In this report, we outline what classifieds, financial and social services OLX, Paytm and ShareChat said, respectively, about TRAI’s public consultation on the regulation of OTT services. OTT Service Providers are abbreviated to only OTTs in the report. Some of these points have been edited and paraphrased.

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Q1. Which service(s), when provided by OTT service provider(s), should be regarded as the same or similar to service(s) provided by the TSPs? Suggestions are required, naming OTT services with descriptions comparing them with services provided by TSPs.

OLX

  • According to the EU’s draft Electronics Communications Code, both substantial and ancillary service providers use TSPs’ network infrastructure, but only substantial OTT services compete with their traditional telecommunication businesses.
  • Substantial OTT service providers should be regarded as the same/similar to TSP services, as they are substitutable and compete with them
  • It would be arbitrary and anti-competitive to conflate substantial and ancillary OTT services, since nearly all OTT services have an element of communication.

Paytm

The following services by the OTT providers may be regarded as the same or similar to services provided by TSPs –

  1. Personal Messaging – Messages among individuals
  2. Messages from Businesses – Messages from businesses to Individuals
  3. Video and voice calling

ShareChat

  • TSPs hold a scarce resource, making them significantly distinct to online communications platforms.
  • Commonality of a few aspects of the services provided by online communications platforms does not make them similar to TSPs.

Q2: Are there issues related to lawful interception of OTT communication that are required to be resolved in the interest of national security or any other safeguards that need to be instituted? Should the responsibilities of OTT service providers and TSPs be separated?

OLX: No response

Paytm

  • Because an OTT provider has failed in monitoring fake news spreading through its platform resulting deaths of our fellow Indians, it becomes necessary that OTT providers also be subject to appropriate regulations such as those applicable to TSPs (Section 69 of IT Act, 2000 gives the power to the Govt. to intercept, monitor or decrypt any computer resource).
  • For National security and supervisory/ regulatory control Indian authorities must have absolute and unrestricted access to Indian data.
  • Data stored outside India will be open for potential misuse. Since most OTT providers store, process and transfer data belonging to Indian citizens or companies in another country, it becomes difficult for law enforcement authorities to investigate or gather evidence in criminal and taxation matters.
  • OTT providers should be mandated like TSPs to store and process data locally.

ShareChat

  • The consultation paper assumes that an OTT platform with the same services as a voice or text is akin to a TSP. This in essence would be similar to comparing a bicycle to a bus. While both provide transportation services, their services cannot be considered either similar or substitutable.
  • As a subjective standard, a regulatory body would determine the ‘substitutability’ of an application, creating policy uncertainty on an online platform that uses communications features, even as an ancillary feature to its core purpose (e.g. chat systems in payments applications). Moreover, it may make companies risk averse to innovate on communications applications to avoid the risk of being classified as an OTT platform.
  • Several nuances need to be considered to determine substitution and the significant degree of subjectivity to make this determination, make OTT classification a challenging and unproductive effort

Q.3. Whether regulatory or licensing imbalance is impacting infusion of investments in telecom networks especially required from time to time for network capacity expansions and technology upgradations? If yes, how OTT service providers may participate in infusing investment in the telecom networks? Please justify your answer with reasons.

OLX

  • TSPs reinvest in telecom infrastructure, and incur heavy license fees to operate, as they use a public resource – spectrum.
  • OTTs operate as an auxiliary service over networks that are dependent on the ownership and control of TSPs, and the consumption of OTT services is therefore dependent on the contract between the network subscriber and the TSP.
  • Customers pay the TSPs directly for internet bandwidth to use OTT services, leading to revenue inflows for TSPs catering to data traffic.
  • OTT service providers do not directly gain revenues from network usage, and seldom do consumers pay OTTs a fee to use their services.
  • A simple cost-benefit analysis finds that TSPs stand to gain most from making investments in network capacity expansions, as they charge customers a regular direct-subscription fee, and gain profits directly from the rise in the user growth and data consumption of OTT services.

Paytm

OTT providers should be subject to the following regulations

  • OTT providers should be subject to IT Act, 2000 in interest of National Security….This can prevent spreading of fake news and help law authorities in getting to perpetrators of fake news, thereby helping maintain law and order in the country.
  • OTT providers should be subject to data localization: for National security and supervisory/ regulatory control, Indian authorities must have absolute and unrestricted access to the Indian data.

ShareChat

  • It states that differences in regulation do not necessarily result in regulatory imbalances.
  • As stated by the ITU, the mere fact that an industry faces a business challenge due to technology, should not give rise to the need for regulation of its competitors.
  • Changes in technology will result in changing business models, as is evidenced by the rise of data first TSPs in countries such as India and Singapore.
  • Researchers globally have suggested greater partnerships between OTT services and TSPs to generate revenue.
  • Even with the existence of net neutrality norms, some of the measures that TSPs can look to adopt include:
    • generating new revenue sources: by developing new features such as IPTV or new services such as mobile money
    • encouraging the adoption of high bandwidth products: by providing free access to high value applications such as gaming services or video distribution platforms.
  • As regards the remunerating TSPs for network usage, we suggest:
    • The first would be charges to a TSP for interconnection with a competing network. TSP should ideally be rewarded for making available their network.
    • The congestion claimed by the Consultation paper is essentially data traffic, which is paid for by consumers and generates a significant portion of the current revenue for TSPs.

