Sustainability & users benefit should be key drivers of net neutrality


Manoj Kumar | April 23, 2015

Much debate as taken place on the way forward of ‘Net Neutrality’ in India following the issue of the consultation paper by the Telecom Regulatory Authority of India (TRAI) for inviting stakeholder feedback which comes to a close this week. The need of the hour is to address all stake-holder concerns. This discussion paper tries to deal with some of the key issues relevant for the way forward on ‘Net Neutrality’ in India, while taking examples from similar issues dealt in other countries.

In India, OTT (over the top) services have emerged as an issue on mobile networks as opposed their fixed line counterparts. Worldwide, the number of smart phones is projected to double from 1.5 billion last year to three billion in 2017. Most of those new phones with internet access will be in the developing world, and India. But to impose regulation upon an infrastructure that is still finding its feet seems premature. To restrict existing users’ access to any assortment of services might have the effect of negatively impacting untapped markets.

Those in favour of regulating OTT services argue that the market for these in India has been developing for at least five years, and that their service models are not in their nascent stage anymore. This is true, but that the domestic market is far from realising its capacity must also be taken into account.

It is not that a regulatory framework must be discounted entirely, but that the government must be prudent in its attempt to bring about one and not rush into making a decision that the telecom market will not be able to sustain in its current state.

Relative to what it could be, internet connectivity in India is very low. As things stand, the next huge wave of users will arrive armed mostly with low-end smart phones that are beginning to proliferate in the telephony market. In such a scenario, licensing OTT services might result in a drop in existing users due to an increase in the prices of such services, possibly also alienating markets that have not even been tapped yet; it is imperative to keep in mind here that this dynamic creates a different relationship to the internet from traditional connections at home or work. The combination of increased costs and the monopolistic powers of ISP might also make it more difficult for low-cost innovation for sustain itself, something that the internet has been especially valuable in fostering since its inception.

On the other hand, as mentioned in the TRAI paper, OTT service providers fall under the Indian telecom licensing regime whereas TSPs operate under a separate regime wherein voice and messaging services can be offered only after obtaining a license. TSPs have claimed that many OTT services are similar in nature to what the TSPs have been catering to, but remain unencumbered by the licensing agreements that the TSPs have to abide by while providing those services. In doing this, OTT service providers essentially piggyback over the infrastructure provided by the TSPs, which enables them to offer similar services at drastically lower costs.

As a result, there is the absence of a level playing ground for the two competing products same consumer services segment. Thus, it would be worthwhile to reorganize the services provided by OTT service providers in terms of the consumer services segment they cater to, rather than blindly classifying them as data services. In this status quo, as stated in the previous answer, it might not be a bad idea to refrain from licensing till such time as when India achieves basic goals liked improved access to the net.

The proliferation of OTTs has definitely made a dent on TSP revenue.

While usage of OTT services such as Skype and Line for local or national calling has begun to see increased adoption only recently driven by technology advances driving higher data bandwidth and service quality, these and similar services have had a far greater impact on the TSP revenues from international calls. Especially in a market like India where the cost advantage for local and national calls is minimal considering the relatively low calling rates offered by the telecom companies and data networks.

Adoption of OTT messaging services has been so fast and widespread that they are no longer a product of mobile data, but have for all intents and purposes become a major contributor to them.

The principal reason for this rapid adoption is the cost savings offered by these services. OTT messaging services offer basic messaging services either free of charge or for a very subsidized subscription fee. Considering the fact that the amount of mobile data used for basic OTT messaging is very low and the number of messages is not limited, the cost per message to consumer is negligible.

Even so, the increase in data revenues is not justified as a compensatory measure to balance this impact. Traditional TSP service provisioning is through circuit-switched networks, which are facing an overwhelming competition from their packet-switched counterparts from the Internet. In making claims for shared revenue, TSPs undermine the superiority of packet switched networks technology available to them, with the help of which they can increases the cost-efficiency of their own services.

In generalizing the kinds of services that OTT apps provide, regulatory authorities might relegate a vast pool of OTT players which do not directly compete with any of the established service sectors into a flawed pricing model.

