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On Tuesday, Microsoft and Internet and Mobile Association of India (IAMAI) organized a roundtable to discuss regulations around VoIP services in India. The event was attended by officials from Department of Telecom, Cellular Operators Association of India (COAI), Microsoft and Vodafone among others, while officials from Bharti Airtel and Idea did not turn up. Here’s a lowdown of what went on at the roundtable:

History of ISPs and internet regulation in India

Deepak Maheshwari, Symantec’s director of government affairs in India and ASEAN, said that back in January 1998, internet service providers (ISPs) were allowed to provide a small bouquet of services including www and email. Any other service needed permission from the government. In November 1998, ISPs were allowed to offer anything they wanted except internet telephony, before allowing it in April 2002.

At the same time, telecom operators contended that some of their regulatory burden and license fees should be reduced since the government allowed internet services and VoIP was a possibility. Initially, incoming traffic was four times the outgoing traffic. TRAI did not allow people to make calls from an IP network to circuit switched networks within India but allowed for international calls, which Maheshwari describes as a “balancing act.”

In 2006, Unified Access (UASL) and Cellular Mobile Telephone Service (CMTS) license holders were permitted unrestricted internet services and allowed to people make calls from VoIP services to landlines or mobiles, a significant advantage over companies such as WhatsApp and Skype. And yet none of them has rolled it out. “India continues to be the only country in the world where Internet telephony is legally allowed but not legally available,” Maheshwari says.

VoIP was cheap (it still is) and that was its biggest advantage during its formative years, according to Maheshwari. But today it is of superior quality than traditional voice calling and has additional facilities such as of video calls, which voice calling doesn’t support. Today the conversation has moved from cost to quality, he said.

Don’t overburden VoIP services with regulations – Laura Carter of Microsoft

Laura Carter, Microsoft’s assistant general counsel, laid down the three broad categories of VoIP services and corresponding regulations in the world.

1. App to app calling or PC to PC calling: Unregulated in most of the world
2. VoIP to a phone number (also known as one-way VoIP): Light regulation in many countries (such as registration or sometimes a small fee)
3. VoIP to PSTN (also known as two-way VoIP): It is regulated in most of the world. Tends to be differently regulated from plain old telephone services (POTS). In many countries it is lightly regulated (registration or securing a license) since these countries have recognized that these are not network driven services, Carter says adding that they are untethered from the network.

In the US, VoIP to VoIP calling is outside the scope of the Federal Communications Commission’s ambit while one-way VoIP is totally unregulated as it doesn’t compete with traditional telephony services.

The country created a special category of VoIP called ‘interconnected VoIP’ in which a person gets all the benefits of the traditional phone service such as number portability and access to emergency services like 911. Policymakers in the US ensured “they were regulating the things that truly were similar,” says Carter. The restriction on making calls from VoIP to Indian phone numbers while allowing international calling is peculiar to India and it ignores the global nature of the internet, she added.

An official from Department of Telecom clarified that India can come up with laws within its geographical boundaries but has no control of the laws in other countries.

The other side: VoIP should be licensed

People representing the telecom operators and ISPs hammered the same point they have been making for a while: same service same rules. They have been trying to persuade stakeholders to work towards increasing bandwidth and improving network infrastructure. Only then people will be able to use services such as VoIP.

An official from Vodafone said that if the regulations are relaxed for VoIP services then it should be done for telecom operators too. He added that the cost of voice calling is so low in India that there is no demand for data calling. “We are not bothered,” he said.

Several high-ranking executives in the telecom sector have made the same point before. But that’s actually not true. Consider this:

According to Skype’s bandwidth consumption page, Skype lists 100kb per second as the recommended speed for voice calling. This means that per minute, each recommended quality call consumes 6 mb of data, which is 0.75 MB. At Airtel’s Data Realization per mb rate of Rs 0.26 per MB, this means that users spend Rs 0.195 per minute using VoIP. This 46% cheaper than Airtel’s Voice realization per minute of Rs 0.3622, but this reduction in cost is more than compensated by three factors: Consumers at both the ends of the call pay, they speak longer and video calling is an integral part of VoIP. (Read Medianama’s submission to TRAI on differential pricing)

If the telecom operators are “not bothered” about data calling then why argue for regulating them?

WhatsApp & Skype calling will become a habit

Rajesh Chharia, president of Internet Service Providers Association of India (ISPAI), says people will develop the habit of making free calls over Whatsapp, Skype and FaceTime not being mindful of the fact that people pay data charges — at both ends. This is different from traditional voice calling in which only the person making the call pays, a phenomenon known as Calling Party Pays. “Then what for we are expecting that any revenue will come from VoIP?” he remarked. Chharia went on to say that the costs for ISPs in license fees, service tax, income tax is simply too high, which would deter them from allowing VoIP services.

On Calling Party Pays, which was enforced around a decade ago, the Vodafone official acknowledged that it has been an “unqualified success” even though telecom operators were skeptical initially. He further argued that when TRAI calculates Interconnection Usage Charges (IUC), it removes data since data cannot be treated as calling party pays. “I use my network, she uses her network,” he said. For VoIP to PSTN, conversion (VoIP to TDM) needs to happen outside India and if VoIP services want to offer these services within India they are free to take a license, he added.

Vikram Tiwathia, deputy director general of COAI, shared Chharia’s views. He put forth some numbers:

1. India has 13% of the world’s subscribers but contributes only 2.73% to the revenues. The business is not as rosy at it looks and is heavily indebted. Any new service that eats up into the $2 ARPU is a challenge. If the business has to continue then the $2 pie has to grow.
2. 70% of the capital expenditure for a telecom operator is spectrum cost.
3. ARMB is falling. Realization per minute of a voice call 35-40 paisa — that money flows into upgrading networks. It is 6 paisa ARMB for data.

Tiwathia argued that VoIP was predominantly targeted at the urban users partly because they could buy handsets that support VoIP, leaving the rural populace out. “We will continue to be a heavy 2G market and in that the realization is 40 paisa per voice call. The 2G person is subsidizing the urban guy where the cost per MB is still too low,” he said.

Here it is important to remember that smartphones prices have been steadily falling and even finding their way into the Indian hinterlands. A DoT official present at the event remarked that the telecom industry has been flourishing over the years irrespective of the spectrum cost. “Whatever the spectrum cost has been, but for one, there have been buyers,” he said.

Tiwathia said if VoIP and other applications are so useful then “why is that only the telcos are asking for reduction in spectrum cost? Why aren’t Flipkarts of the world asking for it.”

Many believe the question of who owns the customer and who pays for the services will be a defining factor in shaping the telecom industry. Dilip Chenoy, former chairman and CEO of National Skill Development Corporation, believes Whatsapp and Viber like services own the customers at the moment — and that’s a challenge for telecom operators.