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No evidence of VoIP cannibalization of Voice – Airtel India CEO Gopal Vittal


“There is still no evidence that suggests that there is cannibalization,” Gopal Vittal, Joint MD and CEO (India & South Asia), for Bharti Airtel said on the companys earnings conference call, when asked about whether data (Mobile Internet) is cannibalizing their voice business. Vittal pointed towards cannibalization on SMS (by messaging apps), but mentioned that the contribution of Internet Telephony (VOIP) “at this point in time is very, very tiny. And so it is not really material as we look at it.”

Expects TRAI to address a potential future problem

However, the company expects regulatory support to address a potential future problem: “There is an arbitrage between voice pricing and data pricing and clearly as an operator we are expected to roll out networks and incur a lot of CapEx on it, we believe there must be some kind of a framework by which we are not disadvantaged in terms of our core source of revenues and that is the context in which the consultation will hopefully take place,” he said, referring to the impending TRAI consultation on determining a revenue sharing relationship between telecom operators and Internet companies, which, in our opinion, would legitimize violation of net neutrality.

There were conciliatory words from Vittal on working with the Internet ecosystem, acknowledging that Airtel would not have a data business without the Internet ecosystem, and that “we have several partnerships of all kinds on content applications and are opening up APIs and exclusive device alliances and so on and so forth. And whether it is a small internet company or a large internet company, the larger ones we actually are pretty much collaborated with everybody.”

Airtel, it appears, it merely looking at this consultation from a VOIP (Internet Telephony) perspective. Vittal pointed out that the TRAI has indicated that the consultation will have to do with “security concerns, issues of lawful intercept and a whole host of other regulatory issues. So beyond that I think we expect the balanced outcome as that process unfolds.”

CapEx requirement for data is “not material”

At the same time, Vittal also mentioned on the concall, responding to a question, on whether new towers are required to accommodate data growth that CapEx requirement “is not material. There could be some requirement in a few places and a few cities but it is still a little early to say so we will assess that as we go forward.” He added that in some cities where there is congestion, the company will assess the need for standalone sites, but “frankly it is not significant at this stage so we will wait and watch.”

Offloading data traffic to 4G

Airtel says that it is experimenting with offloading data traffic to 4G, and voice traffic to 2G.

MediaNama’s Take

1. Not just about VoIP: This consultation doesn’t look like it will be merely from a VoIP perspective, and while Airtel is only flagging VoIP, the phrase ‘OTT’ encompasses much more. To cite a COAI paper on OTT regulation, OTT includes VoIP, Instant Messaging (IM), Applications (Apps), Cloud Services, Internet Television, IPTV, M2M – Machine to Machine (M2M) communications, Social Networking. So, all digital services are under threat of being carved out as separate packs. The COAI is a lobbying association of which Airtel is a core member. Google and Facebook as associate members, with their own net neutrality violating projects – read this and this.

Also the OTT regulation isn’t just about VoIP, just as an Internet Filter isn’t just about porn.

2. CapEx requirements for data is not material: it’s interesting that Airtel says this, because it means that the investment in CapEx is already done. It’s been the same model with voice: invest in infrastructure, and monetize it over many years. The biggest problem, it would then appear, is spectrum cost. The more the Indian government makes from spectrum, the more telecom operators will be forced to charge customers. We wonder if Airtel will give up on its fight against net neutrality fight if it wasn’t expecting high spectrum costs.

3. Another way of looking at the Net Neutrality issue: One of Airtel’s services – Mobile Internet access – currently poses a danger for another Airtel service – Voice access. It wants to grow one without cannibalizing the other, and against consumer interest, it trying to restrict Mobile Internet (and the services consumers use on it). Alternatively, it is trying to convert a one sided market where the consumer pays (in telephony, it is the calling party pays system), into a two sided market, and charge Internet companies and consumers both.

Three rules of Net Neutrality

  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.
  2. All sites must be accessible at the same speed (at an ISP level): This means no speeding up of certain sites because of business deals. More importantly, it means no slowing down some sites.
  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, because, well, we don’t have fast and slow lanes: all lanes are slow.

All of our Net Neutrality coverage here.

Disclosure: Airtel is an advertiser with MediaNama

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