“The larger conversation you’ve seen about our network usage fees is from telcos, right? And that entire conversation is linked to an investment into the infrastructure that they’re saying is skewed; that you don’t have infrastructure investments made by OTT [communication] platforms, you only have them being made by telecom and that burden is excessive,” said Rahil Chatterjee, an associate at Ikigai Law firm, explaining the position of telecom companies on network fees at MediaNama’s discussion on “App Bans and Network Fees,” held on August 10, in New Delhi.
This discussion was organized to make sense of the recent consultation paper released by the Telecom Regulatory Authority of India (TRAI) on the regulation of online communication platforms. One of the arguments mentioned in the paper was that communication platforms (like Whatsapp and Telegram) should compensate telecom companies through a network fee for using the infrastructure of the telcos. The crux of this argument is that communication platforms offer the same services as telecom companies (calling and messaging) and are eating away at telecom companies’ customer base.
MediaNama hosted this discussion with support from Google and Meta. CCAOI, the Centre for Communications Governance at the National Law University (Delhi), the Centre for Internet and Society, and The Internet Freedom Foundation were our partners for this event.
Are telecom companies really suffering all that much because of communication apps?
Amrita Choudhury, the Director of the Cyber Cafe Association of India (CCAOI), who was also one of the speakers at the event, explained that telecom companies and communication platforms co-exist with one another. “If you look at it today, my Vodafone telco does not charge me for SMSes or voice. They are earning from me from data. So, this is their business strategy – they will earn money from data. If their voice revenue or SMS revenue is decreasing, that’s because they are not charging me that way. They know where the money comes from,” she said. This tells us that telecom companies have shifted their revenue generation model to keep up with the competition.
She pointed to a study conducted by the TMT management consulting firm Analysys Mason in Europe which suggested that between 2018 and 2021 – when telcos made an [network-related ISP] investment of 3%, the network traffic increased by 160%. “With this very small amount of investment, they can have more growth in their networks,” Amrita said, explaining how it wouldn’t cost telecom companies too much to improve their infrastructure. She further explained that investment is part of running a business, “Even if you have a retail shop, you will have to rehaul it after some time to attract customers. That’s how business works,” she said.
Nikhil Pahwa, MediaNama’s founder and a fellow speaker at the discussion, also used facts and figures to dispute the need for network fees. “In FY16, which is [the] financial year ending March 30th, 2016, Airtel had an average revenue per user of Rs.194 per user. They now have an average revenue per user of Rs.193. India Voice Minutes [minutes of voice calling being done on Airtel’s network] at that point in time were 307,988 million minutes of voice. They are now 1.124 billion minutes of voice,” he said, adding that, “if in its submission [to TRAI’s consultation], Airtel at any point in time argues that it is struggling or it is losing money, the numbers don’t bear it out.”
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What do other countries think about network fees?
Chatterjee mentioned that the TRAI consultation refers to a report by the Body of European Regulators for Electronic Communications (BEREC) report which refutes the need for network fees. He further mentioned that “if you look at the European consultation [on network fees], the phrase they use is LTG, right? Large traffic generators,” explaining that while TRAI’s consultation discusses communication apps in specific, the same is not true in Europe. “If you actually look at what network usage fees is related to, specifically across the globe, when you look at any sort of other conversations, it’s about traffic generation,” he added.
Chatterjee’s comments leave us with a very important question: why should only communication platforms pay network fees? When we consider whether communication platforms should be charged network fees, it is important to highlight that streaming services (like Netflix or YouTube) use more bandwidth than a communication platform would. So why are these services not included in TRAI’s discussion?
Choudhury chimed into the discussion by bringing up the example of South Korea. She explained that in 2021-22, South Korea said that all online platforms have to pay a certain fee to move their traffic through a telecom company’s network. “The concerning part out there is that even after paying, the OTT is responsible for the quality of [its] services,” she said, adding that because of these regulations, smaller apps have moved their servers outside the country, to avoid paying the network fees.
What TRAI needs to consider before implementing network fees:
“As a regulator, what is your concern, right? What’s the harm we’re looking to address? What is the harm we’re going to create by these regulations? And at the end of the day, it’s the user, right?”, Chatterjee said, explaining that the regulator needs to consider that if they implement a network fee arrangement, eventually, the end user will have to incur the fee. He said that in India, internet penetration is now moving from urban centres to rural areas. He added, “Imagine increasing the cost of services in rural areas. You’re not going to have the same buy-in on the internet and the entire digital ecosystem.”
He brought up the example of the United States, where a bill on a revenue share agreement between telecom companies and communication platforms is currently being tabled. “And the bill’s first primary sort of need is to have an assessment, is to actually have a thorough regulatory assessment about what is the problem you’re looking to solve,” he said, adding that India is currently struggling to figure out what it seeks to address with a network fee arrangement.
How do network fees lead to a net neutrality issue?
Explaining the issue of net neutrality here, Pahwa said, “ So [let’s say], I run a website, it could be a personal website, it could be a business website, it could be an app. That app is being served out of a computer of mine which is called a server. For that server to access the internet, I have to buy bandwidth. Sometimes when I’m buying server space from a cloud service provider, they bundle in bandwidth along with the server.” Then, an internet service provider (ISP) charges either the website directly or, more commonly, charges a hosting service provider [a service that allows people to make websites].
“So, I’m paying my hosting service provider for bandwidth, who is paying the ISP through a bulk agreement,” he said. He added that this ISP has agreements with other ISPs across the world so that the person who eventually accesses the website only has to pay their immediate ISP. Pahwa said that if websites would have to pay all the ISPs, which is what a network fee would entail, that would effectively mean paying 2000 ISPs in India alone. In such a case, he added, as a website owner, he would have to prioritize, like – “Hey, I’m going to be available on these three ISPs, and I’m not going to be available on all of these other ISPs.” This, he says, means that there will be bubbles on the internet, like an Airtel Internet or a Jio Internet, where certain specific websites would be accessible.
He mentioned that it is important to remember that communication apps are not freeriding on the internet, they are simply paying their edge ISPs. If the network fee arrangement were to become a reality, it would imply that websites would be double charged or even triple charged by ISPs.
Update: The story was edited to correct the name of an organization.
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