Facebook WhatsApp deal

Around a month ago, Rajan Mathews, the Director of the telecom industry lobbying association COAI, sent a letter to Rahul Khullar, the Chairman of the Indian telecom regulator TRAI, in which Mathews made the following key points about WhatsApp’s proposed voice service:

1. OTT (Internet) services (including WhatsApp) which offer Voice violate and circumvent Indian telecom licensing provisions
2.  WhatsApp violates Indian laws in respect of routing and switching and has become a virtual network provider without a license, bypassing number allocation, security norms and routing norms since it uses MSISDNs for switching.
3. Without a licensing regime of VoIP, there will be a disruption in the existing business of telecom operators, and be a loss to the exchequer (through telecom operators).

This was sent in the same month that Airtel* violated net neutrality, and forced the TRAI to announce a consultation. The COAI has previously sent a paper explaining telecom operators issues with Internet services, which they feel are “free riding” on their networks, and the TRAI had also held an event where issues between Internet services and telecom operators were debated. We’ve got extensive reports from that event here.

MediaNama received a copy of the COAI letter from a representative of a telecom operator member of the COAI, and sent the following questions to Mathews and the COAIs PR agency two weeks ago, who haven’t responded to our mail:

1. Could you clarify the basis of your claim that WhatsApp is a Virtual Network Provider? It hasn’t licensed  bandwidth or spectrum from any telecom operator, and consumers are accessing its service over internet protocol.
2. How are services like WhatsApp, Hike, Viber or Skype competing with Telecom operators, when consumers are paying telecom operators for data packs used to access these Internet based services?
3. How is the government deprived of revenues when they are getting a share of the revenues earned from Internet access services?

It’s worth noting that Facebook, which completed the acquisition of WhatsApp for $22 billion last year, is actually a member of the COAI. When they had joined the COAI last year, MediaNama had asked Ankhi Das, ‎Director & Head of Public Policy, Facebook India, about COAI’s anti net neutrality lobbying, for a revenue share arrangement between telecom operators and Internet companies:

MediaNama: What is your take on the telecom industry CEO’s going to TRAI, and COAI including a revenue sharing arrangement between telecom operators and OTT as a part of their agenda for the government? Should the government get involved in this? It happened in Broadcast where the TRAI formalized carriage feeds between distributors and broadcasters. Do you want government intervention?

Ankhi Das: That is not something that we support. We are signatories to various industry papers, and we’ve had a public position on this consistently. I think the Internet ought to be free. That position will never change. That position is never going to change. It is free, it ought to be free. I doubt how much receptivity is there to these ideas. These are just bad ideas.

Remember that Facebook is also looking to launch Internet.org, which violates also net neutrality (see the principles outlined below), and this interview took place before that. Given COAI’s letter to the TRAI, we checked with Facebook on whether, as a COAI member, they knew about this letter, endorsed it, and to understand whether their views on Net Neutrality have changed. Our questions for Facebook:

1. As a member of the COAI, does Facebook endorse COAI’s stand on Whatsapp and the proposed Whatsapp (Voice) service?
2. Was Facebook, as a member of the COAI, consulted about this letter before it was sent (to the TRAI)?
3. What is Facebook’s take on each of the three points mentioned above?

A Facebook representative told MediNama that the company won’t be commenting on these questions. Remember that Facebook and Whatsapp both have strong relationships with telecom operators. For example, Uninor offers (or used to offer) these plans:

Uninor_whatsapp_facebook

An email sent to Neeraj Arora, Head of Business for WhatsApp, also hasn’t been responded to. We sent him the following questions, again with reference to the three points listed earlier:

1. With reference to the first point raised above, please explain how WhatsApp doesn’t violate Indian regulations?
2. With reference to the second point raised, please explain how WhatsApp doesn’t violate Indian laws in respect of switching and routing WhatsApp, and operating as a Virtual Network Operator without a license.
3. Was Facebook, as a member of the COAI, in touch with WhatsApp regarding the letter?

Whatsapp hasn’t responded to the email. In March, at the Mobile World Congress, a day after WhatsApp Voice was announced, MediaNama had asked Arora about how WhatsApp Voice might impact its relationships with telecom operators:

MediaNama: How does this (relationship with telecom operators) change with voice, because it’s one thing to drive data…?
Arora: That is a better question. I would say, if you go back two and half years, when we started doing carrier deals, and this question was asked in every meeting: You want to work with us, we want to work with you, but it cannibalizes SMS. And now I don’t even get that question anymore. I’m predicting that the same thing will happen with voice. We’ll launch voice, and hopefully users will like it…I hope they like it. And, if they end up using our voice product, it drives data, and it will be the same curve again. First carriers will say…
MediaNama: But it’s a completely different thing when you’re impacting around 8% of revenue (SMS) versus when you’re impacting 60-70-80% of revenues (Voice), right? The danger they feel is greater.
Arora: To be very frank, I’ve not talked to carriers after this announcement. I will see how they feel. Jan on stage said yesterday that the future is about data, and there were two more carriers on stage on the same keynote with him, and they also said it’s about data. (If) it’s all about bits and bytes and not about messages and calls, then we’re aligned. This phase from when VoIP is not commonly used to a phase when hopefully everything flows through the data pipe…I’m sure there are lots of smart carriers who are thinking of that transition and planning for it, and pricing correctly. Why does India have such a low data penetration? It should be like 10x of what it is today, and I think we can help that. Google, Facebook, Twitter, these companies provide services that can speed up data penetration, and if we can work with carriers to do it, why not?

Well update in case any of them respond. In the meantime, the questions remain.

Our three Net Neutrality principles:

Rule 1: All sites must be equally accessible: ISPs and telecom operators shouldn’t block certain sites or apps just because they don’t pay them. No gateways should be created, in order to give preferential discovery to one site over another.

Rule 2: All sites must be accessible at the same speed (at an ISP/telco level): This means no speeding up of certain sites because of business deals. More importantly, it means no slowing down (throttling) of some sites.

Rule 3: The cost of access must be the same for all sites (per Kb/Mb or as per data plan): This means no “Zero Rating”. In countries like India, Net Neutrality is more about cost of access than speed of access: all lanes are slow.

Disclosure: Airtel is an advertiser with MediaNama

(Updates: added disclosure, which we had forgotten to include earlier)