In its new consultation paper on Net Neutrality, the Indian telecom regulator TRAI, appears to exceed its remit, while looking into licensing of certain Internet services that it says “can be regarded the same or similar to the services provided by [Telecom Operators].

There’s one particularly odd thing that stands out: the paper itself is titled “Consultation Paper on Regulatory Framework for Over-The-Top (OTT) communication Services”, but the paper “services as can be regarded the same or similar to the services provided by [Telecom Operators]” has a much wider scope, because telecom operators also provide content, music and radio, news among other things. Effectively, this is about Internet Regulation.

Comments on the consultation paper

1. The TRAI doesn’t have the jurisdiction to become an Internet regulator: The TRAI has been trying to expand its jurisdiction to cover the Internet, which is not its remit. It held a consultation on privacy, and then backtracked to say that it only governs privacy in the telecom sector. In its recommendation, it said that until the government passes the data protection law, “the existing Rules/ License conditions applicable to TSPs for protection of users’ privacy be made applicable to all the entities in the digital ecosystem.”

It then issued a regulation that in effect held that if Apple doesn’t allow the TRAI SMS spam app on its App Store, then it has the authority to as telecom operators to block those devices from their network.

The TRAI Act (act, amendment) talks about license conditions for a service provider, interconnection issues of telecom services, spectrum management, quality of service etc. None of this concerns services provided by anyone on the Internet. The TRAI Act doesn’t allow TRAI to regulate the Internet.

(Related reading: Concerns about TRAI Consultation paper on Data Protection)

2. Internet regulation should not be slipped in through the backdoor of telecom regulation: Internet regulation is not a telecom issue. It is not the mandate of the TRAI or the Ministry of Telecom, but a remit of the Ministry of Electronics and Information Technology (MEITY). While there are governments calling for Internet regulation – French President Macron did that at the Internet Governance Forum yesterday – this is still something for the Union Government to consider, and for MEITY to implement.

3. The Internet is already highly regulated: One statement I noticed being repeated on multiple TV channels yesterday was that messaging, voice calling and video content applications need to be regulated because they are currently unregulated. An editorial in The Hindu points towards other countries subjecting apps to licensing or regulatory considerations, and says that India must follow suit.

The idea that online services are unregulated is false. All of this ignores the fact that the Internet is already highly regulated: the Information Technology Act (IT Act) covers aspects of liability of online services, their responsibilities and obligations, and has severe penalties included. So why is there a need for adding additional regulations?

4. License Raj for the Internet: Licensing is a means of exclusion and exclusivity, not inclusion. Millions of applications which involve messaging will get impacted, as will everything that has video. If they don’t have a license, they will not be allowed to operate.

Instead, access needs to be un-bundled from services: telecom operators should have a license to provide Internet access, not specific services. They should be freed from the regulation of calling and messaging, and given the shift to Internet Protocol, Internet Access should be the only service they provide. Voice, text, interactivity etc are all a part of Internet services.

However, it seems that while TRAI agrees that access should be unbundled from services, it still wants to regulate online services. In its VoIP ruling, it said “So, the Authority is of the view that as per the present licensing framework, Internet Telephony service can be provided independent of the Internet access Service. In other words, the Internet Telephony service is un-tethered from the underlying access network”… “The separation of network and service layers of telecom service offerings is the natural progression of the technological changes in this domain.”… “It is now possible to separate provision of service contents, configuration and modification of service attributes regardless of the network catering to such service.”

5. Licensing will destroy consumer experiences of new types of services: Everything on the Internet is a remix: services combine audio, video, text and interactivity to provide new consumer experiences. If a part of this – messaging, voice and video – is licensed, services will break down. Most ecommerce businesses incorporate a messaging platform for customer care. There are games that incorporate both messaging and VoIP. There’s a Manchester United forum called RedCafe.net that as a Personal Messaging feature which allows users to message each other. Messaging is also a key feature of all online social media activity. Many games integrate Internet calling as an integral part of their social engagement experience, so that gamers can talk to each other while playing, coordinate, collaborate and compete. Twitter Direct Messages and Facebook messages are a form of messaging, which are a part of the platforms. Carving out any of these segments will destroy consumer experience and hence public good.

What had Reliance Jio asked for in 2015?

It wanted regulation, and said that “…it would be a fallacious assumption that low internet penetrations and speeds warrant that the OTT services should be kept out of the regulatory framework just to facilitate their growth.”

