TRAI has rightly determined that there is no need to regulate OTT players at this time—and in doing so, is one of the first in the world to champion this approach
Vaghela's appointment as TRAI chairman was announced earlier this week.
“Don’t take a piecemeal approach. Address the big picture!” This is the conventional path we are taught to take when tackling complex issues with multiple stakeholders and differing viewpoints. But, the telecom regulator, Trai, recently turned that philosophy on its head—to roaring success. Trai’s recently released recommendations on regulating over-the-top (OTT) players is a powerful case study in how, sometimes, breaking away from a traditional approach helps achieve greater insight and clarity. Trai rightly determined that there is no need to regulate OTT players at this time—and, in doing so, is one of the first in the world to champion this approach.
The fiery debates between telecom operators (TSPs), OTT players, and consumer-rights activists surrounding OTT regulations started over five years ago. Discussions stemmed from the topic of net neutrality—the concept that all websites and apps must be made available to all internet users at the same speed and cost without interference by TSPs.
The issue soon spilt over into economic disputes over data tariffs for the free local and international calls conducted via OTT services like WhatsApp. Another related and heavily-discussed topic was ‘internet telephony’. Several TSPs pushed to be able to allow consumers the ability to place calls over public internet networks to compete with OTT players. Equally important were the conversations around privacy and security of data transmitted over OTT networks, and whether the OTT industry needed to be regulated.
Trai, contrary to expectations, tackled each of these individual (but related) issues separately and issued specific recommendations for each of them. And in 2018, after addressing the other concerns, it released the consultation paper on the need for OTT regulations. After receiving over 89 comments from a wide range of stakeholders, the regulator reviewed key arguments from various angles before arriving at the final recommendations.
Deliberations for regulations on OTT primarily centre around ‘substitutability’. Are the services offered by OTT players direct replacements for TSPs? While a few stakeholders feel this is true, the functionality between the two paints a different picture. Trai notes that “TSPs have exclusive rights like spectrum, interconnect with PSTN, network infrastructure, and obtain numbering resources”. OTT players, on the other hand, do not have these privileges and rely on TSPs to reach their end-users.
Trai accurately established that in a young and competitive market as the case is now, regulatory haste may lead to economic waste. Currently, both OTT and telecom players benefit from the symbiotic relationship between the two types of services. As the OTT market expands, they utilise more network, spectrum, and infrastructure, and grow telecom traffic.
And the OTT market is flourishing, driven by smartphone app downloads and video streaming. India’s data consumption, already the highest globally, is expected to double by 2025 (Ericsson June 2020 Mobility Report). Indians have proven to have a voracious appetite for OTT services; more so while being sequestered at home under Covid-19 restrictions. There was a whopping 67% growth in streaming services in April 2020 versus the previous year (BARC-Nielsen report). The Indian video-on-demand market is estimated to grow to $5 billion by 2023.
Indians also led the way in the number of app downloads. Consider Aarogya Setu, the world’s most downloaded app with 127 million downloads as of July (Sensor Tower), or the 30 million downloads in just three months boasted by Chingari, the Indian app filling the TikTok void in India. Within two months of launch, Reliance’s e-commerce app JioMart saw 7 million downloads.
India recorded the highest number of online gaming app downloads in the world in Q2-2020 (Sensor Tower). Homegrown apps are also getting traction on a global scale. The OYO hospitality chain app crossed 50 million downloads overall—at home and abroad. Zomato, the popular food-delivery app, now covers the UK, Ireland, Canada, and many other countries.
Meanwhile, the department of telecommunications (DoT) and Trai are actively involved in global discussions surrounding a ‘collaborative framework for OTTs’ through the International Telecommunication Union (ITU). Other countries are in various nascent stages of considerations around OTT regulations. Trai has wisely decided to wait until the complexities and market forces at play are studied and deliberated on at a global scale before finalising a regulatory framework around this issue.
The recommendations also reflect on discussions surrounding the privacy and security of data transmitted through OTT players. For example, some stakeholders feel that OTT data should be made accessible and easily interpretable when required for legal purposes. However, Trai identified a key issue here: A mandate for data accessibility overrides encryption and other protections to protect the main stakeholder—the individuals or communities who own the data.
Forcibly requiring clear text for communication over OTT will expose the data owner to a higher risk of interception from unsavoury elements. While the issue of data privacy and security is significant, the case as it pertains to communication over OTT is not clear cut. It spans international jurisdictions and begs for more research before introducing regulations.
And though unrelated, the timing of Trai’s recommendations couldn’t have been better for Indian innovation to thrive. The announcement arrives close on the heels of Covid-19 social distancing norms, the banning of 59 Chinese apps, and the PM’s ‘Digital India Atmanirbhar Bharat Innovation Challenge’ clarion call for Indian tech. The OTT market is young and ripe with competition in an industry with little barriers to entry. With very little capital and technical know-how, anyone can build an app and compete in this digital world.
68% of Indian small and medium businesses (SMBs) expect to rely on digital transformation to bounce back and keep up with post-Covid-19 consumer demand (Cisco India SMB Digital Maturity Study 2020). This digitalisation is expected to add $158 to $216 billion to India’s GDP by 2024, according to the report. In such a market, more regulatory shackles will greatly hinder and slow down SMB growth.
By 2025, India is expected to add 410 million new smartphone users (Ericsson June 2020 Mobility Report). This boom ushers in an immense opportunity for telcos to invest in the infrastructure required to elevate the quality of their broadband network and grow internet penetration. This move will help Indian telcos and OTTs rise and satisfy our nation’s—and even the world’s—ever-growing thirst for more apps, videos and games.
Perhaps, Trai’s unique ‘piecemeal’ approach illuminates for us the way forward in becoming atmanirbhar. To rebuild the nation in the aftermath of Covid-19 and amid border disputes with China, all sections of our society—public policymakers, regulators, and private players alike—must come together piece-by-piece to weave an economy-boosting tapestry of progress through technological advances and innovation.
With research inputs by Chandana Bala
President of Broadband India Forum and Founder & CEO of Advisory@TVR. Views are personal