Rupert Murdoch-owned Start India – one of India’s biggest broadcasting companies – has come out strongly against the Indian telecom regulator’s move to let telecom operators side-step the so-called net neutrality principles in the country.
UPDATE: Airtel Digital has removed all Star channels from all its packs.
Star India, formerly Start TV, wondered why the Telecom Regulatory Authority of India had come out with the proposal seeking to officially permit companies to engage in what is largely described as “speeding up” and “slowing down” of Internet traffic.
Under the traditional architecture of the Internet, all traffic, whether flowing from Indiatimes.com or Nytimes.com, is treated equally, or neutrally. Allowing telecom companies to side-step such practices would allow them to introduce so-called ‘fast lanes’ and slow lanes for paying websites.
Net neutrality advocates see this as a potentially minefield of dangers as websites, app-makers and anyone else who uses the Internet can potentially be forced to pay a number of telecom operators to ensure delivery of their content to end users. They fear that allowing ISPs to levy such a toll on traffic would destroy the open nature of the Internet that has been a key factor behind its growth.
While small start-ups have been the most vocal about preserving net neutrality in India, Star India’s comments indicate that even big broadcasters are worried about having to pay “carriage fees” on the Internet.
“The Internet is not broken. There is no problem for the government to solve here. That the Internet works—that Internet freedom works—should be obvious to anyone with an Apple iPhone or Microsoft Surface, a Samsung Smart TV or a Roku, a Nest Thermostat or a Fitbit,” said Star India, an associate of Sky, a global content and broadcasting company.
Star India is already struggling in its traditional business as has to pay “carriage fees” to platforms like cable TV and DTH to ensure that it is able to take its content to the end consumer. It has recently launched the Hotstar app to leverage the Internet for its next level of growth. Like nearly all companies on the Internet, Star India too fears the emergence of a ‘toll collection’ mechanism on the Internet.
“We live in a time where you can buy a movie from iTunes, watch a music video on YouTube, listen to a personalized playlist on Pandora, watch your favorite Philip K. Dick novel come to life on Amazon Streaming Video, help someone make potato salad on KickStarter, check out the latest comic at XKCD, see what Seinfeld’s been up to on Crackle, navigate bad traffic with Waze, and do literally hundreds of other things all with an online connection.
At the start of the millennium, we didn’t have any of this Internet innovation that has been since fuelled by the Free Internet,” it pointed out.
It wondered why the TRAI had even come out with the present proposal. The TRAI had justified its proposal saying that technological are making traditional voice calling business redundant or expensive, and this could lower the profits of telecom companies. TRAI had, as an example, said that today people are able to make calls using the data network, and this would make the traditional phone business unviable.
“The consultation paper also does not make out any case of anti- competitive practices,” Star India said. “No regulatory impact assessment has been done, there is no ‘consumer problem’ as such that has been defined, no cost benefit analysis has been conducted, no qualitative or quantitative aspects have been highlighted of the problem at hand, hence the CP to the extent stated is actually deficient.
It pointed out that it was not the regulator’s job to protect private companies’ investments or their profit margins.
“There seems to be almost a suggestion that it is the duty of the regulator to guarantee the revenues of the TSP (telecom service provider)s. All that the OTTs (over-the-top applications) have done is to remove inefficiencies in the value chain delivering better value to the consumers and instead of looking at it from the consumers’ point of view, whom we are all here to serve, there seems to be an inclination to try and protect incumbent and in many cases, outdated revenue streams of the telecom service providers.
“The only thing that OTTs have done is to create a level playing field for all and the incumbents are more than welcome to evolve their current business models to participate in this. However, we fail to recognize any obligation on the part of the regulator, society or the government to protect traditional revenue streams at the cost of burgeoning inefficiencies.”
“OTTs are one of the most democratic breakout concepts in recent history. The fact that anyone can create an OTT application and start serving the entire global population has enabled innovation like never before. OTT services have delivered better value and have enabled competition in the market. They have been able to leverage technology to flush out inefficiencies from the existing ecosystem and have succeeded in delivering better value to the consumers.
