By TV Ramachandran, President, Broadband India Forum
In the on going box-office run of the OTT tragi-comedy, recently a media newsletter came up recently to offer the gratis advice—“Perhaps YouTube should just pay Airtel”. Such a piece of bold affirmative action surely warrants critical attention by the stakeholder community at large.
The stated trigger for the newsletter is an oped piece in another media vehicle on August 14, 2023 which advocated that OTTs should pay a network fee to telecom companies “as subsidy for investment in broadband infrastructure” and a counter to this entitled “Why should OTTs pay fees to telcos?” from a think tank on 22nd August 2023. These were understandably provocative enough for the do-gooder newsletter to jump in unsolicited and offer the advice that YouTube should pay Airtel the subsidy as an incentive. Of course, the writer graciously allowed that YouTube should have the freedom to negotiate with Airtel as regards the amount of incentive—a rather magnanimous concession to OTTs.
The way the case is made out is indeed interesting. It is said that the matter is a worldwide phenomenon—almost implying that this has been justified everywhere in the world. And why is this so? In Australia, telecom operators Optus and TPG have demanded this. In Europe, “16 telecom officials signed a joint statement calling for tech companies… to pay their share”. Also stated is that European and British telecom companies stepped up their lobbying at the Mobile World Congress in February.
Does the above sound prima facie convincing? Possibly. However, doing a double take, one wonders why 100% commercially interested parties like telcos, who would love such gratis payments, not be expected to say anything other than this? Rather naive to quote such information as justification or convincing evidence. One also wonders why it has been forgotten to quote findings and recommendations of reputed, independent and non-partisan agencies like the European regulatory authority BEREC or the global body ITU?
BEREC went into the matter of levying network-related costs on OTT platforms and concluded that the arguments made by telcos and their supporters are flawed:
1. The internet has proven its ability to self-adapt to changing conditions, such as increasing traffic volume and changing demand patterns.
2. There needs to be an adequate justification for any measure intervening in the market.
3. The “sending party network pays” (SPNP) model would provide ISPs the ability to exploit the termination monopoly and it is conceivable that such a significant change could be of significant harm to the internet ecosystem.
4. Therefore, SPNP would require regulatory oversight and could require regulatory intervention.
5. Traffic is requested and thus “caused” by ISPs’ customers.
6. CAPs are also able to optimise the data efficiency of the content and applications they provide.
7. Fixed access networks costs exhibit a very low traffic-sensitivity, while mobile networks experience some degree of traffic-sensitivity.
8. IP-interconnection disagreements are typically about increasing the capacity of the IP interconnection link.
9. The cost of network upgrades that are necessary to handle an increased IP traffic volume are very low when compared to the total network costs.
10. CAPs and ISPs are mutually dependent on each other.
11. The demand from ISPs customers for content drives demand for broadband access.
12. Availability of broadband access drives demand for content.
13. There is no evidence of “free-riding”.
14. Costs for internet connectivity are typically covered and paid for by ISPs customers.”
At the ITU 2022 Plenipotentiary Conference, member states overwhelmingly rejected proposals to regulate OTT apps like telecommunications services. ITU had already released a study in 2020 that highlighted the symbiotic relationship between OTTs and telcos and also issued a recommendation which acknowledges the distinction between OTTs and telecom.
ITU also advised Member States to consider the fundamental differences between traditional international telecommunication services and OTTs, including the cross-border nature of OTTs, low barriers to entry for OTTs and integration of markets amongst other factors.
In India too, both DoT and TRAI have consistently stated in at least 5 to 6 decisions/recommendations between 2015 and 2022 that telecom service and OTT are different and there is no need to regulate the latter. One is also surprised and disappointed that the impugned newsletter refers to DoT coming out with a Consultation Paper on OTTs a month ago. This is inaccurate. Fact is that TRAI, not DoT, has come out with a comprehensive Consultation Paper.
Expert agencies, Analysys Mason and WIK Consult have in their reports have also made some key points in the matter:
- Consumers drive data traffic, not OTT or the tech companies,
- Traffic growth is stable, not exponential,
- Telcos can easily handle more traffic at negligible cost,
- Network-related costs for internet service providers have remained stable over time even while traffic volumes have grown significantly. There is no additional cost for the telcos if a user streams more content as the user will likely pay the operator in the form of a higher data plan. This just shows that the telcos are perfectly able to handle steady traffic growth at an almost negligible incremental cost,
- Mandatory fees may disadvantage smaller telecom operators while bigger telecom companies with their own streaming or cloud services may discriminate and unfairly promote these services.
BEREC also concluded that imposition of such fees may lead to price hike for consumers, disincentivise Big Tech from making investments. Tech invests in infrastructure and telcos benefit.
It should also be noted that a majority of the EU nations (18 out of 29) have rejected the telcos’ proposition of sharing the network cost by the OTTs and they have upheld the findings of the BEREC Report. In fact, the Dutch Government has officially rejected the telcos’ position in the matter.
The newsletter, in its wisdom, has ignored all the substantive findings by globally reputed agencies quoted above and relied only on the commercial stakeholder interests of telcos. Surprisingly, consumer interest does not seem to have been considered at all by them. The newsletter waxes at length about Net Neutrality, but quite mixing up issues and conveniently forgetting that the European Authority and experts clearly found that a network fee payment by OTTs to telcos could create serious issues of Net Neutrality violation and this was also a reason for their rejection of the telco demand.
One is also saddened to note that it has been omitted to consider the case of Korea, the only place in the world where a sending party payment was tried out and found to be a great failure. South Korea’s action led to the following outcomes:
- Consumer prices went up dramatically,
- Content offering became less diverse,
- Internet became slower, while investments in network infrastructure declined,
- It forced many small and large providers of content and apps to exit the South Korean market and relocate their data centres abroad.
The author of the newsletter seems to also have a special view on the value of public policy arguments, summarily dismissing them on the grounds that they are “made from the standpoint of fairness, legality and other predictable public policy language… Boring. Boring. Boring.” This is an astonishing pronouncement. If one were to junk all principles of fairness, legality and public policy, what would be the basis for any semblance of regulation, law and order or justice?
The newsletter steadfastly presses ahead to boldly suggest that public policy conflicts directly with commercial interest. Obviously, in their view, customer interest—a primary goal of public policy, is opposed to business interests! A startling proposition, which administrations and private enterprises should take note of in their plans going forward.
All in all, some rather unique concepts from a bygone era have been floated for debate by the impugned article. Maybe it was not realised that the world has changed to new digital norms and would therefore the article probably laments like Judy Garland that “Toto, I’ve got a feeling we’re not in Kansas anymore”.
Disclaimer: Views expressed are personal and do not reflect the official position or policy of the Financial Express Online