  • A regulatory framework to address security concerns, with communication services like WhatsApp and Viber, to bring them on par with telecom operators.
  • A nominal entry fee and a minimal license fee for OTT services
  • Hosting services from within India
  • Setting up Lawful Interception and Monitoring (LIM) systems
  • Verification and authentication of consumers of telecom services
  • Providing necessary facilities for continuous monitoring of the system, not employing any bulk encryption equipment and taking prior evaluation and approval of Licensor for any encryption equipment for specific requirements.
  • Providing decryption keys to the Government
  • Restriction on switching of domestic calls/ messaging from outside the country
  • Maintaining call detail record/ Internet protocol detail record (IPDR) for Internet including Internet Telephony Service for a minimum period of one year.
  • Maintaining Parameters of IPDR as per the directions/instructions issued by the Licensor from time to time.
  • Responsibility for ensuring protection of privacy of communication and confidentiality of subscriber information.
  • Measures against Caller Line Identification (CLI) masking

6. The Same Service Same Rules argument is fallacious: 

  1. VoIP services are a part of Internet services: Telecom operators provide three services to consumers: Circuit switched telephony (PSTN/PLMN) and messaging, and Mobile Internet. Internet calling (VoIP) and online messaging are integral parts of Mobile Internet. So, this is an instance of one telecom operator service (Mobile Internet) substituting others (SMS and PSTN/PLMN voice calling).
  2. Internet services and mobile telephony are distinct: VoIP services and regular phone calling are two distinct services which are imperfect substitutes, just as rich-text messaging and SMS are imperfect substitutes and distinct from each other.
    1. In terms of the flexibility of the service, ​I​nternet telephony and IP based messaging (such as WhatsApp, WeChat and Line) are more versatile and rich in terms of features. The PSTN/PLMN services have a competitive advantage because they can terminate calls on landline and mobile networks. VoIP calls can terminate on wireline IP networks, ​and calls can be received on desktops as well as mobile devices, while PSTN/PLMN telephony does not have this application being used widely. Telecom operators can terminate VoIP services on circuit switched networks.​
    2. Regular phone calling (PSTN and PLMN) voice is not integrated into any online services, and neither is it an integral part of any of these, while Internet telephony (VoIP) is a part of the Internet.
    3. VoIP services have no control over Internet access Quality of Service:​ while mobile phone calling has sufficient bandwidth for high call quality, and telecom operators are responsible for the quality of their Internet access service, VoIP service companies have absolutely no control over the bandwidth available to consumers, since Internet access is provided by telecom operators and ISPs.
  3. Same Service Same Rules is applicable only and only when sufficient spectrum is available for purchase by each and every application service provider in the world, so that they can take complete control over the consumer experience. That is impossible since spectrum is a limited resource, and telecom operators have exclusive direct usage of spectrum.
  4. Same Service Same Rules may be made applicable to other imperfect substitutes: If same service same rules is to be made applicable to VoIP and messaging, then it must be made applicable to all telecom operator services that have similar counterparts:
    a. Payment gateway services: ​Telecom operators integrate with online service providers via their own API22 or through carrier billing providers such as Fortumo and Boku23. This allows consumers who have stored money in the telecom operator prepaid wallet to buy online music subscriptions, video streaming subscriptions, e­books and articles, along with other content. As per the “Same Service Same Rules”, Payments should be released to merchants in 2­3 days, as specified by the RBI guidelines, which state:
    i. All payments to merchants which do not involve transfer of funds to nodal banks shall be effected within a maximum of T+2 settlement cycle (where T is defined as the day of intimation regarding the completion of transaction).
    ii. All payments to merchants involving nodal banks shall be effected within a maximum of T+3 settlement cycle.
    b. Mobile Wallet Services:​ Telecom operators store money in their mobile account, which can be used to purchase goods and services, including through carrier billing. This is similar to the semi closed prepaid wallet ecosystem, wherein, as per the RBI guidelines, semi closed prepaid wallet licensees have to allow customers to withdraw money to their bank account, if required. Therefore, as per “Same Service Same Rules”, consumers should be allowed to withdraw money from their prepaid balance. While we understand that some telecom operators have subsidiaries and/or affiliates with mobile wallet licenses, they should have to apply separately for usage of their mobile account.
    c. Mobile VAS purchases: T​elecom operators allow consumers to buy digital content using their stored balance amount. This is similar to credit card and debit card payment systems. As per ‘Same Service Same Rules” norms, these transactions should follow the two factor authentication system from the Reserve Bank of India, which mandates the usage of either One Time Password or Verified By Visa/Mastercard 3D Secure to authenticate the transaction.
    d. Music Streaming service: Telecom operators provide music streaming services on mobile VAS, called Mobile Radio. This is similar to FM Radio, and should be subject to the same guidelines as FM music, and telecom operators should have to procure a separate license to operate in each circle.
    e. Video streaming service:​ Telecom operators provide video content on demand, as well as streaming services. This is similar to TV channels, and hence telecom operators should need to apply for an IPTV license for video streaming service.
    f. Text alert service: T​elecom operators provide news via SMS alerts, including cricket related score updates and similar news. This is similar to publishing news content, and hence telecom operators should need to get an RNI registration to operate alerts.

