Indian Startups Slam Telecom Operators Over ‘Hafta Vasuli’ In Net Neutrality Showdown

A few months ago, Indian startups were fighting pitched public battles with big tech giants to wrest control of the Internet & Mobile Association of India (IAMAI). The homegrown players even dragged the search major Google to the court over the latter’s billing policy, resulting in a proverbial tug of war between the two parties to prove their dominance. 

While many believed that the terse standoff deepened the chasm between the two, both Indian startups and big tech companies, in a surprise move, have joined hands against a common rival — the Indian telecom operators. 

At the heart of this coalition is a proposal floated by Indian telcos that want over-the-top (OTT) platforms to foot their infrastructure costs. 

Leading from the front, Indian startups have condemned the execution of such a proposal, cautioning that such a move would be in violation of the core principles of net neutrality and ‘reeks of gatekeeping’. Indian players also fear that the same mandates may eventually envelope smaller players, making them operate as per the ‘whims and fancies’ of telecom operators.

In late September, as many as 132 Indian startup founders banded together and wrote a letter to Telecom Regulatory Authority of India (TRAI) chairman PD Vaghela, raising their concerns against any such proposal. The signatories included Paytm’s Vijay Shekhar Sharma, Zerodha’s Nikhil Kamath, Innov8’s Ritesh Malik, Vishwas Patel of Infibeam Avenues, PhonePe’s Sameer Nigam, and People Group founder Anupam Mittal, among others. 

Speaking with Inc42, Infibeam Avenues’ joint managing director Vishwas Patel termed the proposed network levy as equivalent to ‘hafta vasuli’ (illicit means of collecting money).

Patel added that startups will not give in to the whims and fancies of the telcos as the proposed revenue-sharing agreement poses a threat to net neutrality in India. 

“As per terms of their licence agreement, they are bound to offer internet services to paying users in a non-discriminatory way. But imposing any network fee mandates on OTTs could entail gatekeeping by telecom operators. What if an OTT platform is not able to pay the fee, will customers not get access to that particular service?” Patel added. 

While conceding that the matter right now largely pertains to big OTT players, Patel feels that nothing will stop the telecom operators from rolling out the payment mandates for smaller players, especially startups. This, he added, could spell disastrous implications for the homegrown startup ecosystem. 

Within the confines of the startup body IAMAI, the mood also seems to be unflinchingly in favour of an all-out offensive, which would dissuade the government against any such move. While Patel, a member of IAMAI’s governing council, claims that the body is still evaluating its next course of action, a source told Inc42 that the matter is actively being discussed. 

Meanwhile, Wint Wealth cofounder and CEO Ajinkya Kulkarni, who also signed the letter, believes that internet is the biggest utility and ought to be neutral. 

As per Kulkarni, even the slightest departure from net neutrality would lead the country down the ‘1984 route’, referring to the dystopian novel by George Orwell, which orbits around the repercussions of authoritarianism and mass surveillance of people and their behaviour. 

“On the policy front, there should not be even the slightest deviation from net neutrality, not even for social welfare schemes. It is way more important than anything else and is my social responsibility for the generations to come and my children,” Kulkarni said. 

The Big Bone Of Contention 

The matter made national headlines right after the TRAI issued a consultation paper on regulating OTT communication apps in July. The paper explored the idea of identification of a mechanism to regulate the apps and to examine issues related to selective banning of such apps.

The idea was to seek comments from relevant stakeholders but the matter blew up into a major storm after the comments by the telecom operators were made public. 

Telcos Reliance Jio, Airtel, Vodafone Idea (Vi), and even BSNL, batted for a new framework whereby OTT players would be mandated to ‘contribute’ towards network costs based on bandwidth consumption.

They also rubbished claims that such a move would violate net neutrality and sought a regulatory framework to govern OTT platforms on par with telcos.

Reacting sharply, the major startup cofounders of the country banded together and shot off a letter to the TRAI chairman and slammed any such proposal and called for maintaining the neutrality of the internet. 

Afterwards, the Cellular Operators Association of India (COAI) again issued a statement presenting its side, stating that the letter written by founders was built on falsehood and misinformation. The industry body also rubbished allegations that their recommendations to TRAI could lead to violation of net-neutrality rules. 

