Indian internet has an over-the-top question to settle

Proposal to regulate services offered directly via the internet may hurt net neutrality

Net neutrality, or the idea that all data on the internet should be treated the same, is under threat. This was a battle that many thought had been won in 2016 when attempts to compromise net neutrality made headlines and were subsequently thwarted after a sustained public outcry. Less than a decade later, the open and equitable nature of India’s internet remains in jeopardy.

At the heart of the matter is the desire to regulate over-the-top (OTT) services — those offered directly via the internet. This includes a host of applications — everything from WhatsApp to Spotify, Netflix to YouTube, and Zoom to Slack — that have become part of everyday life.

 

Two recent proposals make recommendations to this end. These proposals are perhaps concerning, given that the regulator has traditionally advocated for net neutrality.

Unsurprisingly, most telecom companies favour such regulation. However, regulating OTT services through measures such as licensing and network fees or allowing interception of messages by authorities may have serious implications for both users and India’s digital economy.

Network fees

India’s data consumption has exploded over the past few years. In 2022, it accounted for 21 per cent of global mobile data traffic — up from 2 per cent a decade ago. For telecom companies, this is a double-edged sword. Greater usage means greater revenue, but it also leads to “clogged networks”.

In their response to the telecom regulator, companies said they should be paid a “network fee” or “fair share” by large OTT players since these services generate the bulk of traffic. This will violate net neutrality – by discriminating against data accessed on non-paying OTT services – and hurt users too.

If the proposal is implemented, not only will customers have to pay for data to download and access apps, but digital services like Netflix, Amazon Prime, Google, Meta and Disney+Hotstar will need to pay a fee to telecom companies.

Platforms will pass this burden on to customers by raising subscription fees or even removing free services. In effect, customers will pay their telecom provider for data twice. Such a move will hurt the telcos, too. Fewer internet users would reduce data usage and revenue.

Licensing

There is also a debate over whether OTT services or even e-commerce companies should be licensed.

Telecom companies argue that as many apps provide calling and texting services, they too should be subject to licensing conditions and pay a fee. Same service should have the same rules, they argue. However, telecom companies pay a licence fee because they utilise and monetise spectrum — a natural resource the government grants them exclusive rights over. Apps, on the other hand, work on the internet, which functions on the underlying networks provided by various entities, including telcos.

The consequences of such a move will be far-reaching. It will force every application that offers a communication feature to be licensed. This would include, say, a Zomato, which lets you communicate with its delivery personnel or any app with a customer service interface. More devastatingly, it would rob millions of Indians, businesses and even the government the ability to communicate freely over the internet.

By forcing entrepreneurs to first seek licences before beginning digital ventures, a 21st-century Licence Raj will not only stifle innovation and job creation but also deter investors, both foreign and domestic.

Interception

The idea of new legislation and regulatory mechanisms for OTTs is understandable and forms a necessary part of a larger regulatory framework for the era of digital communication. Unfortunately, some ideas being mooted don’t resonate with today’s realities.

Take the approach to interception, for instance. The proposals suggest that the government be allowed to intercept, monitor or block messages in case of “public emergency” or “in the interest of the public safety”. There is no clear definition for these terms, but this would entail intercepting messages sent over secure services such as WhatsApp, Signal or Telegram, and would involve breaking end-to-end encryption. However, once end-to-end encryption is broken, it isn’t just the government but also bad actors that have access to these messages.

This is concerning when online scams are growing both in volume and sophistication. According to estimates, 500,000 Indians fall prey to such scams each year. This would likely increase exponentially under the proposed interception rules.

While we wait for the government’s view on such legislation, what is clear is the need for greater multi-stakeholder examination of the consequences of this proposal. Telecom companies' proposal has the potential to change the internet as we know it, jeopardising the significant gains made by India’s digital economy.

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The writer is a senior member of Ikigai’s public policy and advisory team, specialising in cybersecurity, data, cloud, telecom, and related sectors.

These are the personal opinions of the writer. They do not necessarily reflect the views of www.business-standard.com or the 'Business Standard' newspaper