Free riders vs piggy-riders: A tale of two cities caught in an OTT debate

The debate over whether over-the-top services should pay telcos user revenues bids fair to overlap with the issue of net neutrality

On the face of it, New Delhi and Riga, capital of Latvia, may have little in common. But recently, over-the-top or OTT has been a heavily debated point in the tech and media circles in both cities. The question being raised by the traditional telecom firms and related ecosystem is the unfairness of OTT firms having a “free ride” atop the infrastructure created and paid for by telcos. The other side’s argument is that telecom operators have been piggy-riding on OTT content to drive their own data usage. And that telcos are able to garner substantial ARPUs (average revenue per user per month) derived from the wide popularity of content and communication services offered by OTTs.

At the recent 5G summit called “Techritory” in Riga, telcos argued with OTT participants on issues ranging from regulation to investments and innovations. Back home, angry letters and submissions have been sent to the government, keeping OTTs firmly in headlines.

Ultimately, it all boils down to money: Telcos want OTT firms to give them a part of their revenue for using their platform. Individually as well as through the Cellular Operators Association of India, they are quick to point out that OTT majors — from Skype to Google and Facebook to Microsoft — are neither sharing any revenue with the government nor are they spending anything to acquire spectrum. Their message underlines the fact that the OTT scene is quite a contrast to the telcos’ revenue outgo, both to the government (for spectrum and licence fees) and towards building robust infrastructure. Meanwhile, in a high-pitched battle of words, the Broadband India Forum (BIF) has demanded that telcos must pay OTTs in return for higher data traffic across telecom networks. Telcos have laughed at the idea even as OTTs have rubbished the argument that they are free riders.

Tamali Sen Gupta, a corporate lawyer and independent board director, makes a distinction between content OTTs and those that are communication service providers on the issue of revenue-sharing. “Why should telcos want to take a portion of content fees… Content companies have only a single source of revenue,” Sen Gupta said. However, on OTT communication services, she said they are competing with the carrier. “So there could be a case for revenue share.”

A prominent telecom watcher and analyst requesting anonymity said that from the India standpoint there should be some charge on the communication service OTTs for using telecom platforms. He was referring to OTTs such as Zoom, Microsoft Teams and Google Meet among others. A common argument is that OTTs are not charged in any other major country for riding the telecom infrastructure but that logic may not apply to India, the analyst said. “In most other geographies, the telecom tariffs are high, unlike in India. And the Indian telecom sector is in distress,” he reasoned, adding that there must be some mechanism to charge these players. The other option is for telcos to impose high tariffs on consumers and come out of the distress, he added. He clarified, however, that there’s no ground to charge content platforms. “Content is everywhere and everything. Even e-commerce firms should be charged in that case, but that’s not desirable,” he said.

In this chicken-and-egg tale on who should pay whom and who’s exploiting whom, the regulator and the government have been in wait-and-watch mode — for years. This subject has kept the Telecom Regulatory Authority of India (Trai) and the Department of Telecommunications (DoT) engaged for at least eight years now.

In August 2014, Trai had organised a seminar on the regulatory framework for OTT services. That was the first time that representatives of telecom service providers, OTT providers and legal experts presented their views on a subject that would turn increasingly controversial. Then, in response to a DoT reference to bring out a consultation paper and subsequently a recommendation paper on the thorny issue, Trai said in September 2020 that telecom services have shown exponential growth in data traffic and service providers have launched tariff plans with unlimited voice usage as part of data plans. The Trai recommendation underlined the point that “with the increase in the usage of OTT, traffic of telecom service providers has also grown”.

While pointing out that various studies on appropriate business models are under consideration in various jurisdictions, “any regulatory prescription in haste may leave an adverse impact on the industry as a whole”. So, Trai’s answer to the tricky question seemed to be: Don’t meddle. To be specific, Trai said that market forces may be allowed to respond to the situation, and stayed away from prescribing any regulatory intervention. It added as an afterthought that at an appropriate time intervention will be done, if necessary.

Has that time come now? Another consultation paper is in the works at Trai to arrive at something more conclusive. In the meantime, other regulatory frameworks such as the proposed Telecom Bill would include communication OTTs as service providers, going by the draft legislation. The Personal Data Protection Bill could also bring under its ambit OTTs in some way. Even as the jury is out on this, experts believe it’s tough to clearly define OTTs and get a fix on regulating them, especially in relation to imposing a financial charge. Tariff is under forbearance and Trai is unlikely to get into that space for OTTs.

As industry representatives and policymakers put their heads together to find a solution, from Latvia to India and elsewhere, all eyes are on what the International Telecom Union (ITU) may suggest on the subject. The expectation is that a technical report or guidelines would be issued by the ITU that could well become a blueprint for countries facing the telecom-versus-OTT fight. However, as telcos press for big tech platforms to contribute to network costs, there’s a nagging fear of crossing the clearly drawn “net neutrality” line by governments including in India as against a “walled garden” theory. Differential pricing for different sets of consumers would violate the net neutrality principle, OTT backers point out. Against that backdrop, we could possibly be staring at a net neutrality 2.0 narrative —the first involving Facebook’s controversial Basics offer some years ago — while trying to fix the OTT conundrum.