Telecom Companies Vs OTTs: COAI Says Claims Of 'Usage Fee' Violating Net Neutrality Principles Misleading

Firing a fresh salvo in the revenue share debate, industry body COAI on Monday said the demand of telecom operators for a reasonable ‘usage fee’ from OTT communication service providers towards network use is "fair and rational", and would drive the digital infrastructure while contributing to the economy.

Just days after Internet and Mobile Association of India's (IAMAI) assertions that demand for 'revenue share' was an underhanded attempt to violate net neutrality, COAI returned fire saying it is "misleading" to state that Net Neutrality principles will be violated. "Certain entities with vested interests are misdirecting the issue of the need for a regulatory framework for the communication OTTs and the need of usage charge to be paid by OTTs to the TSPs, by bringing in the aspect of Net Neutrality in a misleading manner, to make it a populist issue," SP Kochhar, Director General of COAI, said in a statement, without naming IAMAI.

The Cellular Operators' Association of India (COAI) is telecom service providers' body and its members include operators such as Reliance Jio, Bharti Airtel and Vodafone Idea. COAI underlined that all its member telecom service providers (TSP) are committed to following the Net Neutrality principles as per their licensing conditions as also all other regulatory and security compliances which the TSPs undertake to safeguard consumer interest and security "which OTTs presently do not".

"There seems to be lack of appreciation of the fact that net neutrality pertains to non-discriminatory treatment of content which has no nexus to the usage fee issue," COAI said. "The proposed usage charge is to justly meet the funding requirements for creating a robust telecom infrastructure in India, increased revenue for the exchequer, and continued innovation, as is the need of the hour for India’s growing digital ecosystem," COAI argued.

 It has been mooted that OTT communication services pay a network usage charge to the concerned telcos in a fair and equitable manner for the actual traffic carried by these OTTs on operators' network based on measurable usage, it said adding this usage charge will contribute towards the development, maintenance and upgradation of the network infrastructure.

COAI went on to highlight the European Commission’s recent commitment in the Digital Decade Declaration to develop adequate frameworks so that “all market players benefiting from the digital transformation … make a fair and proportionate contribution to the costs of public goods, services and infrastructures …”.

According to the association, the revenue collected by operators from the OTTs will help the telcos rollout and expand networks to meet the infrastructure requirements for OTT services. "It may also be noted that the revenues thus collected will count towards the TSPs AGR (Adjusted Gross Revenue) calculations. Hence, the OTTs will effectively be contributing to the national exchequer through the TSPs," COAI said.

Keeping in mind that a supportive framework needs to be provided to nurture startups, and small enterprises in the OTT ecosystem, COAI has also proposed that smaller players with low usage need not be required to pay the usage charge.This will ensure that innovation and entrepreneurship would not get affected. The concept of a significant intermediary has been well recognised in various Government guidelines and rules for imposition of additional obligations on such intermediaries.

"OTT platforms take a free ride on TSP (telecom service providers) funded networks without contributing to the setting up, operating and maintenance costs either directly or indirectly or for the expansion of networks through USOF," COAI highlighted. Telecom companies invest heavily in network infrastructure and spectrum, comply with quality-of-service norms, audit of accounts, and pay goods and services tax, licensing fees, facilitate lawful interception and monitoring systems.

"...in stark inequality, the OTT platforms owned and operated by huge foreign entities leverage the data to build a subscriber base which they use for substantial direct/indirect benefits – chiefly from advertisements based on data analytics and other monetising strategies of data collected from subscribers of its platforms," COAI said.

Since most of these OTT platforms are owned/operated by huge foreign entities, "this Indian data is used for filling up the coffers of the owners and increasing the GDP of that country". As these platforms are not under the telecom law presently, their revenues do not contribute to our economy or telecom growth because there is no Indian taxation on these operations, COAI said.

In fact, lately, many OTT (Over the Top) communication players are contemplating/already charging subscribers a significant fee for verified accounts, adding further lead to their revenues, COAI contended. "It is ironical that representatives of entities profiting themselves by levying charges on subscribers while riding free on the telcos’ network, are stating that paying for usage would effectively raise costs for users,” Kochhar said.

He added: "The fact, though unfortunate, is that the proponents of such OTT service providers wish to continue to have free lunch at the expense of TSPs, while conveniently overlooking the fact that the TSPs continue to invest immensely towards building the nation’s digital infrastructure and delivering connectivity, access and opportunities for inclusive growth to the Indian citizens.”

COAI went on to say that any entity which creates a property or infrastructure by investing funds, is entitled to take usage charges (rent or lease charges) from someone who uses the same for commercial purposes. Hence, a legal framework enabling TSPs (who invest in establishing nation-wide telecom infrastructure) to charge any user that uses its service/infrastructure is fair and reasonable.

"While effectively both TSPs and OTTs provide similar communication services to the same Indian population in the same prevailing environment, in the same geography, engineered over the same application layer...they presently operate under different rules which are disadvantageous to the TSPs and the nation," COAI said.

COAI's counter-attack comes after the IAMAI recently alleged that the telecom industry's demand for revenue sharing by OTTs for using communications infrastructure is "a covert attempt" to dilute net neutrality in India and will sound a "death knell" for digital ecosystem.