By SP Kochhar,
The Indian telecom industry has found itself at the centre of a heated debate on fair-share contributions from large traffic-generating (LTG) platforms to telecom service providers (TSPs). The industry has vehemently advocated a system where LTGs contribute equitably to the infrastructure costs incurred for the upkeep and advancement of networks.
Its stance centres on ensuring sustainability and progress of the network infrastructure to efficiently deliver the ever-increasing data traffic, chiefly due to the rise of LTGs and their business offerings. In the wake of rising misinformation in various fora, it is crucial to restate the key considerations to debunk the dubious arguments being put forth by some vested interests.
Unravelling double standard
One of the concerns raised is that fair-share charges might lead to double charging: one through mobile tariffs for internet access, and the other from LTGs. However, a closer examination of this argument reveals a double standard.
While LTGs vehemently oppose fair-share charges, they simultaneously generate substantial revenues from both users through subscription fees, and also via advertising income. This is in stark contrast with the dedication of TSPs to provide affordable digital connectivity, even in challenging financial conditions. It demonstrates how LTGs profit substantially while refusing to balance fair-share charges with their massive advertising gains, further dispelling the apprehensions they’ve raised about the impact of such charges on their revenues and profitability.
Burdening end consumers
It is also recommended that TSPs raise consumer tariffs to recover the network expenses and ensure the sector’s sustainability. This contradicts the LTGs’ purported commitment to provide affordable and accessible services to end users. But TSPs have promptly dismissed this proposal, emphasising their decision to refrain from increasing consumer tariffs for this purpose, which aligns with the national objective of promoting affordable digital connectivity for all. This willingness of the LTGs to shift the financial burden onto end consumers while safeguarding their own profits raises questions about their commitment to the welfare of citizens and our economy.
Unconvincing international precedents
LTGs have sought to support their claims by invoking international precedents, particularly citing the lack of decision on similar fair-share proposals by some European Union nations yet. However, recent global market developments provide a different picture. For instance, the recent settlement between Netflix and SK Broadband in South Korea signifies a potential trend for resolving disputes on network usage fees. Furthermore, the European Commission’s investigation has recognised the contribution of large global platforms to network traffic, paving the way for establishing a “fair contribution mechanism” for network usage.
Lowering Broadband Costs for Consumers Act
Another pivotal development is the introduction of the Lowering Broadband Costs for Consumers Act of 2023 in the US Senate. Sponsored by three senators, this bipartisan legislation clearly establishes the need for various “edge service providers” which generate disproportionately large traffic, i.e. LTGs, to contribute to infrastructure costs so as to make digital connectivity affordable for end users.
The Act proposes that large-edge providers that annually account for more than 3% of the total internet traffic in the US and earn over $5 billion in revenues be assessed to share the financial load of delivering affordable digital connectivity. The acknowledgement of this need by LTGs to contribute to network costs vindicates the position of the Indian telecom sector.
LTGs have also tried to mislead the public through various campaigns, claiming that a fair-share policy will harm small players. Such malicious campaigns persist despite TSPs’ repeated clarifications that they are seeking contributions exclusively from the big players — the multinational giants that rake in substantial profits channelled to their home countries. This exposes the false claims about LTGs’ substantial contribution to the Indian digital economy. On the other hand, the Indian telecom sector has established its support for the interests of small, indigenous players. The public may already be aware, though, that the LTGs are attempting to shift attention away from the real issue by using small players as a shield.
Telecom revenue dynamics and flawed revenue claims
LTGs claim that their presence on telecom networks increases customer retention, but this is questionable. Telecom networks existed and served users long before the advent of over-the-top (OTT) platforms, and a large portion of internet users do not use OTT apps.
Moreover, the sheer number of telecom users in India creates a sizeable market for OTT platforms, granting them a distinct advantage without corresponding investments in telecom networks. This situation implies increased capital and operational expenses, exacerbating the challenges faced by telecom providers.
LTGs have also made flawed revenue claims, citing data revenue growth. However, their simplistic before-and-after comparison overlooks crucial factors, including mounting capital and operational expenses which outweigh the revenues, inflation, and other variables. A substantial portion of TSP revenues is also being eroded due to the cannibalisation by OTT communication services.
With the fast-evolving trend of digital convergence across sectors, the need for a fair-share mechanism that ensures equitable contributions by entities benefitting from the burgeoning app economy is imperative. Without such a government directive, a big portion of the economic gains from data usage may continue to be channelled offshore, depriving the Indian economy of its deserved share.
The author is Director-general at Cellular Operators Association of India.
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