Regulation of OTT services in India

Introduction

The Indian government and the Telecommunications Regulatory Authority of India (TRAI) have been investigating ways to regulate over-the-top (OTT) service providers since 2015. The difficulties that they have encountered, despite extensive work over the past five years, exemplified by the fact that no regulations have yet been issued, provide a caution to others seeking to regulate OTT services. The ongoing debate has surrounded two issues in particular: net neutrality and regulatory balance.

Net neutrality

Net neutrality is the concept that all data packets carried over the Internet should be treated equally. On a strict interpretation, net neutrality prevents telecommunication service providers (TSPs) from undertaking traffic management, for example to prioritize time-sensitive applications, such as voice or videoconferencing, over delay-tolerant applications, such as file sharing or email. However, the fact that different applications have different characteristics means that in the real world some differentiation is inevitable and appropriate. Net neutrality is then the guiding principle as to when and why and to what extent differentiation between data packets is allowed.

A government committee reported on net neutrality in May 2015, recommending that (DOT 2015: 86):

• OTT applications services enhance consumer welfare and increase productivity. Therefore, such services should be actively encouraged and any impediments in expansion and growth of OTT application services should be removed.
• Specific OTT communication services dealing with messaging should not be interfered with through regulatory instruments.
• In the case of VoIP OTT communications services, there exists a regulatory arbitrage wherein such services also bypass the existing licensing and regulatory regime creating a non-level playing field between TSPs and OTT providers both competing for the same service provision. Public policy response requires that regulatory arbitrage does not dictate winners and losers in a competitive market for service provision.
• The existence of a pricing arbitrage in VoIP OTT communication services requires a graduated and calibrated public policy response. In the case of OTT VoIP international calling services, a liberal approach may be adopted. However, in case of domestic calls (local and national), communication services by TSPs and OTT communication services may be treated similarly from a regulatory angle for the present. The nature of regulatory similarity, the calibration of regulatory response and its phasing can be appropriately determined after public consultations and TRAI’s recommendations to this effect.

This report appears to limit the scope of OTT regulation to domestic voice applications. However, the TRAI’s public consultation (TRAI 2015) took a wider view. Noting that TSPs can and do resort to differential treatment of OTT service through such practices as prioritization, throttling, and blocking, TRAI identified the different regulatory treatment of essentially similar services as being the root of the problem.

Regulatory balance

The fundamental difference between the OTT service providers and the TSPs is in the ownership of the network, and the concomitant responsibilities for maintaining and upgrading that network to meet quality of service (QoS) standards. Whereas TSPs face all of these responsibilities as part of their licence obligations, OTT service providers do not have a licence and face no such obligations. The aim of OTT regulation, according to TRAI, should be to restore regulatory balance.

TRAI considered two possibilities:

• Licensing OTT service providers as communications service providers (CSPs) enabling them to have proper interconnection with other service providers and at the same time ensure QoS to the end customer.
• Licensing OTT service providers as applications service provider (ASPs) which would not impose as many obligations but would enable a proper regulatory framework to consider cases of revenue sharing open access to application services, and prioritized services being offered to customers.

In its consultation paper, it sought answers to questions such as:

• Is it the right time to establish a regulatory framework for OTT services?
• Should OTT players offering communications services (voice, messaging, and video) be brought under the licensing regime?
• Should OTT players pay for the use of the TSPs’ network over and above data charges paid by consumers?
• How should imbalances in the regulatory framework be overcome?
• How should security concerns be addressed with regard to OTT players.

Public consultations but no regulatory decisions

The public consultation in 2015 generated a lot of interest, both in India and across the world. TRAI received 26 major submissions as well as a range of comments from interested parties. t also received a request from the Department of Telecommunications to provide recommendations on “traffic management system, economic, security and privacy aspects of OTT services” not covered in the 2015 consultation paper. This led TRAI to publish a number of regulatory decisions in 2016-18 on matters that were related but peripheral to the question of OTT regulation. That question remained unresolved.

In November 2018, TRAI therefore issued another public consultation paper on OTT regulation (TRAI 2018). This time it chose to focus only on OTT services that could be regarded as the same as, or similar to, the services provided by TSPs. However, the precise scope of this definition was itself problematic as there was no national or international agreement on the matter. The paper proposed, as a matter for consultation, that “substitutability might be the primary criterion for comparison of regulatory and licensing norms” (TRAI 2018: 9).

Discussion of substitutability led on to a discussion of quality of service, of security, and of obligations such as the requirements to ensure the privacy of communication and to guard against unlawful interception; to ensure that traffic may be intercepted and monitored (e.g. by law enforcement agencies); and to provide toll-free access to emergency services. The question asked was whether similar obligations ought to apply to OTT players. An alternative approach would be to remove these requirements from the TSPs in light of their loss of customers and revenues to the OTTs.

TRAI’s second consultation received 89 responses by the time it closed in January 2019, more than three times the number received in 2015. While no formal report or decision has been published by the regulator, in early 2020 a TRAI official said that “the issue of whether to regulate communication apps, known as over-the-top (OTT) players, isn’t likely to be resolved any time soon given that the matter is far more complicated than earlier thought.”^[1]

Through the comprehensive consultation process the Indian authorities have discovered, as have others both nationally and internationally,^[2] that the regulation of OTT services comprises so many complex economic, political, social, and national security issues that it is almost impossible to resolve. Meanwhile, practical arrangements are being made in the telecommunications marketplace to enable TSPs and others to adjust to the realities associated with OTT and other online services.

Endnotes

1. As reported in the Economic Times of India on January 30, 2020, available here. ↑
2. For example, see ITU (2020: 2), which concludes that OTT services “raise complex issues that stakeholders need to navigate together in the decade to come.” ↑

References

DOT (Department of Telecommunications). 2015. Net Neutrality: DoT Committee Report. New Delhi: DOT. https://dot.gov.in/sites/default/files/Net_Neutrality_Committee_report%20%281%29_0.pdf.

ITU (International Telecommunication Union), 2020. Economic Impact of OTTs on National Telecommunication/ICT Markets. ITU-D Study Group 1. Geneva: ITU. https://www.itu.int/md/D18-SG01-C-0339/.

TRAI (Telecom Regulatory Authority of India). 2015. Consultation Paper on Regulatory Framework for Over-the-Top (OTT) Services. New Delhi: TRAI . https://www.trai.gov.in/sites/default/files/OTT-CP-27032015.pdf.

TRAI (Telecom Regulatory Authority of India). 2018. Consultation Paper on Regulatory Framework for Over-the-Top (OTT) Communication Services. New Delhi: TRAI. https://www.trai.gov.in/sites/default/files/CPOTT12112018.pdf.