TRAI Fails To Deliver On Mobile VAS Promise: Drops Key Provisions

It is our considered opinion that the Telecom Regulatory Authority of India has failed to deliver on some of the key provisions that had been a part of its draft guidelines, and by dropping some clauses, they have created loopholes that we think will allow the status quo between Telecom Operators and Value Added Service Providers to be maintained. There are, however, a few positive steps like the instituion of transparency, but a key issue of dispute resolution in the Mobile VAS space remains untouched, and is further hampered by the plan to not go ahead with the creation of an ‘Other Service Provider Category”. Do remember that these are just recommendations from the TRAI, and India’s Department of Telecom will make its own decision.

The key changes have been made to the Common Short Codes Plan (Issue 8, Pg 41) and Other Service Provider registration (Issue 4, Pg 29).

Common Short Code Plan Rendered Lame

Based on a recommendation from the Internet and Mobile Association of India (IAMAI), the TRAI has recommended that Common Short codes be made operational within six months of allocation, instead of one year. However, the following clause from the draft guidelines has been altogether dropped:

All the telecom access service providers shall have to integrate with tele and bearer service (Voice/SMS/ GPRS/WAP) to their network, the common short codes allotted by DoT. All the telecom service providers shall be mandated to open the common short codes allocated by DoT. The common short code allocated by DoT shall be opened and integrated with the IP address given by the Value Added Service Provider free of charge within 10 days of the receipt of written communication along with DoT allocation of common short code received from the Value Added Service Provider. The opening of common short codes shall be supported at different price points transparently including toll-free model (incoming calls/ messages to toll-free common short codes / short codes shall be charged to the subscriber of the short code). (Draft Recommendations, Pg 41)

This has been replaced with: The opening of common short code shall be subject to mutual commercial agreement between telecom operators and value added service provider in all cases. The common short code allocated by DoT shall generally be opened and integrated with the IP address given by the Value Added Service Provider within 3 months of the receipt of written communication along with DoT allocation of common short code received from the Value Added Service Provider. The orders/ directions/ regulations of DoT or TRAI, from time to time, as the case may be, shall be applicable in this regard. (Final Recommendations, Pg 51)

What this means
This completely changes the context of another clause that suggests that common short code that has been issued be made operational within six months of allocation and DoT shall be intimated about the date of operationalisation, else the short code may be cancelled or re-allocated (in order to prevent hoarding). We believe that this will give telecom operators an inordinate amount of power in negotiations – if a commercial arrangement between telecom operators and VAS company is not worked out within 6 months, the company risks losing the common short code. While we don’t begrude telecom operators their negotiating power and position, these changes effectively destroy the independence of the Common Short Code regime.

Some Positives: Transparency in Carriage Charges, Network Neutrality On Mobile Devices

Telecom operators cannot block access to mobile portals to their consumers who have subscribed GPRS or WAP service (web-enabled services) i.e. there will be no selective blocking of mobile portals or short codes.. They will have to maintain transparency in billing for the purposes of settlement of revenue share with the value added service providers/ content providers i.e. sharing of usage details, download etc., including user base, in their management information system (MIS) in respect of value added services. Telecom Operators will also need to publish the charges for value added services, as well as access charges if the access charges are different from charges under the tariff plan, and are not included in the charges of value added services.

Other Service Provider Plan Dropped

The regulator has also dropped its initial plan to create a separate telcom segment called Other Service Providers (OSP). This follows comments from operator lobby groups COAI and AUSPI stating that all VAS services are essentially On-Deck because the VAS provider has to use the pipe to reach the subscribers of the operator. “The classification of VAS into On-deck and Off-deck is not justified”. Reliance Communications suggested that replacing the VAS content regime with content VAS being billed by the VASP will reduce overall operator revenues, and a resultant decline in the license fee payouts to the Government. On-Deck VAS company One97 Communications has highlighted complications in the billing regime, given that most consumers are prepaid customers, suggesting that with VAS companies should be treated like MVNOs, since with evolution, the line between the two will blur. They’ve also suggested that there is no clear liability for poor services or wrong charging in case of customer complaints.

Our Take
We disagree with COAI and AUSPIs contention that all VAS services are On-Deck – what about the Mobile Internet? That’s akin to each ISPs claiming that the entire Internet resides on their platform. The consumers use the pipe to access services, and this way we are limiting consumer options. We also disagree with One97’s contention – just because liability is not clear does not mean that it can’t be defined. We believe that an OSP regime would have been a shot in the arm for mobile payments in India, since OSPs would need operator independent payment mechanisms, including cash cards.

Dispute Resolution

There is no clarity on the issue of dispute resolution – a registration of an Other Service Provider legitimizes it as a VAS entity, and ensures that the other recommendations from the TRAI are applicable to the entity. The ambiguity over dispute resolution still exists, so if a telecom operator blocks a mobile portal or a short code – who does a VAS company appeal to? If a telecom operator decides not to connect to a common short code during the 6 month window we mentioned earlier – what can an applicant do?

While the intentions were right with the draft recommendations, the TRAI has disappointed with its final submission. This is our take on the recommendations – if you agree, disagree or have a different perspective, please do share it.

Downloads
— TRAI’s Final Recommendations on MVAS
— TRAI’s Draft Recommendations on MVAS

6 Comments

Ankur July 1, 2010

Nikhil,
Have you heard anything new emerging from TRAI on VAS such as new license charges post the recent changes in policy w.r.t. old 2G licenses.

Nikhil Pahwa August 20, 2009

Raj: these are still recommendations, and that's where it stands. they have not been put into action, and with a new TRAI Chief, it's possible that there will be a new process

Raj August 19, 2009

Hi there, does anyone know, if these final recommendations are put into action at all......Or is this only talk, yet to take shape.....
I want to be a VAS....unable to go around operators....thus unable to launch a service on SMS short code....

Happyman February 16, 2009

Very disappointing indeed. Unfortunately till the people who really matter in Operator businesses - and by that I mean the absolute top men - don't wake up to VAS, the mindset of the babus below ain't changing.

MoByte February 16, 2009

Lets agree that first and foremost, any VAS company in todays environment that is clocking anything less that 36 crores a year (India revenues, net share) is a very small start up which could die tomorrow (it has less than 2% share of the VAS market). This effectively rules out pretty much every big name in this space except 4-5.

Set these companies against the AUSPI and the COAI member revenues and you will see where the scales tilt.

The AUSPI & the COAI have opposed every move of the TRAI. If they had it their way, we would still be paying 8.00 for incoming, 16.00 for outgoing and no more than 2 players in each circle.

The TRAI has messed up an opportunity to create a new paradigm. The operators have seen huge drops in subscriber net adds and this will continue to happen (despite the numbers they are publishing). Will be interesting to see what happens next.

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