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The TRAI has no grounds for recommending regulation of OTTs

The TRAI Chairman, RS Sharma, told the Economic Times that the authority’s focus, when it comes to OTT regulation, is to fix the regulatory imbalance between OTT players and telecom operators, where telecom operators say that they are licensees and have law enforcement compliance burdens, while apps that provide similar services don’t. There are apparently also economic concerns.

MediaNama’s take

The TRAI has largely restricted this consultation to the regulation of Internet Telephony in India, and to put it simply, it asks whether voice calls made using Whatsapp and Skype should be regulated in line with how calling over regular phone calls are regulated. There are effectively three grounds on the basis of which the Telecom Regulatory Authority of India may regulate OTT applications:

1. Economic concerns: the concern that had led to this debate on regulation of online services and Internet Telephony was that these services were eating into telecom operator calling revenues. These arguments are no longer relevant. If you look at the data published by the DoT for 2018, there are a few things of note:

Revenue from the telecom sector declined by 7.34% between FY16 and FY18 end, a drop of around Rs 6137.13 crores. Between FY17 and FY18, the decline has been 1.79% (Rs. 1116.92 crores). Thus, a majority of the drop was between 2016 and 2017, when several mobile operators were in the process of reducing and eventually ceasing operations. That can’t be entirely attributed to a growth of VoIP


If you look at the decline, there has been a 40.3% decline in ARPU per month for revenue from calling, for GSM services (which constitute most of the mobile access services) between 2017 and 2018. Calling, as a source of revenue, has declined from being 35.14% of GSM ARPU to being 20.86%: a drop of Rs 12.96 per month. In contrast, ARPU per month for data has grown to 43.7% from 30.13%, an increase of Rs 12.55. This is with GSM ARPU per month remaining flat.

Today, data contributes more to telecom operator ARPU than calling does.

I would guess that the decline has more to do with Jio’s growth and customer acquisition tactics of making calling free, than VoIP cannibalization. The TRAI has to figure out how much of this drop in calling revenue is owed to Reliance Jio making calling free, and how much of it is because of cannibalization of revenue from VoIP. In any case, the drop in calling ARPU seems to have been adequately compensated by the growth in Data ARPU.

Thus, the economic rationale for regulating OTT services isn’t very strong.

2. Security concerns: In its consultation paper, the TRAI points towards security considerations, saying that “OTT services are offering communication with encryption”, and they lack details of the user of the service, beyond their mobile number (which is acquired via an OTP confirmation). The TRAI cites issues that there is no trance of the user, or interception of content of communications in case of misuse of the service, and “security agencies may feel helpless to control such situations”.

A few points to note here. Firstly, encryption is essential for safety of communications: it allows users to feel that their communication is protected, and allows for trust in communications between two people at a distance. Wholesale, unrestricted availability of data access, without adequate judicial scrutiny, will have a chilling effect on free speech. What the Centralised Monitoring System enables, with limited oversight, is problematic. Our calls and messages can be monitored en masse. Surveillance of everyone is neither necessary nor proportionate.

However, the concerns raised in the TRAI paper go far beyond OTT communications: they need to be addressed via a separate process, preferably via a bill in Parliament, where issues of security and privacy, and the jurisdiction and operations of security agencies, can been looked into, as recommended by the Srikrishna committee looking into privacy. The TRAI, in my opinion, should recommend that concerns of traceability, surveillance and security be looked into separately, because we need a national policy here. It can’t be a reason for regulating one type of service in isolation.

3. Regulatory arbitrage or same service same rules: In terms of telecom operator arguments of same service same rules, these are largely in three buckets: firstly that security requirements are different for VoIP services, secondly that there are licensing requirements, thirdly that government revenue share considerations that need to be considered.

A few points to consider here:

  • VoIP services are already regulated: like the rest of the Internet, they’re regulated by the IT Act. They’re not unregulated.
  • They’re not the same service: regular telephony and internet telephony are imperfect substitutes. Internet telephony is more versatile, and is an integral part of several services, including CRM software, multi-player games, virtual worlds, among others. It is a key component of interactivity. Restricting VoIP will end up restricting innovation using VoIP: apps will have to shut down VoIP parts of their services for India, leading to some features not working.
  • VoIP is not independent of telecom: VoIP cannot operate without telecom operators providing access to the Internet. Telecom operators can provide regular calling independent of the Internet, or another licensed service provider.
  • ISP licenses already allow VoIP: Telecom providers provide Internet access, which is a licensed service. Person to person Internet telephony has always been allowed, and restrictions, in terms of licensing, have only been placed on connecting VoIP services to regular telephony networks. This has been acknowledged by the TRAI in the past. In its recommendations related to VoIP in 2008, the TRAI had said that:

2.2.2 PC-to-PC Internet telephony: In this scenario, the calling and called parties both have computers or similar devices that enable them to connect to the Public Internet (refer Fig. 2.3). Both end-users are able to establish communication (Data or voice communication) only by prior fixation, as they have to be connected to the Internet at the same time and use compatible software. Presently, large numbers of Instant Messaging applications are available on Internet to make PC-to-PC Internet telephony possible. The ISP’s role in such scenario is limited to provide access to the Internet. The ISP network is transparent to such application used by the subscribers. Today PC equivalent devices like personal digital assistants (PDA) or advanced mobile handsets are available, which can also run such software supporting Internet telephony. This type of Internet Telephony is permitted under existing ISP license.

Phones today are just much more powerful versions of the PDA’s the TRAI had referenced in 2008. ISPs (and TSPs) today provide connectivity to the Internet, and their role is limited. Instant messengers today are no different from instant messengers today. There really are no grounds for the TRAI’s assessment to change here, apart from the fact that scale is very different. The same principles should apply. Access to VoIP services is a part of Internet access, and it should remain that way.

  • Revenue share concerns are invalid: Telecom operators already pay a revenue share to the government, as a part of their overall revenue, of which data services are a key component: around 43% of ARPU. If a revenue share is charged separately for VoIP services, how will the government separate out VoIP traffic from the rest of the Internet?

Thus, there really are no grounds for regulating VoIP/OTT communications services separately.

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