From Jio To Airtel, Telcos Seek Revenue Sharing With OTTs To Foot Network Costs

From Jio To Airtel, Telcos Seek Revenue Sharing With OTTs To Foot Network Costs


Reliance Jio, Airtel and Vi have suggested that OTT players should ‘contribute’ towards network costs based on the traffic they consume

As critics flag net-neutrality violations, telecom operators seek refuge in the argument of exorbitant network costs and data-guzzling operations of OTT platforms

The saga rose to a feverish pitch as TRAI published the responses it received from various stakeholders in relation to a paper floated in July 2023 on regulating OTT apps

For close to half a decade now, telecom operators and over-the-top (OTT) apps have been locked in a multi-pronged battle, with the telcos calling for a regulatory regime under which online platforms would have to foot the bill of their network infrastructure. 

The saga rose to a feverish pitch this week as the Telecom Regulatory Authority of India (TRAI) published the responses it received from various stakeholders in relation to a paper floated in July 2023 on regulating OTT apps

For the first time in a long time, telcos banded together as they reiterated their stance — ‘internet companies should compensate them for their networks’

Leading from the front was Reliance Industries-owned Jio, the biggest telecom operator in the country, which suggested that OTT players should ‘contribute’ towards network costs based on the traffic they consume. 

“Hence, we suggest that TRAI should recommend for OTT providers contributing in the network development and building a broadband backbone for the country. In this effort, other OTT service providers should also be required to pay their fair share,” said Jio in its submission. 

Claiming that this ‘contribution’ would help restore level playing field, Jio noted that this ‘fair and proportionate’ contribution could be based on certain criteria such as volume of traffic or turnover threshold or number of users. 

Calling for a bottom up market-based cost recovery model where users pay for network upkeep, Jio urged TRAI to restore the property rights of telcos over networks created by them on the line of how OTTs protect their intellectual property rights (IPRs). 

India’s second-largest telecom operator Bharti Airtel also echoed a similar sentiment but appeared a little precise in its approach. Pitching for a direct contribution by OTT players to telcos, Airtel, in its submissions, called for adopting network traffic as a parameter to compute such charges. 

Batting for an ‘enabling’ regulatory provision, Airtel added that only large traffic originators exceeding 5% bandwidth occupation at peak hours measured at an individual operator network level ought to foot the bill of the network infrastructure to ‘protect’ innovation and enable smaller OTT players to thrive. 

“The fair share solution aims to restore the balance of the digital ecosystem to ensure the sustainability of networks, benefiting both telecom operators and large digital platforms. The topic being critical for sustainability of industry, the TRAI may even consider initiating a separate and detailed consultation on this issue to decide on modalities of fair share,” said Airtel in its submissions. 

Delving a little deeper, Airtel also proposed the modalities of this approach, saying that largest traffic generators (LTGs) could be quantified based on criteria such as volume of traffic, turnover threshold and number of users, among others. While noting that a few largest traffic originators (LTOs) accounted for half of the total global traffic, Airtel suggested that a direct collaboration approach with telcos, involving the exchange of payments directly between OTTs and telcos, was a practical solution.

Not the one to be left behind, Vodafone Idea (Vi) also called for a traffic-based approach to determine the ‘fair share’ contribution from large OTT players to telcos towards network costs. However, Vi put the onus on the government to decide the quantum of charges payable by OTTs to operators. 

Vi pitched for a government-regulated approach at the outset, which could be reviewed after a few years. 

Curiously, state-owned Bharat Sanchar Nigam Limited (BSNL) also opined that OTT platforms should be brought under the same licensing and regulatory regime as telecom operators

“… it is submitted that considering the unique market proposition of India in the telecom space, there is (a) need to create (an) equal level playing field for TSP and OTT and arbitrage in entry & operating cost should be addressed,” said BSNL in its submission. 