Classification of OTT services must eventually take place, and regulatory laws be applied based on their respective service segments. This may cause additional costs for the OTT players, for example for e-retailing sites and apps to register as a retailing service like the brick and mortar retail outlets do and undergoing the same kind of licensing agreements. However, services like Wikipedia are novel in a way that they act as a knowledge repository rather than a targeted service that earns revenue and it would be in best interests to keep such services as simple data services. It must also be considered that if a service provider has to pay every TSP network to allow its use on such network, the internet will descend into a chaos of pricing models and segregation of access based upon them.

It is a fact that such imbalances exist, as is evident if we consider the example of off-line and online services in a unified way. For example, Skype and GSM services may not be classified as packet and circuit switched networks, that is, not on the basis of the underlying technology, but as voice service providers, or even better, real-time communication services providers.

Based on this kind of classification, the government can arrive at upgraded regulations which cater to both kinds of technologies which provide what is basically the same service. OTT services would then be obliged to provide fore lawful interception, detailed logs, providing mandatory emergency services and acquiring of service license before they can start operation in a country, while still being able to compete with the traditional service model in terms of pricing and revenue. Meanwhile, the traditional service providers have an option to upgrade themselves into fully IP-based networks which would allow them to drastically cut their own rates in order to compete with the OTT players.

Thus by following this evolutionary model of classifying services in segments rather than their underlying technology, we may achieve a level playing ground among different players.

By introduction of regulatory reforms into the current telecom licensing regime, it might be possible to mitigate security concerns arising from OTT service providers. The government should eventually, at a stage where the market has reached adequate maturity, apply the same rules to OTT apps as it does to telecom operators in terms of security. Should these players not comply with requirements, the regulatory authority may then block such services through reasonable network management.

The Internet is an open framework. The unprecedented innovation it has seen in recent years owes much to this democratic structure. It might be the case that some OTT providers use techniques which are not secure, but such malpractices are revealed at very rapid rates owing to this openness of the Internet. There are open standards like SSL which the service providers on the Internet must adhere to, and any loopholes in the service are quickly exposed. However, it is these service providers who have been innovating and should their means and methods be restricted by regulatory compliance to certain protocols, innovation will be stifled.

As for concerns relating to the various aspects of consumer interest and their protection, India can seek the example of those countries which have already brought into place net neutrality and/ or regulation legislation:
Chile, recognized as one of the more advanced telecom markets in Latin America, outlawed zero rating services in 2014, banning operators from offering free access to social media websites as part of a mobile data package and including provisions for parental controls, privacy, virus protection, and network security. In this course, it became the first Latin-American country to implement net neutrality laws.

Nearby Brazil, too, passed a legislation called the “Internet Bill of Rights” last year, which makes equal access to internet mandatory - ISPs are barred from restricting content and from charging more for data-heavy services - and protects the privacy of the Brazilian internet users.

In India, which has a market similar to Brazil and Chile’s in terms of penetration and affordability of services, the concept of net neutrality has no basis in law. The Telecom Regulatory Authority of India [TRAI] has made attempts at establishing neutrality rules several times before this but to no avail as yet.

The US, too, has succumbed to pressures from an assortment of civil society organizations campaigning for neutrality - in February this year, the Federal Communications Commission [FCC], being nodal regulatory authority, brought into force the Open Internet Rules [OIR] which classify ISPs as “common carriers”, rendering them equivalent to telecom service providers. In January 2014, a federal appeals court had struck down the FCC, which in 2010 had introduced provisions preventing internet service providers from blocking websites or imposing limits on users. Consequently, a user created a petition on White House’s ‘We the People’ platform, leading up to the installation of the OIR.

The debate has taken a different shape in the European Union, with strong restrictions on privacy and traffic management. The current policy proposal is one that essentially prohibits traffic management on the public Internet. In 2013, the Commission introduced a legislative proposal “Connected Continent: Building a Telecoms Single Market” intended to end discriminatory blocking and throttling and deliver effective net neutrality.

