Indian Startups Vs Telcos: Row Erupts Over Imposing Network Costs On OTT Platforms

Indian startups are up in arms against telecom operators after the latter’s suggestions to the Telecom Regulatory Authority of India (TRAI) to bring in a regulatory regime that mandates that over-the-top (OTT) platforms pay for their network costs. 

Taking to X, formerly Twitter, Zerodha cofounder and chief executive officer (CEO) Nithin Kamath attributed the ‘exponential growth’ of Indian startups to net neutrality, adding that the destiny of the nation is tied to a neutral internet.

“The exponential growth of our technology and startup ecosystem would not have been possible without this. Without net-neutrality, there perhaps would not have been a Zerodha. The destiny of our increasingly digital nation is tied to the internet remaining open, accessible, and neutral for everyone,” said Kamath.

Chiming in, online travel aggregator Cleartrip’s cofounder and director of product and strategy Hrush Bhatt also called on startup founders and online users to ‘save the Internet (again)’.

Meanwhile, Medianama’s Nikhil Pahwa, leading a coalition of Indian founders and seeking support from many others, has drafted a letter addressed to TRAI chairman PD Vaghela seeking continued support for net neutrality in India.

The draft letter has urged against bringing OTT players under the same regulatory ambit as telecom operators, adding that any such proposal could lead to overregulation of the internet in India and would have discriminatory consequences on the country’s startup ecosystem.

“… Telecommunications licensing requirements, if extended to internet applications and services, may impose onerous obligations on Internet services, including costly legal compliances, and impact key product decisions which may harm India’s vibrant startup ecosystem,” said the letter that is seeking support from Indian startup founders. 

Opposing any potential revenue-sharing agreement between telcos and OTTs, the letter said that such obligations under the proposed framework would favour big tech companies, who can afford to adapt to such regulations, and impact the ‘thriving’ homegrown startup ecosystem. 

Terming such a proposed regulatory framework discriminatory, the letter said that the move will impact India’s prospects domestically and internationally and greatly harm the vision behind ‘Digital India’. 

Batting for net neutrality, the letter stated that licensing and cost obligations on OTTs are directly at odds with the Centre’s ‘Startup India’ initiative. 

“… TRAI must caution against any demand to charge network fees from large traffic generators and prevent TSPs from yet again trying to engage in such rent-seeking behaviour, and not impose telecommunications licensing frameworks on Internet companies,” concluded the letter. 

Consultation Paper Causes Furore

The matter erupted into national limelight after TRAI, last month, published responses received from various stakeholders in relation to a paper floated by it in July 2023 on regulating OTT apps. 

In its submission, Reliance Industries-owned Jio suggested a framework that would entail that the OTT players ‘contribute’ towards network costs based on the traffic consumed citing restoration of level playing field.

Bharti Airtel also pitched for direct contributions by OTT players to telcos, adding that such charges ought to be calculated by adopting network traffic as a parameter. Similarly, Vodafone Idea (Vi) also sought a government-led approach for computing such charges, urging TRAI to determine ‘fair share’ contribution from large OTT players based on traffic.

State-owned Bharat Sanchar Nigam Limited (BSNL) also called for bringing OTT platforms under the ambit of the same licensing and regulatory regime as telecom operators. 

The three private telcos also rejected the charge that their proposals violate principles of net neutrality. 

On the other hand, startup body Internet & Mobile Association of India (IAMAI) previously, in its submissions, said that any such move would disincentivise growth of digital businesses and add a cost to accessing free or cheap content.

This is not the first time that the two sides have sparred with each other. A similar proposal by TRAI in 2018 was shelved after vehement opposition from industry bodies and backlash from users online. At the time, industry bodies Nasscom and IAMAI had opposed the move while telecom body COAI had called for further regulation of such apps.

While the matter seems to have now erupted a major discussion on net neutrality in India, the ball is now in the Centre’s court. As much goes behind the scenes, it remains to be seen which side the government tilts towards.