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COAI thinks India should implement a US-like bill to charge large platforms a fee

The proposed Lowering Broadband Costs for Consumers Act in the United States requires edge providers and service providers to contribute to the Universal Service Fund (USF).

Telecom industry body Cellular Operators Association of India (COAI) suggests that a bill akin to the proposed Lowering Broadband Costs for Consumers Act in the US should be adopted in India as well, according to a report by the Economic Times. This act, proposed last month, requires edge providers and broadband providers to contribute to the Universal Service Fund. This fund, as defined under the act, will “provide specific, predictable, and sufficient support for expenses” incurred by telecom companies. The US senators proposing the bill suggest that by requiring edge providers to cover associated costs for rural fiber networks will, “reduce the financial burden on consumers and rural providers while strengthening broadband connectivity throughout rural America.”

Edge providers covered under the act include— a digital advertising service, a search engine, a streaming service, an app store, an over-the-top (OTT) messaging service, a video conferencing service, a video gaming service, and an e-commerce platform. This effectively means that if this act is implemented, online services anywhere from Netflix and YouTube to WhatsApp and Amazon would have to contribute to the Universal Service Fund.

Some context:

This act bears similarity to what telecom companies have been urging for in India. In a consultation conducted by the Telecom Regulatory Authority of India (TRAI) in July this year, telcos such as Bharti Airtel, Reliance Jio, Vodafone Idea and telecom associations like COAI suggested that communication platforms like WhatsApp and Telegram should be licensed and should meet the same regulatory requirements that telecom companies currently meet and should pay a network usage fee for using telecom companies’ network infrastructure to reach their customer base.

“We are very happy that whatever is given as a provision proposed in this bill, vindicates our stance,” COAI Director General SP Kochhar said when discussing the US bill. He believes that if a bill akin to the Lowering Broadband Costs for Consumers Act is implemented in India, online platforms would disclose their exact traffic load, then telcos and platforms can mutually discuss the “reasonable infrastructure cost that entities can share.”

Exemptions under the Lowering Broadband Costs for Consumers Act:

This act exempts edge providers that—

  • transmit less than 3% of the broadband data transmitted in the US in the previous year
  • earned less than $5 billion in revenue in the US during the most recent year
  • if the service provider’s revenue renders the level of contribution would be insignificant

Kochhar suggests that just like the exemptions in the Lowering Broadband Costs for Consumers Act, Indian telcos are not asking every service provider to contribute to network costs and instead only going after large traffic generators.

Why it matters:

The fee that Kochhar is proposing would be a violation of net neutrality principles which say that all platforms should be treated equally. It could also incentivize telcos to give better service to those online service providers that pay a fee and de-prioritize those that do not.

Why charging online platforms for network development may not work: 

If COAI’s suggestion were to hypothetically be accepted and such an act is proposed and implemented in India, online platforms would end up contributing to India’s Universal Services Obligation Fund (USOF). This fund is used to provide telegraph access to people in rural and remote areas at affordable and reasonable prices. It collects a levy of 5% of telcos’ Adjusted Gross Revenue (AGR) to improve telecom access in rural and remote areas.

Participants at MediaNama’s App Bans and Network Fees event have highlighted that the funds collected by the USOF have not been sufficiently used. “The corpus [for USOF] has been actually increasing every year, okay, instead of decreasing. So, they are collecting more money than they are disbursing every year, and I think except for one or two years when the disbursement was higher than the collection, and today it’s [collection is] around 70,000 crores,” Deepak Maheshwari, Senior Visiting Fellow at Indian Council of Research on International Economic Conditions (ICRIER) said at the event.

Further, it has been pointed out that contributions to the USOF isn’t the only way to encourage the development of telecom infrastructure. “Competition builds infrastructure. Donations don’t necessarily bring about the most efficient outcomes. I’m not saying I’m against the idea of donations for a good cause, but building telecom infrastructure when competition is also a solution is not necessarily a good cause,” MediaNama’s founder Nikhil Pahwa said during the event. He explained his position further by stating that even in situations where USOF has been used for infrastructure projects, it hasn’t yielded the best results. “I believe there have been [studies if] you look at parliament and the rollout of what is that BharatNet, right? Extremely inefficient, virtually useless,” he said.

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