7. Licensing of VoIP and messaging amounts to double charging license fees:​ If VoIP services have to be licensed and forced to pay a license fee, then that amounts to double charging by the government for data services: first, from telecom operators, and secondly from VoIP and messaging providers.

8. On interconnection regulations: When licensing creates exclusivity and limits competition, regulation also needs to enable consumer interest, and hence interconnection becomes necessary, taking into account the switching cost. This is thus necessary in the telecom sector. On the Internet, which doesn’t have licensing, with no/low cost of download and access, and thus zero/low switching cost, interconnection isn’t necessary.

On Mirror Now yesterday, Gopal Aggarwal of the BJP also talked about data being a previous asset and needing regulation, as a part of this consultation.

9. Government wants to shape users’ internet experience? In its differential pricing ruling, the TRAI had said that “In India, given that a majority of the population are yet to be connected to the internet, allowing service providers to define the nature of access would be equivalent of letting TSPs shape the users’ internet experience. This can prove to be risky in the medium to long term as the knowledge and outlook of those users would be shaped only by the information made available through those select offerings.” Restricting online services via licensing or further regulation would amount to the TRAI itself shaping users’ online experience.

10. Licensing will encourage vertical integration: Licensing will enable shutting down of unlicensed players, and dependency of licensed Internet services on telecom operators; most ISPs and telecom operators would already have licenses for these services contained in the Universal License, and this would mean vertical integration. In its differential pricing ruling, the TRAI had said about vertical integration that:

This poses an even greater concern in cases where there might be a conflict of interest in the service provider’s role as a service provider as well as a participant in a vertical market where it acts in competition with other content providers. New and smaller service providers will face crucial challenges in view of the significant market power enjoyed by bigger service providers and content providers.”… “allowing the keepers of the infrastructure to differentiate on the basis of content, would impose negative externalities on the rest of the network as internet serves as infrastructure for many other markets. This is especially so since the internet is a fluid and dynamic space where a user could be a simple subscriber at one moment (when she accesses the internet through a data pack), and become a content provider (when she writes a blog post) at the next.”

11. Revenue loss argument is fallacious: There is high competition in the telecom sector, and the decline in telecom operator revenues is a function of this competition, especially because of Jio’s choice to give unlimited free calls. This is not something that is being done by online Internet services, or that Internet users are responsible for. Telecom operators shouldn’t be blaming the Internet for their issues.

In fact, on the revenue loss argument, the TRAI itself had said that “the Internet use is growing at an unprecedented high rate and existing providers will generate revenue from data services which will be required by a subscriber to make even an Internet Telephony call.” ”Increasing revenue realizations from data services due to increasing Internet traffic will not only compensate for the loss of conventional voice traffic but will also increase the revenue potential of the last mile access networks.”

12. Anti-trust issues won’t come into play and TRAI has been criticised in the past for looking into them: Last year, the Competition Commission of India wrote to the TRAI Chairman RS Sharma, saying that their move to create a framework on predatory pricing “definitions, concepts of the Competition Act and decisional practices of international anti-trust jurisdictions, may blur the lines between the two bodies and lead to confusion,” according to The Economic Times. Competition issues are addressed based on two concerns: one is market dominance and secondly, on abuse of dominance. Dominance clearly currently rests with telecom operators, when it comes to voice services. Secondly, there is no abuse of dominance, because there is no dominance. In fact, consumers have benefited because of the availability of voice and video calling services.

13. TRAI could carve out exception for licensing VoIP and what it terms as “services permitted under the license”: In its recommendations to DoT on Net Neutrality, the TRAI had said that:

To the extent that such services are permitted under the license and also fall under the definition of specialised services, they would not be subject to the principles of non-discriminatory treatment”… “the provision of such services should not be detrimental to the availability and overall quality of Internet Access Services. This could be monitored using various quality of service parameters.”

VoIP is a service permitted under the license. Could the TRAI offer licensing as a means to better quality of service, and an exception from its Net Neutrality regulations?

Disclosure: I was a co-founder of the SaveTheInternet campaign for Net Neutrality in India.