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TRAI Recommends Application Services Licensing, Common Short Codes; Issues

Bureaucracy may just get a hold of VAS if this goes through: After an extensive consultation process, the Telecom Regulatory Authority of India has finalized two key recommendations on Value Added Services, now called Application Services, since the authority has recognized that these can be run independently of telecom operators: Firstly, bringing application service providers under a licensing regime, and secondly, the setting up a Short Code Council (SCC) for allocation of short codes independent of Telecom operators. Readers should bear in mind that these are recommendations and not the applicable policy yet. Download the recommendations here.

On the whole, as much as the move to set up a Short Code Council is a positive move, there is “Bureaucracy” written all over these recommendations, and it appears to be a move to control a struggling VAS ecosystem, and will inhibit the growth of an independent content and services ecosystem, because approvals will mean that the SCC could be used to control content; this should be seen in the context of the TRAI’s  SMS Spam regulations which initially inhibited SMS based social networking and publishing.

However, these recommendations will have to be approved by the Department of Telecom, these which could take from a month to infinity, given the history of TRAI recommendations:

Application Service License

– Definition of Application Services:
“Application services are enhanced services, in the nature of non-core services, which either add value to the basic tele services or can be provided as standalone application services through telecommunication network. The basic services are standard voice calls, voice/non-voice messages, fax transmission and data transmission.”
– Licensing Application Service Providers through Authorization: Application Service Providers will have to apply for licensing to provide their service. The benefits of bringing ASPs under licensing are mentioned only from the governments point of view: “will meet the requirement of simplicity as well as meeting the necessary requirements in terms of security and proper conduct of telegraph.”
– Application Service Provider Terms & Conditions: The licensee needs to provide information on introduction of upgradation or addition of services to the TRAI and licensor (DoT) 15 days before launch.

Our Take:

– Data Services Too? We hope that the authority means that Application Service Providers are those who directly use the telecom network services like IVR and SMS, because if they also mean data transmission, then just about everything on the mobile Internet and all applications will come under the Application Service Provider definition.
– In the recommendation paper, the TRAI mentions multiple instances of “Licensing under Authorization”, in some cases where it has asked for a non-refundable processing fee of Rs 15,000, and an annual fee of Rs 10,000, and another instance where there has been “No entry fee, licence fee, bank guarantee and roll out obligation.” The terms for the ASP License have not been specified.
– Mandatory? It is not clear whether the authority recommends that taking an ASP license is mandatory for those providing applications.
– Benefits? It’s also not clear what benefit an ASP will receive on becoming a licensee. There is a carrot: “Once the recommendations for bringing ASPs under licensing regime are accepted, the Authority will consider the issues related to Interconnection between TSPs and ASPs. The Authority may consider related to Revenue share, MIS reconciliation and open access for application services at an appropriate time.”
– Bureaucracy: As of now, this move does two things – it increases the influence and the role of the regulator in the ecosystem, and given that ASPs will require licensing, it creates an unnecessary barrier to entry. For example, the licensor (i.e. DoT) and TRAI needs to be intimated about any upgradations or any additional provisioning of value addition at least 15 days before the introduction of these services. This adds a bureaucratic hurdle to cross, and will inhibit experimentation.
– Slippery Slope: Once application service providers come under registration, it’s likely to be a slippery slope of regulation. The TRAI, as it understands more and more about the ecosystem, can push for amendments, and each change will impact the business environment. Take a look at the ISP licensing regime – which went from a situation where anyone could become an ISP to a license fee payment regime, from 100% to 74% FDI, and a forced consolidation allowing only larger players to remain.

MediaNama’s recommendations to the TRAI were for not licensing or registration of application services.

Short Code Registry

– A Short Code Council (SCC), to be set up by the TRAI, which will allocate short codes in accordance with the National Numbering Plan to both ASPs and telecom operators independently. Application service provider can launch the service only after online approval by the SCC. A new or modified service will require a revised approval.
– Short Code Council will also centrally manage the details of short codes allotted, type of service provided under short code, tariff for the service and hosting details for application services, which can be used by customers for discovering the services interactively.
– Application Selection: “Appropriate fee, one time and recurring charges, should be charged for allocation of common short code by Short code Council so that only the genuine and serious content provider/ application service provider/entity should seek the same”
– Three month deadline for ASPs: The service needs to be operational within three months of allocation of a short code, else it will be presumed that the common short code has not been made operational and non-utilization of short code for a period of more than three months will be subject to cancellation of short code and reallocation to other applicants.
– 15 day deadline for telcos: Telecom service providers should open the common short code within a fortnight after the code is approved by the Short Code Council and update this information online with Short Code Council.

Our Take

– Not quite what we wanted: This move to free up Short Codes has been long pending, and it is welcome, but we’re concerned that the additional bureaucratic process might inhibit the growth of an independent short code ecosystem. Our recommendations were for setting up a Short Code Registry on the lines of ICANN, and allow anyone to register and purchase network access and independently launch services. A subjective selection process means that instead of dealing with telecom operator VAS department subjectivity before launching a service, businesses may have to deal with regulatory subjectivity (and an increased lack of understanding of consumer trends).
– Short codes only? One also doesn’t know whether this will have an impact on long code messaging sevices as well, but at present, it doesn’t look like it will.
– On Deadlines: There’s a deadline of three months for provisioning, but no indication of what will happen if the telecom operator doesn’t allow provisioning of service, and no penalty for telecom operators specified, though there is one for ASPs. Can an ASP be held to ransom by a telecom operator because he runs the risk of losing his short code? The three month deadline is a good idea because it prevents squatting on short codes, but cancellation should also take into account the way this industry functions.

MediaNama’s recommendations to the TRAI 

a. Separation of ownership of identity of the Digital Service Provider/MVAS company from provisioning by Access Service Provider/Telecom Operator by creating a Common Short Code Registry, governed by a Common Short Code Registrar. At present, Digital Service Providers/MVAS companies do not own the short codes they operate.

b. Separate billing for services/content from access charges, to bring transparency and standardization in consumer billing, and independence for the Digital Service Provider/MVAS company from Access Service Provider/Telecom Operator. We would recommend the removal of the existing revenue share mechanism as a means to ensure ubiquitous pricing mechanisms across digital platforms.

c. Enforce provisioning of independent mechanism for verification of billing, in order to address MIS issues, and bring billing for content and services in line with Mobile and Online Banking guidelines from the Reserve Bank of India, as well as regulations governing payment service providers.

Download our recommendations for an open ecosystem here.

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