India's Department of Telecommunications yesterday allowed mobile users to purchase digital content, like apps and e-books, by making payments from their prepaid balance and post-paid bills, up to a value of Rs 20,000. This follows a recommendation from the Watal Committee report on digital payments, which explicitly said that direct carrier billing is not permitted under current regulations, but that the RBI, TRAI and the DoT should allow Direct Carrier Billing. The good news first: The most significant development in this announcement is that now prepaid users can purchase apps and services using their mobile balance. Remember that though direct carrier billing had been launched earlier last year (with a deal between Idea and Google), it had subsequently been limited, via a direction from the Department of Telecom (we were told by sources), only to postpaid consumers. Google subsequently also launched carrier billing for the Play Store with Airtel, with the same limitation. Over 95% of India's user base is prepaid: the first put money into their mobile account, and then use it for purchases. This development will allow apps creators to target more than just the 1%. The terrible news: The Department of Telecom has also said that "Such purchase of digital content shall not be treated as pass-through revenue for the purpose of computing Adjusted Gross Revenue (AGR) for license fee and spectrum usage charge." Now, this is myopic and creates a massive disincentive for carrier billing. One key reason why content creators did not want to integrate carrier…
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