Online services have the greatest incentive to ensure access to speedy connectivity.

Q.4. Would interoperability among OTT services and also interoperability of their services with TSPs services promote competition and benefit the users? What measures may be taken, if any, to promote such competition? Please justify your answer with reasons.

OLX

  • As TSPs already own and control the networks upon which OTT apps operate, promoting interoperability could give rise to anti-competitive practices by TSPs.
  • TSPs may engage in price-based discrimination of data services to incentivize their in-house and owned OTT platforms, which would be antithetical to net neutrality.
  • When two different OTT services enable interoperability, it is a part of their contractual agreement, making the possibility of entering into a monopolistic agreement negligible.
  • As a few big players dominate the TSP market, promoting their interoperability with OTTs could give rise to oligarchic, if not monopolistic, and predatory behavior towards OTTs.
  • The same does not hold true for interoperability between OTT services, which would benefit the end-user, given the volume and of versatility of OTT services.

Paytm: Yes

ShareChat

  • There may be future competition risks arising from the online communication platform economy, relating to the lock in effects of users in online platforms, especially in payments, financial services, and e-commerce.
  • However, given the cross sectoral nature of risks, they would be better resolved by the subject matter regulator (i.e. the Competition Commission) rather than the TRAI.

Q.5. Are there issues related to lawful interception of OTT communication that are required to be resolved in the interest of national security or any other safeguards that need to be instituted? Should the responsibilities of OTT service providers and TSPs be separated?

OLX

  • There does not seem to be a need to burden OTT platforms that are fully compliant with existing laws and regulations.
  • The responsibilities and obligations of OTT service providers and TSPs are distinct, and they should be addressed by separate regulatory regimes.
  • OTT services providers do not operate a network of their own nor do they lease network capacity from a network operator. Any issue that is extraneous to or is not currently addressed by existing laws, such as, data protection and privacy, should also regulate TSPs and OTTs separately.

ShareChat

  • The appointment of local officers, establishment of domestic response units, and use of technology to proactively comply with domestic norms should be required from all social media and OTT communications entities operating in the Indian market.
  • However, we would request that the regulatory obligations on platforms be streamlined and limited. Establishing multiple regulators, and mandating compliance with differing standards in law would only increase the cost of compliance, and achieve limited public policy benefit for the government as a whole.
  • The existing regulatory framework and the reforms proposed by the government (along with active monitoring and enforcement) should be sufficient in addressing these concerns.

Q6. Should there be provisions for emergency services to be made accessible via OTT platforms at par with the requirements prescribed for telecom service providers? Please provide suggestions with justification?

OLX, Paytm, ShareChat: No response

Q.7. Is there an issue of non-level playing field between OTT providers and TSPs providing same or similar services? In case the answer is yes, should any regulatory or licensing norms be made applicable to OTT service providers to make it a level playing field? List all such regulation(s) and license(s), with justifications.

OLX

  • TSPs are free to enter into businesses competing with OTTs.
  • Market dynamics are best qualified to determine the course of the OTT ecosystem, as regulatory and licensing norms in the space may raise the entry barrier for start-ups and SMEs.

ShareChat

  • The TRAI’s consultation paper also notes that both TSPs and OTTs are equally regulated under the Information Technology Act, 2000 with respect to their obligations on due diligence standards to maintain safe harbor protections, lawful interception, and encryption norms.
  • These do not necessarily translate into an unequal regulatory playing field.
  • ShareChat acknowledges that some non-resident online platforms are non-compliant with Indian regulatory standards. However, we believe that this is better resolved by reform in special regulation (in relation to intermediary regulations) and improvement of cross border law enforcement processes (such as letter rogatory’s and mutual legal assistance treaties).

Q8: In case, any regulation or licensing condition is suggested to made applicable to OTT service providers in response to Q.7 then whether such regulations or licensing conditions are required to be reviewed or redefined in context of OTT services or these may be applicable in the present form itself? If review or redefinition is suggested then propose or suggest the changes needed with justifications.

ShareChat

  • We do not see any case for licensing of online platforms.
  • We would welcome any measure to level the playing field between resident and offshore online platforms, which often flout domestic regulatory standards and act against domestic interests.
  • We would recommend that these entities be made as responsive to law enforcement requests as Indian owned and resident technology companies such as Sharechat.

Other issues flagged by ShareChat

  • Social communications platforms bring significant consumer and economic benefits
  • Licensing of online business can be counter-productive to the goal of a self starting local innovation economy
  • Obligations should not impose disproportionate costs on Indian companies
  • Regulations should aim to meet legitimate public policy goals for the government

Read what the telecom companies said in their comments to the TRAI.