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TRAI Chairman: Telco’s & Internet co’s need to find models of working together without destroying value

We’re at the TRAI seminar on the regulatory environment around OTT’s, essentially, regulation of Internet services on Mobile. We’ll try and update live from the event. For context, read this and this. Please pardon the typos.

TRAI Chairman Rahul Khullar:

Over the last 6-8 months, a number of CEOs from the telecom sectors have come and spoken to me about the impending problem of OTT. Very recently, in the context of spectrum sharing, they said that this is something which has become a very serious problem. We said we don’t know much about it, but rather than go into a pre-consultation, a sensible way is to organize a seminar, to talk about the issues, and what are the problems. That’s why the seminar has been organized.

1. What has happened in the rest of the world.
2. What has happened in India.
3. What have been the experiences with OTT.
4. What do we do?

Robert Ravi (of the TRAI) indicated, that the OTT applications hurt Telcos the world over. Voice and messages is obvious for telcos, and video is another stream that is hurting them. The question that is, what did the rest of the world do? the rest of the world looked on. Tech is good for consumers, tough luck. If telcos aren’t able to recover investments. On the other side, the telcos made the arguments that are we just pipe providers? I don’t know the answer.

The second thing is to understand what has happened in India and why much of the OTT threat is exaggerated in the indian context: we don’t have the bandwidth for the speeds, and for as long as spectrum shortages continue, where will we get the ability to provide the sort of services. Like it or not, the penetration of smart phones is small in India. What is our broadband coverage? where are we in terms of broadband? What is happening in the developing world and what is happening here is miles apart. Even with 900 sims, from a policy perspective: look, why is half of India’s population still not connected? With roughly 450 million people, for 900 sims.

This is something I told a number of CEO’s of telecom operators. We are 5-7 years, maybe 10 years behind the rest of the world. The kind of decimation of revenues that you’ve seen in the US and Europe, you’re unlikely to see it here. Our situtation is different.

What has been the world’s experience with this? One is just blocking OTT’s. That’s not particularly useful, and in many jurisdictions, the regulator has had to intervene to prevent blocking. Which means you get into arrangements with OTT. Then the other alternative is that you protect your own revenue stream by producing your own rival service.

A third is, can you, the telecom provider, provide something that the OTT provider doesn’t do? can you guarantee a quality of service to a telco.

What has hurt most of the Indian telcos, is not Skype or Viber, but WhatsApp. That’s why you guys have started screaming today. Since international long distance revenues are so small in India, I’m not going to get carried away by that. As you work today, I think you need to look at what are the different types of models of OTT services. If only you understand how they do business, and how you can blend in. I’m trying to think back to where it can go.

When VAS providers came in, the telcos were top dogs. The same VAS provider walked out and became over-the-top. You need to start thinking more constructively as partners. There is competition, but there is co-existence.

The next thing is what kind of regulatory practices we need to follow. For those of you attended Dubai (Ed:some event) in December 2012, there was no consensus. It is something that you need to think of. In China, they charge for content. In other places, they charge a termination charge. All of you collectively need to think of the practice in different jurisdiction, and what is the least disruptive to the advancement in technology. It is very easy to create a regulation that helps telcos and destroys OTT, and destroys value.

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