calls are allowed without a SIM also. In such a scenario only personal calls are blocked by the TELCOs. Calls to emergency numbers like 100 or 101, go through, at any time and from anywhere.
Consumer’s Concern – right to Emergency Call feature!!! - TELCO subscribers leverage the national directives like MNP, Do not disturb features etc. There are no such consumer focused directives for OTT players given by any Regulator.
Consumer’s Concern – right to Services driven by National Directives!!!
Content Provider operates primarily in two forms - a traditional VAS provider or the OTT avatar.
- VAS providers demanded an Off-Deck model from TELCOs which was not granted strategically. OTT players didn’t take the permissions. They just barged in.
Ever changing business dimensions! Followers turning into Dictators! - Content providers as an OTT player; have been skeptical about the Net Neutrality aspect. In a few scenarios, reported worldwide, they reported biasedness shown towards their traffic by the carrier TELCOs. With presence of DPI boxes in the eco-systems and established processes like Lawful Interception, boundaries of Net neutrality are difficult to be drawn. Interestingly, VAS players were always free from this fear. VAS sale is an addition to TELCOs revenue and why would TELCO hamper VAS delivery?
Content Provider’s Concern (the OTT player) – right to Net Neutrality!!!
Network Provider unwillingly offers piggy ride to uninvited guests on its network.
- Data privacy laws and Data retention laws are justified as far as National Security and Subscriber’s privacy & interest are concerned. TELCOs incur huge OPEX while maintaining Customer Verification Records, Call Detail Records and providing a platform for Lawful Interception. These laws burden TELCOs and the OTT entrants ride free.
Network Provider’s Concern – right to Level Playing Field!!! - TELCOs like any other enterprise are bound to the country Tax laws. OTT players are not even counted as an enterprise.
Network Provider’s Concern – right to Level Playing Field!!! - In order to sell services beyond base geographical boundary, TELCOs adhere to the International Trade Norms. OTT players hop geographical boundaries without any licenses required.
Network Provider’s Concern – right to Level Playing Field!!! - OTT players don’t comply with the Interoperability standards and QoS standards. Comparing a TELCO-OTT equation with a TELCO-TELCO equation, the losses incurred in former case are double layered. There are no interconnection charges given to the Network Provider and the rider is offering free Messaging and VoIP calls across any telecom network disrupting the very core TELCOs business itself.
Network Provider’s Concern –right to Level Playing Field!!!
Now we go back to the point we started the discussion with, “probably this debate didn’t start at the right note.” Than what are the right notes?
National Security is the right note. Consumer’s Right is the right note. Right to fair play is the right note.
A holistic debate about regulation of TELCO/OTT space starts from visualizing each stakeholder’s concerns and proposing a framework that addresses those.
