Telcos Push for OTT Levy to Fund Rural Connectivity; Seek Govt Intervention

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Telcos Push for OTT Levy to Fund Rural Connectivity; Seek Govt Intervention: Report

Telcos Push for OTT Levy to Fund Rural Connectivity; Seek Govt Intervention
In a renewed push to ease their financial burden and fund rural digital infrastructure, Indian telecom operators have urged the government to impose a levy on over-the-top (OTT) platforms that generate large volumes of data traffic. The proposal, submitted by Reliance Jio, Bharti Airtel and Vodafone Idea to the Department of Telecommunications (DoT), seeks to classify these OTTs as Large Traffic Generators (LTGs) and require them to contribute to network upkeep, according to a Business Standard report.

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Also Read: GSMA Calls for Regulatory Framework to Ensure Fair Contribution from OTT Players

Telecom Operators Submit Proposal to DoT

The telcos have suggested that the proposed levy on OTTs’ India-generated income be pooled into the Consolidated Fund of India or the Digital Bharat Nidhi (DBN), formerly known as the Universal Service Obligation Fund (USOF). The objective, they say, is to support the expansion of data and voice connectivity in underserved regions.

Industry executives familiar with the proposal said the move aims to ensure that OTT platforms—such as Netflix, WhatsApp, Facebook, Instagram and Amazon Prime—which rely heavily on telecom infrastructure, contribute fairly to its development and maintenance. Telcos argue that LTGs consume significant network bandwidth without investing in the underlying infrastructure.

“According to executives familiar with the details, the idea is to help telcos use the fund, coming from the levy on such OTTs, to provide data and voice connectivity in the underserved areas of the country,” the report said.

Also Read: Indian Telcos Reiterate Call for Fair-Share Contributions by OTT Platforms

Funds to Support Underserved Regions

“It is imperative that the LTGs, who transmit a huge volume of data over the networks established by telecom service providers, contribute to upgrading the network infrastructure. As a solution, we have suggested that LTGs participate in the development of India by contributing a part of their income to the Digital Bharat Nidhi (DBN), for progressive development of digital infrastructure in India,” SP Kochhar, Director General of the Cellular Operators Association of India (COAI), was quoted as saying in the report.

“This would fund the much-necessary network growth and evolution, while helping bridge the urban-rural digital divide and eventually lead to a reduction in contributions to DBN by the telcos,” he added.

Global Precedents and Industry Reactions

With few global precedents, carriers have been closely watching the outcome of a revenue-sharing agreement between South Korea Telecom and Netflix, industry insiders noted. The agreement, signed in 2023 following a legal battle, is seen as a benchmark.

Telecom companies in India currently pay 5 percent of their adjusted gross revenue (AGR) to the DBN, in addition to spectrum usage charges, corporate taxes, and GST. Carriers have also requested the DoT to temporarily suspend the 5 percent DBN levy to alleviate their financial stress. As per DoT data, over Rs 86,356 crore of the Rs 1.7 trillion collected under the DBN remained unutilised as of December 2024.

The LTGs like Netflix, WhatsApp, Amazon Prime, Facebook, Instagram, and Zoom, pay corporation tax as well as GST to the Indian government. “There is likely to be an opposition to any such proposal, which has been the case traditionally as well,” said a senior executive from an industry body representing OTT apps, according to the report.

Also Read: Indian Telcos Renew Calls for Fair Share from OTT Platforms

Financial Pressures on Indian Telcos

An industry source argued that even as OTT apps rode on the telecom infrastructure, generating vast volumes of traffic, they contributed nothing to the network infrastructure they depended on. “This creates an imbalance which directly threatens the quality and sustainability of mobile broadband in India,” the source was quoted as saying.

The latest move marks a shift from earlier demands for direct revenue-sharing agreements between telcos and OTT players. Carriers had contended that LTGs should share revenues as they do not contribute towards building or maintaining the network infrastructure. The telecom sector has invested more than USD 3 trillion in deploying 5G services across the country.

The telcos’ proposal gains added significance following the Supreme Court’s dismissal of a review petition by Vodafone Idea, Bharti Airtel and Tata Teleservices over AGR dues, interest and penalties amounting to over Rs 1 trillion. The Court clarified that the government may offer relief, such as converting dues into equity—a step already taken by Vodafone Idea, making the government its largest shareholder with a 49 percent stake.

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