The Ghost From The Past

On the surface, the fight between startups and telcos may seem to be a new one, but it has been brewing for at least half a decade now. The genesis of this battle can be traced back to 2018 when TRAI issued a similar paper, which was eventually shelved after vehement opposition from industry bodies and backlash from users online. 

Just two years earlier, Facebook had tried to introduce ‘Free Basics’ in India – offering users free internet but limited the access to only a few curated websites. This was done in partnership with Airtel. 

However, Facebook’s Free Basics snowballed into a major controversy and that was when Indians were first introduced to the term ‘net neutrality’. Eventually, Facebook Basics was shelved by the company in 2016 and TRAI’s 2018 paper also met a similar fate. 

Now, five years on, another debate on net neutrality has stormed between Indian startups and telecom operators, who see the emergence of OTT apps impacting their revenues. 

Not to mention, calls and messaging services account for a big revenue chunk for these companies, which have been undoubtedly hit by free offerings from OTT communication apps such as WhatsApp. 

It is this aspect that telcos want to change. In their comments to TRAI, Reliance Industries-owned Jio recommended imposing a network cost on OTT platforms based on the traffic consumed by such platforms. 

Bharti Airtel was sharper in its approach, saying that all traffic originators that exceed 5% bandwidth occupation at peak hours measured at an individual operator network level would be liable for such charges. Joining in was Vi, which also pitched for a government-led approach for computing such charges and put the impetus on TRAI to determine the ‘fair share’ contribution. 

Training guns at this first was the local startup body Internet & Mobile Association of India (IAMAI) which submitted before TRAI that any such move would disincentivise growth of digital businesses and add a cost to accessing free or cheap content.

However, a big storm was still incoming as startup founders came in with full force against the telcos’ proposal. 

Startups Mount A Challenge

As the comments were made public, Indian founders took to Twitter to express their displeasure over any move to ‘compromise’ net neutrality. At the outset, it was Zerodha cofounder and CEO Nithin Kamath who said that the destiny of a Digital India was tied to the internet remaining open, accessible, and neutral for everyone. 

“Uncompromised net neutrality has been the cornerstone of India’s digital success. I am sure the same will be upheld. I don’t think there is any misinformation or someone is misled in the signed letter from all startup founders here,” tweeted Paytm CEO and founder Vijay Shekhar Sharma.

Meanwhile, Medianama’s Nikhil Pahwa led a coalition of Indian founders and drafted a letter to the TRAI chairman, seeking continued support for net neutrality in India. Eventually, 132 Indian startup founders came around and signed the petition.

But what is net neutrality that has created such a buzz in the ecosystem? In simple words and as per the Department of Telecommunication (DoT), net neutrality means that the internet ought to treat all information equally, regardless of its content, application, service, device, sender, or recipient.

It was this definition that formed the basis of the startup founders’ letter, which cautioned against any move towards “over regulation” of internet services categorised as OTT services. 

“As a key representative of the Indian economy and internet innovation ecosystem, we are writing to urge the authority to continue their support for net neutrality principles and caution against any move towards overregulation of internet services being described as OTT services, which may have discriminatory consequences,” the letter read. 

Citing the inherently different structural and functional nature of telcos and internet apps, the founders added that bringing the OTTs under regulatory purview would tilt the playing field in favour of telcos. They also flagged increased compliance and vague terms used by telecom operators in their comments to TRAI. 

Meanwhile, Patel said he believes that the telcos are trying to create confusion and using disparaging words against startups airing their grievances. He was essentially referring to the COAI’s counter letter to the TRAI chairman which claimed that ‘certain entities with vested interests’ are misguiding people, propagating unfounded fears and indulging in ‘propaganda activism based on fallacies and unfounded fear-mongering.’

Meanwhile, the tensions between the startup ecosystem and the telcos appear to have peaked as industry bodies of both sides publicly lash out at each other. On the other hand, the government has kept its cards close to its chest and has been caught in the midst of a proposal which could have a reaching consequence on the country’s startup ecosystem and allied industries. 

With the ball now in the Centre’s court, it remains to be seen what the government eventually decides. For now, both industries wait with bated breath as more developments continue to tumble out,