“All of this holds immense potential especially in a country like India where the state and government have struggled to find innovative ways of bettering the lives of the society and the nation. The regulator and the government should not only encourage but also do everything possible to fuel this growth further,” it added.
Star India is the second big media corporation after the Times of India group to come out against TRAI’s proposal to allow telecom operators to introduce “special lines” in Internet traffic.
“Net neutrality facilitates innovation and competition, as economic actors take advantage of the level-playing field in communication networks to launch new services. The concept of “innovation without a permit”, where new entrants compete fairly with the incumbent giants is at the root of the development of the Internet as we know it. Entrepreneurs of the Internet have become the linchpin of the emergent knowledge economy.
“Beyond prominent examples of companies that became huge thanks to the possibility to innovate and grow on a neutral Internet such as Google, Skype, eBay, or Twitter, there are thousands of smaller companies and services that represent an even bigger contribution to growth and social welfare. Free/open source software or open contents services such as Wikipedia or WordPress count among the most-used services in the world, and only exist thanks to the neutral and decentralized nature of the Internet. Many other essential parts of the Internet took advantage of an open network, and became widely used all over the world only a few months after being created, because it was relatively cheap to produce and distribute their innovative services,” it said.
Star India poked holes in TRAI’s suggestion that those who make OTT products, such as Microsoft (which makes Skype) and Facebook (which makes WhatsApp) are direct competitors of telecom and Internet service providers.
TRAI had pointed out that WhatsApp and Skype do not pay spectrum charges, or license fees in India, and were simply using the infrastructure created by operators like Airtel and Idea Cellular without paying a single paisa. TRAI had argued that the situation did not seem fair as these software companies were not paying charges and levies like telecom operators.
Star India, however, said it was not fair to say that WhatsApp and Skype was simply freeloading on the infrastructure of other companies.
“Any contention or analysis that is premised on a proposition that telcos and ispsinvest on the networks and the apps ride on such networks without paying anything is fundamentally flawed. It’s the same as saying that the electricity company invests a lot on electricity grids and power generation and the manufacturers of electronic appliances get a free ride on it. The people who use such appliances pay the electricity companies for the electricity, just like the people who use Whatsapp and Skype pay the Telcos for data,” it said.
Telecom operators have also complained about companies like Youtube, owned by Google, for “riding on” their infrastructure for free, causing trouble to them and burdening their network.
Star, however, sought to turn the tables by saying that it should be companies like Airtel and Idea who should be paying Star and Youtube as it was their customers who were consuming their content. On platforms like DTH and cable, part of the monthly subscription charges paid by the end-consumer is passed on to the content owners, while on the Internet, none of the data charges collected by the telecom operator is passed on.
“We are of the view that the real question that needs to be considered is whether the TSPs should pay the OTT’s a share of data revenue for significantly driving data consumption which is borne out by the manifold increase in Telco data revenues. We believe that it is too early to have a regulatory framework around the relationship between TSPs and OTTs given the nascency of the ecosystem.
“Given the fact that numerous OTT services have created a strong consumer proposition for the internet, thereby driving penetration, it is equally likely that TSPs incentivise / compensate OTT services that are responsible for driving up data consumption by sharing a percentage of their data revenues. Given the rapidly evolving business practices, we believe overarching regulations would only stifle innovative partnership models and be detrimental to the consumer and the business community at this stage.
“Internet-based services and apps don’t pay for telecom operators for using the network, and it should remain the same going forward. Forcing Internet-based services to pay extra for using a particular network negatively impact consumers and harm the Indian digital ecosystem. As mentioned in the above answer, data revenues of Indian telecom operators is already on an upswing and is slated to increase rapidly over the next few years, hence the argument for creating a new revenue source is not justified.