Telcos Spark The Net-Neutrality Debate

Apprehensive of stirring a debate on net neutrality, the three telecom operators, in a single voice, claimed that any potential bid to regulate and impose licensing regime on OTTs would not violate principles of net neutrality. 

Jio while pitching for restoring telecom operators’ property rights over their network brushed aside any allegations of dilution of net neutrality principles. Claiming that there was global consensus on the point that telcos should be permitted to pass on some of the cost to OTT platforms, Jio said that such an approach was in line with the principles of net neutrality. 

“We submit that such an approach will be within the principles of net neutrality and there will be no impact on prevention of unreasonable discrimination of internet traffic based on content, nature of service etc. Further it will help deliver on the promise of universal access, will help India meet its broadband proliferation objectives and will help bridge the digital divide,” it added. 

Airtel also said it does not ‘foresee any potential challenges’ arising out of its ‘fair share solution’, adding that a regulatory framework that mandates cost contribution by OTTs would address investment challenges faced by the industry.

Vi also said that such a revenue-sharing formula would not violate net neutrality norms and that content would continue to remain fully accessible without any traffic management, throttling, blocking and paid prioritisation.

“By defining a threshold resulting in only large traffic originators having to pay fair share to TSPs, there will be no impact to net neutrality,” Vi said in its submissions. 

What stood out, however, was Airtel’s submission that called for regulation of apps, which also offer OTT messaging as a secondary feature. Specifically pointing out Paytm, the Sunil Mittal-led telecom operator said that apps such as the one offered by the fintech juggernaut allows users to chat with others without compulsion to carry out a financial transaction. 

Critics Point Guns At Telcos

Meanwhile, critics pointed out a bevy of net-neutrality issues in their comments with such a proposed revenue-sharing plan. Digital advocacy group Internet Freedom Foundation reiterated its previous stance, urging TRAI to prioritise user interests and choices over those of telcos and OTT players. It also said that net neutrality was under ‘fire’ in India and called for saving the internet.

Meanwhile, the Internet & Mobile Association of India (IAMAI), in its submission, said, “Implementing the SPNP (sending party network pays) model will disincentivise growth of digital businesses since a volume-based revenue share model would hamper continued growth. It would also mean adding a cost to accessing free or cheap content, a part of which will eventually be passed on to consumers, thus raising the cost of internet usage.” 

Terming any revenue-sharing proposal as being against the principle of net neutrality, the Broadband India Forum (BIF) said the demand of a network fee from OTTs players is a strategy of telcos to ‘extract monopolistic rents’ and could negatively impact the trajectory of OTT innovation in the country. 

“A revenue share model 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,” said industry body Nasscom. 

At the heart of the matter is the paper floated by TRAI on the regulation of OTT apps. However, this is not the first time that TRAI is experimenting with such a proposal. It had floated a similar proposal in 2018 as well. 

Just like this time, Nasscom and IAMAI had vehemently opposed the move while COAI and telcos had batted for further regulation of such apps. However, the proposal was eventually shelved then. 

Meanwhile, telecom operators’ contention is many fold. For a long time, they have been demanding similar licensing rules for OTTs as telcos due to the emergence of OTT calling and messaging apps that have hit the telcos’ cash cow of phone calls and messages. 

Another contention seems to be heavy capex and licensing requirements for telecom companies even as OTTs are largely exempt from those. On the other hand, OTTs claim that they spur engagement and bring traffic to the ecosystem, thereby spurring innovation and digital adoption. 

However, the fight is nothing new. Previously, the industry body of telcos, Cellular Operators Association of India (COAI), publicly sparred with the IAMAI, the umbrella group of digital startups, over the former’s proposal to implement a revenue-sharing model between OTT companies and telecom players. The IAMAI then termed the proposal a ‘death knell’ for the country’s digital economy. 

As the union government looks to tighten regulatory scrutiny around digital platforms with the upcoming Digital India Act, all eyes are now on TRAI as to whether it moves ahead with the recommendations of telecom operators or yet again skips it. 

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