Regulators

Star India roots for OTT services; says premature to work on regulatory regime

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NEW DELHI: With the burgeoning of Over The Top (OTT) services in the Indian ecosystem, the Telecom Regulatory Authority of India (TRAI) is looking at creating a regulatory framework to keep a check on them.

However, media and entertainment major Star India is of the opinion that TRAI should not create 'artificial distortions' by creating regulatory frameworks for OTT services, as there is no any evidence of market failure, abuse of dominance, monopolistic practices, or anti-consumer and anti-competitive behavior.

Responding to TRAI’s Consultation Paper on the subject, Star India said that no case has been made out in the Paper of anti-competitive practices. “No regulatory impact assessment has been done, there is no ‘consumer problem’ as such that has been defined, no cost benefit analysis has been conducted, no qualitative or quantitative aspects have been highlighted of the problem at hand, and so the Paper is actually deficient.”

Star India also said that Internet based services are already covered by substantive legislative frameworks like the Copyright Act, the Information Technology Act 2008 combined with the Competition Act. These legislations not only set out the commercial and technical parameters for conducting business but also set the legal boundaries for conduct in a market based environment. “Hence, there appears to be no need for a separate regulatory framework or licensing regime, which seeks to erode or over ride the existing laws or create artificial regulatory constructs, which result in market distortions. In fact, this was the exact argument telecom operators had earlier made while stating their case for not regulating mobile value added services (MVAS), which in essence is quite similar to Internet-based services,” said News Corp’s Indian arm.

Writing on behalf of the broadcaster, Star India vice chairman of legal and regulatory issues Pulak Bagchi said, “The very fact that OTT services have found technological solutions to increase efficiencies means that we should do everything in our ability to promote their growth, not curtail them. Licensing almost always tends to create a privileged club on the basis of restricting access, which is against the very ethos of this revolution.”

Bagchi went on to add that lawful interception is a cost and technology issue. “The government only has to license these technologies from those who own or hold the IP for such technologies. Given that functions like lawful interception, ensuring privacy al are sovereign functions, costs towards the need to be shared by licensee telcos and the government. For this purpose, the AGR payments made by telcos should be deemed to include their contribution towards this end,” he said.

The Indian government and law enforcement agencies access data stored by Internet platforms when deemed legally necessary. Any additional regulations carry grave risk of breaching user privacy and would also require constitutional review - especially since the Government is still working on a proposed Privacy Bill.

Existing legal formulations can also be updated to incorporate necessary technology wherewithal for lawful interception and privacy. License conditions for telcos and ISPs can also be amended to provision for these issues.

The government and courts also have the power to block access to websites on the grounds of national security and public order. It has taken similar steps in the past and has been widely reported by the media. The transparency reports periodically published by major Internet companies suggest that the Indian government routinely requests for user data and blocking of user accounts.Between July 2014 and December 2014, Indian authorities had 5,473 requests for data, covering 7,281 user accounts from Facebook and the company had a compliance rate of 44.69 per cent. Google had a compliance rate of 61 per cent with respect to the requests made by different government agencies across.

The broadcaster further said there was multiple evidence to suggest that the so-called “communication OTT services” are capable of being lawfully intercepted with the right kind of technology being deployed for the purpose by law enforcement agencies.

ThedramaticinnovationintheInternetspaceisprovidingenormousbenefitsto consumers through lower costs, multiple choices and universal access to information and this is sufficient evidence to put on hold any proposed regulatory intervention.

Referring to a question about the growth of OTT impacting the traditional revenue stream of TSPs, Star India said, “There seems to be almost a suggestion that it is the duty of the regulator to guarantee the revenues of the TSPs. All that the OTTs have done is to remove inefficiencies in the value chain delivering better value to the consumers and instead of looking at it from the consumers’ point of view, there seems to be an inclination to try and protect incumbent and in many cases, outdated revenue streams of the TSPs. The only thing that OTTs have done is to create a level playing field for all and the incumbents are more than welcome to evolve their current business models to participate in this.However, we fail to recognize any obligation on the part of the regulator, society or the government to protect traditional revenue streams at the cost of burgeoning inefficiencies.”

It further said that communicationOTT should be welcomed if it can serve the same purpose as that of traditional telecom services in a far less expensive and efficient manner, resulting in relative affordability, greater value and added ease to the consumers. If communication OTT services are less reliant on network capacity or capability because of their low data usage and higher tolerance for latency, it should be encouraged rather than be called in for questioning whether they are impacting traditional revenues of TSPs.

