We’re reporting from the TRAI seminar on regulation of OTT services (rather, Internet services). Details of why this seminar is being held, here. For context, read this and this. Please pardon the typos (and some paraphrasing).

One97 MD Vijay Shekhar Sharma on regulation of Internet services, that telecom operators are pushing for:

“OTT is something that is selling something to the consumer, where telcos are playing a role as an accessing pipe, and providing charging relationships. Earlier, content and services needed them (telcos) for marketing and go-to-market. Now, work like defining the product roadmap, deciding the product lifecycle, is taken care of by the App player. I have examples of other platforms: PC, where Microsoft decides their rules. In web-based, everyone is open and free to place, and we have toll gatekeepers like Google. Incredible innovation has taken place online. Facebook has delivered as a social platform, and allowed services to be provided to consumers, but ever since Zuckerberg decided to take a closed approach (reduced reach of updates), social as a platform (for providing services) has evaporated. App store is the biggest platform today, and App store rules are decided by who owns the App store. Google and Apple (with the biggest app stores) decide.

The (Telecom) operator as a platform has happened in the world, and today is also an opportunity. The role that telcos play (in case of OTT) is about providing charging and access. Government now allows mobile wallets to pay for anything on the mobile phone. I remember when BPL mobile had a partnership with Cadbury’s, where a user could go buy a chocolate, and it was illegal because you weren’t buying anything. The RBI restricts the telecom license to anything that is telco consumable. A grey area is in deals, and you don’t consume a deal on a phone. You go in a store and consume it. Let’s forget about infringing on RBI. The RBI is the definer of what a telco wallet can do.

VAS and mobile content is separate: VAS is a feature phone and mobile content is the other content. The ecosystem: content, app and charging. the hidden part is access neutrality. There will be content creators, social sites, Facebook, YouTube, everyone wants neutrality. Please don’t treat one different from another. Netflix like services could come, and be restricted.

Apps: WhatsApp took away significant revenue. Calling is not as major anyway. Calling revenues will not as much of a cost as much as data will compensate. In the middle are the true OTT players. They might create an app, a service and a content player. Operators control access to the consumer, for which they charge the consumer. There is a lot of menace around it, when telecom operators and VAS players combine for unwanted subscription, but this is the most important pipe here.

Netflix, in prime time, accounted for 70% of internet traffic, not YouTube. I met CEO of Comcast and Netflix. when Comcast says, earlier the cable TV company laid infrastructure, and then did content deals. Netflix just rode that, without doing CAPEX, and made most of the money. This is the moment of truth, where the regulator play will come in. If you want to give a music service to the country, you would take a license and do it via FM. On smartphones, you just start it online and provide it for free.

Telecom carriers are utility, not a capitalist service. It’s like saying that electricity player will decide what refrigerator you will buy. A municipal water supplier does not decide what kind of Cola you drink. You are a pipe, and that’s what you need to focus on. The western players lost it by giving bottomless Internet. Indian telcos are far savvier. People bundle smartphone apps like WhatsApp etc, which come at a monthly rental. Data bundled with OTT apps is a business model of the world. We can discover some of these business cases. Just because you’re partnering with one app, you can’t throttle others.

Network access needs to be paid by the consumer, not by the business. Imagine if you had to pay a telco to receive your email. This is about a decision we have to take. The truth is that there is no logic. I fail to understand the logic of CAPEX. Make an application and let the consumer choose. It’s similar with charging. OTT players, as VAS players, were able to run away from liability. Regulators put a consent platform, and the ownership was explicitly identified as that of a telco. You own the consumer, and the balance and validity. It happened in a feature phone case. In a smartphone, you can’t do that. You won’t get a third party page. The counter logic would be, when there is click fraud and you’re charged, who will be responsible? someone who made money, someone who gave the pipe? Regulation is not the way, as far as the app players are considered. We can’t decide that Samsung can only make fridges and every restaurants will cook what we tell them to.

Telcos have an opportunity to offer identity and location as an API. Applications can be made incredibly good. Let’s remember that these are the business models that telcos have to juggle. If we did not regulate telcos, to give access App developers will land on app stores, and most of the money will be between two people negotiations: Apple and Google. Telcos have an opportunity to standardising revenue share. This is a regulation of telcos, not App players. A telco’s role becomes like that of an App Store: to prevent spam apps, no incorrect charging. Are they ready? I don’t think so. Apple, Google and Amazon are.

I have a what if scenario: What if RBI allowed for everything to be paid by telco wallet: bus, train, taxi, train, Food, etc.?