OTT Open House Discussion with TRAI

May 2019

Over-the-Top Communication Services (“OTTs”) are service providers which provide information and communication technology services (such as voice, text, audio, or video based communication) without owning or operating a network. Instead, OTT providers rely on the global internet to reach the user, hence going “over-the-top” of a Telecom Service Provider’s (“TSP”) network. On November 12, 2018, the Telecom Regulatory Authority of India (“TRAI”) released a consultation paper for proposed regulation of OTTs, which was open for comments and counter-comments till January 21, 2019. Thereafter, open house discussions were held with multiple stakeholders. The last open house was held in New Delhi on May 20, 2019 for deliberating a possible regulatory framework for OTTs.

On May 20, 2019, TRAI conducted its last Open House Discussion on regulatory framework for OTTs. The key issues discussed were divided into 4 sets namely: (a) regulatory issues pertaining to substitutability of services and non-level playing field; (b) national security and lawful interception; (c) monetary and economic impact; and (d) interoperability among OTT services as well as between OTT services and telecom services.

The audience made arguments for and against regulation of OTTs, most of which have been captured below:

Arguments in favour of regulation of OTT

  • Services offered by OTTs are equivalent to those offered by TSPs and, hence, “substitutable.” Therefore, they should be regulated.
  • It was argued that “functional substitutability” cannot be the sole criterion for comparing the regulatory or licensing norms applicable to TSPs and OTTs. Other criteria like consumer experience, technical expertise, market forces, etc should also be factored in while framing the regulations.
  • Presently, OTTs are “free riders” since they do not operate on their own network nor do they license network from a licensed operator. They essentially use a TSP’s network infrastructure for running their applications without being required to observe compliances applicable on licensed TSPs.
  • OTTs perform substitutable services which compete with TSPs without being subject to a licensing regime. Therefore, a non-level playing field exists between OTTs and TSPs causing huge revenue losses to TSPs.
  • TRAI should draft a soft regulatory framework for OTTs which will create a balance between “innovation” and “regulation”.

Arguments against regulation of OTT

  •  OTT services are much broader in scope and aim towards value addition. Hence, they are not “substitutable” to services provided by TSPs.
  • Regulation of OTT services would effectively mean regulation of internet. This could disrupt innovation and cause harm to consumers. Requiring OTTs to procure licenses for rendering specific services would force OTTs to operate restrictively as they would not be able to effectively combine multiple services to give new offerings. Such licensing regime would be akin to pooling the internet in buckets of pre-categorized services, limiting development of new services as interaction with services in a different bucket may require additional licenses.
  • While OTT services are not covered under Indian Telegraph Act, 1885, (“Act”) they are governed by the provisions of Information Technology Act, 2000. Accordingly, it was felt that there is no need for a separate regulatory framework to govern them.
  • One of the stakeholders argued that since OTT services are not covered within the definition of “telegraph” under the Act, TRAI does not have the power to frame regulations.
  • It was contended that services provided by OTTs and TSPs are “complementary”. Both service providers are interdependent and need to have a “symbiotic partnership”.
  • OTT services do not hinder revenue growth of TSPs. On the contrary, greater use of OTT services leads to enhanced data usage which effectively means increased revenues for TSPs.
  • OTTs should not be regarded as “free riders” since they have invested in creation of infrastructure like data centers, submarine cables, etc.
  • One of the stakeholders argued that TSPs operate in two markets. First, where consumers do not have access to internet and second where they have access to internet. TSPs have monopoly in the first market wherein they charge consumers for voice and text communication. In the second market, they charge consumers for enhanced data usage due to use of various OTT services. Hence, TSPs do not suffer any revenue loss or adverse impact on competition due to higher penetration of OTT services as their revenues are not entirely dependent on voice and text communication.

Additional arguments regarding national security and data privacy

  • The audience regarded national security requirements and lawful interception as issues demanding a nationwide dialogue. They argued that discussion on such matters should not be restricted only to OTT services.
  • Those in favour of regulating OTTs argued that TRAI ought to recognize the need for data privacy and localization of data processed by OTTs. On the other hand, OTT representatives argued that such concerns were within the ambit of the draft Personal Data Protection Bill, which is presently being finalized, and TRAI must not frame over-lapping regulations.

The Open House Discussion concluded with TRAI stating that it shall roll out suitable regulations/recommendations for OTT services within 30 days. Accordingly, we expect another document to be released by TRAI by the end of June 2019.

By:

Resham Jain & Nikhil Issar