The broadcaster said that TRAI should keep consumer interests in mind rather than being weighed down by perceived challenges to incumbent telcos or losses accruing to them because of so called decrease in messaging and voice services. Consumers have not been shown to be impacted so as to requiring OTTs to be licensed or registered.

Furthermore, OTT services help in driving up data usage/consumption and resultant revenues for telcos/ISPs, and with greater broadband penetration there will be a rise in volumes and increased revenues from data usage shall more than set off any loss to telcos on account of traditional services like SMS and calls. Further, OTT services also pay at the back end for connectivity and hosting services to the ISP’s /TSP’s backbone.

At the outset, Star India agrees that it was too early for a regulatory framework for OTT services. “It is correct that the Internet ecosystem is still in an embryonic stage of evolution with limited penetration in India (19.19 per cent of Indian population has access to Internet and India’s share of world Internet users is at an abysmal 8.33 per cent). High speed broadband continues to be a pipe dream. Consumer propositions and business models around the Internet in India are still in a state of flux.

Summing up, Star India said that OTT services are at a nascent stage in India and any intervention is likely to throttle innovation or investments in this space with the biggest casualty being start-ups.OTT already has enough bottlenecks and barriers: In any event there are structural bottlenecks and barriers to OTT usage viz. poor networks, low penetration of plastic money, limited customisation etc. Intervention would result in creating further entry barriers thereby stifling competition, hence are best avoided; intervention shall skew level playing fields in negotiations between telcos/ISPs on one hand and OTT service providers on the other, telcos clearly have a higher hand in negotiations always.

OTTservicesarenotinfrastructureproviders; OTT makes money from its content or service offering – owned or licensed (be it ads or subs) while telcos/ is monetize public property viz. spectrum licensed to it by the government.

Star India said any intervention that adversely impacts OTT services could impinge on freedom of speech and expression and hence be deemed unconstitutional.

OTT apps are not completely substitutable to communication services as they are not interoperable – i.e devices that communicate through such apps, require installations of the same, unlike communication services, which can talk across networks regardless of underpinning technologies (GSM, CDMA, 3G, 4G, etc), therefore TSPs cannot allege that they are losing out to OTT.

Star India noted, “We have already seen how the VAS industry had an untimely demise owing to revenue sharing conflicts. Any regulatory intervention that mandates payments by OTTs to TSPs shall result in a similar destruction for the former.”

In reply to one of the questions, Star India said that OTTs are paying for network usage, streaming and technology costs. Just the fact that they have found a more efficient way of utilizing the pipes does not mean that they should be penalized for the same.

OTT players should not be asked to pay for use of the TSP’s network over and above data charges paid by consumers. “We are of the view that the real question that needs to be considered is whether the TSPs should pay the OTTs a share of data revenue for significantly driving data consumption, which is borne out by the manifold increase in telco data revenues. We believe that it is too early to have a regulatory framework around the relationship between TSPs and OTTs given the nascency of the ecosystem. Given the fact that numerous OTT services have created a strong consumer proposition for the Internet, thereby driving penetration, it is equally likely that TSPs incentivise / compensate OTT services that are responsible for driving u p data consumption by sharing a percentage of their data revenues. Given the rapidly evolving business practices, we believe overarching regulations would only stifle innovative partnership models and be detrimental to the consumer and the business community at this stage.”

According to Star India, TSPs should not differentiate on the quality of service based on an economic arrangement with OTT players. However, it is too early to put constraints on any partnership arrangements between TSPs and OTT players that can result in tangible benefits to consumers.

Internet-based services and apps do not pay for telecom operators for using the network, and it should remain the same going forward. Forcing Internet-based services to pay extra for using a particular network negatively impact consumers and harm the Indian digital ecosystem. As mentioned in the above answer, data revenues of Indian telecom operators is already on an upswing and is slated to increase rapidly over the next few years, hence the argument for creating a new revenue source is not justified.

Charging users extra for specific apps or services will overburden them, which in turn will lead to them not using the services at all. It is also akin to breaking up the Internet into pieces, which is fundamentally against what Net Neutrality stands for. Also, the Internet depends on interconnectivity and the users being able to have seamless experience - differential pricing will destroy the very basic tenets of the Internet.

In its covering note Star India said that it realised that the issue was of far reaching consequences and would have a huge impact in the industry going forward.

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