Carrot and stick.

One assessment of regulatory maneuvers related to India’s Internet Control rules by a panelist* at a discussion I was a part of a few months really stood out – he felt that the Department of Telecom held out a carrot for ISPs and other online “Intermediaries” by offering them potential freedom from liablity from libel and slander (i.e. a safe harbor), and at the same time, forced draconian provisions into the rules. They eventually had to accept most of the provisions given to them.

Now look at the recent regulatory changes in the mobile value added services domain together – there have been three key moves from the Telecom Regulatory Authority of India in the last three months, though they have been in the works for a while. First, the stick:

1. The Subscription Business: On July 4th, the TRAI enforced a double confirmation regime for subscription based, mandating that subscribers need to send an SMS (or fax or email) to confirm a subscription to a service, and there can be no auto renewals – every monthly renewal needs to be validated via an SMS confirmation. No doubt that this has been enforced due to years of unverified-but-billed (or scam) subscriptions, where either customers were billed without subscribing to services, or cancellation requests were not executed by telecom operators. The TRAI had fired a warning shot last year, but the scam continued. This is likely to impact the Caller Ringback Tones business the most, and it accounts for a majority of the VAS revenues for telecom operators. The problem with these guidelines is that these are often impulse purchases (press * to copy), and via voice calls (wider reach, beyond a literate population), and operate on auto renewals. A confirmation via SMS just kills it.

2. The Push Business Gets Hit: The long-awaited SMS Spam guidelines are expected to be in force by September 27th 2011, and will impact promotion of services via SMS, as well as come down hard on the SMS based mobile advertising business. This not only impacts the bulk SMS industry (largely responsible for spam), but also automatically puts subscribers into the do-not-disturb NCPR, requiring a user mandated subscription to one of seven categories to enable push SMS.

Now what’s the carrot? The TRAI then issued a consultation paper, offering licensing of Mobile VAS, but at the same time, holding the carrot that it could a offer the industry three positives:
– a common short code registry, for making voice and SMS based VAS independent of telecom operator renewals
– address issues related to MIS and reconciliation of sales between telecom operators and MVAS companies
– address issues related to revenue share between telecom operators and Mobile VAS companies

I doubt that there are many MVAS companies that will publicly talk about need for a common short code, MIS issues or revenue share, but if it comes their way, they will gladly accept it.

There is no telling what exactly the TRAI will deliver on in its recommendations, or whether the Department of Telecom will accept its recommendations, but given situation that has been created by regulatory changes, some might just accept licensing. Something is better than nothing.

Of course, there is no telling that these policy changes are linked in any way, and this is merely circumstantial and there is no such intent. So, questions we’ll leave for you to answer: Is it circumstantial – is the Mobile VAS Industry being maneuvered into licensing by these regulatory changes? What do you think?

Note: the panelist had put a condition that his views can be shared in the press, but he must not be attributed for the comments