“Charging users extra for specific apps or services will overburden them, which in turn will lead to them not using the services at all. It is also akin to breaking up the Internet into pieces, which is fundamentally against what Net Neutrality stands for. Also, the Internet depends on interconnectivity and the users being able to have seamless experience – differential pricing will destroy the very basic tenets of the Internet India has 1 billion people without internet access and it is imperative for our democracy to have an open and free internet where users are free to choose the services they want to access—instead of a telecom operator deciding what information they can access,” it said.
Star also said that telecom companies are highlighting possible declines in voice traffic, while ignoring the fact that data revenue is almost doubling every year.
“In India, mobile data traffic will grow 13-fold from 2014 to 2019, a compound annual growth rate of 67%. Mobile data traffic by 2019 will be equivalent to 3163x the volume of Indian mobile traffic ten years earlier (in 2009). In India, smartphone mobile data traffic will grow 20.8-fold from 2014 to 2019, a compound annual growth rate of 83%. And, smartphones will account for 76% of total mobile data traffic by 2019, compared to 48% at the end of 2014.
As such there is no need to view revenues of telcos in silos, they need to be viewed in totality. We believe that the only lens with which to evaluate regulation should be the impact on consumer benefit. We question the logic of trying to find a way to protect the traditional revenue stream of TSPs. As in every other market, revenue streams will change depending on the ability of providers to drive innovation and deliver new benefits for consumers. If providers are able to deliver value to consumers, then they will derive value from traditional or new revenue streams. However, the TRAI’s only objective should be to explore the impact on consumers. The premise of this question is therefore flawed and should not be criteria for any recommendation from TRAI,” it said.
It said any kind of “traffic management” allowed to the telecom companies should only be on technical grounds. They should not be allowed to “manage” their traffic in exchange for payment, it said.
“We reiterate that only technical objectives should be at the core of traffic management; however no discrimination or differentiation should be practiced for commercial consideration. So long as such practices are targeted towards certain base line principles like internet security, network stability, congestion management, ordinary maintenance and law enforcement, and do not in any way or manner result in commercial gains to the operator or is actuated for commercial consideration – the same may be justified. However it is essential that telcos and ISPs are transparent about such practices by publishing all relevant data on this aspect periodically from time to time. The Regulator can always intervene post facto whenever such base line principles are violated or when the publication is not sufficient. However mere publication should not be a tool for harmful practices. We should be careful that anticompetitive behaviours are not allowed to creep up under the garb of traffic management.”
OTHER ARGUMENTS IN FAVOR OF NET NEUTRALITY BY STAR
OTT is new: OTT services are nascent in India, any intervention is likely to throttle innovation or investments in this space; the biggest casualty will be Start Ups.
OTT already has enough bottlenecks and barriers: In any event there are structural bottlenecks and barriers to OTT usage viz. poor networks, low penetration of plastic money, limited customisation etc.
Skew level playing fields: Intervention would result in creating further entry barriers thereby stifling competition, hence are best avoided; Intervention shall skew level playing fields in negotiations between telcos/isps on one hand and OTT service providers on the other, Telcos clearly have a higher hand in negotiations always.
Differing business models: OTT services are not infrastructure providers; OTT makes money from its content or service offering – owned or licensed (be it ads or subs) while telcos/isps monetise public property viz. spectrum licensed to it by the government.
Intervention would be Unconstitutional: Any intervention that adversely impacts OTT services could impinge on Freedom of speech and expression and hence be deemed unconstitutional;
Extent of Substitutability: OTT Apps are not completely substitutable to communication services as they are not interoperable – ie devices that communicate thru such Apps, require such Apps to be installed in all such devices, unlike communication services which can talk across networks regardless of underpinning technologies (GSM, CDMA, 3G, 4 G, etc), therefore TSPs cannot allege that they are losing out to OTT.
Should avoid the plight of VAS: We have already seen how the VAS industry had an untimely demise owing to revenue sharing conflicts. Any regulatory intervention that mandates payments by OTTs to TSPs shall result in a similar destruction for the former.