The proposals made in paragraph 4.23 seem to skew arguments favour of TSPs. Models of the kind wherein app service providers have to pay the network providers a nominal fees to use those networks, will not only burden the app providers but may also lead to network fragmentation and discriminatory practices. In such cases, it is almost always the customer that faces the brunt of costs.

The additional key practices mentioned in paragraph 4.29 are much more amicable in a that they classify services, and are much suited to providing a level playground for parties in the same service segment.

Net neutrality serves as an excellent theoretical model, something to be aspired to in an environment with adequate bandwidth and no network outages or congestion. This is not the case in India. It must be kept in mind that as triple play services converge onto the same IP path, an unprecedented load is placed on existing networks. In such a scenario, it makes little sense to forward time insensitive data at the same priority as real-time voice or video traffic. In both the Indian scenario and in a global context, this skewed view of how Internet works and the call for net neutrality by disregarding concerns for efficiency can lead to impeded development of infrastructure.

All the concerns listed in 5.47 revolve around a very solid team of transparency and accountability on the part of the telecom service providers. The last point in particular raises an ethical issue if the TSPs are given a free hand to deal with network infrastructure and OTT services. This point, as a prerequisite envisions the existence of same service on prioritized and unprioritised basis through the same network. This means, that the existence of premium plans ensures better and assured quality of service to the subscriber by creating ‘fast lanes’ of Internet traffic. This must not mean that the general lane’s traffic capability is compromised to force the customer into spending more and getting a premium plan. Thus, the regulation must set minimum quality of service requirements that each TSP is mandated to comply with, and should a TSP be found guilty of floundering the rules, they should be penalized.

At this point, the bandwidth caps approach, as described in the consultation paper looks to be the most acceptable because it complies with the principle of transparency - it shall be up to the customer to determine how to spend his quota of bytes. Network operators must not impose any sort of usage policy on users excessive traffic causes network problems. Even then, they must inform users about what steps they will take to delimit access, and to what extent, in order to resolve such problems.

Such an undertaking would go a long way in ensuring transparency, since it would keep users’ in the know about how, and in what forms, their access to the net is controlled. This knowledge would give them leverage to voice complaints, if any, and the basis to ask for change in management.

To say if it is a sufficient condition as this time would be to extrapolate; decisions regarding the introduction of other conditions can be made once this initiative comes to fruition.

Given that network operators are also in the process of upgrading their networks to fully packet-switched networks, it is about a matter of time that they do so. Post that, it makes little sense that the TSPs should share the network upgradation costs with anybody since their own services would be based on byte packets, and with regulations in place, they would be competing with their communication services counterparts (OTT Service Providers) on even playing grounds.

If the CAPs are made to share the upgradation costs, it almost precludes the entry of the local businesses from expanding their business by foraying into the Internet domain. These local businesses have so far existed in the brick and mortar form and are inherently local in scope, but there is much to gain even for them the increased acceptance and penetration of Internet throughout the nation. This sharing model may thus prove to be an obstacle for such businesses, thus stifling innovation and growth for CAPs. This may also cause the established big CAP players to monopolize the Internet market segment.

As long as content is lawful, discrimination of services is unacceptable. Not only would such practices be in direct contradiction of the net neutrality principles, they would also violate of the users’ right of choice. As per the most commonly accepted definitions of net neutrality in legislative circles across nations, blocking of lawful content is a violation of net neutrality.

The government must keep in mind the users’ right to use bandwidth they have purchased in any manner they see fit; once bought, such bandwidth becomes private property, and a network company must not be allowed to dictate the terms on which a user chooses to utilize the same.
As a practical example, if a consumer buys an internet plan that purports to provide at least 2 mbps speed up to 20 GB of data, he should not have to pay any premium over what he has already rendered unto the service provider for using the plan for video conferencing, media streaming, online gaming, or any online activity, regardless of consumption of bandwidth.

As per the TRAI’s consultation paper, the BUTS model’s success is dependent on the establishment of a fair and transparent regulatory framework. Regardless of these qualities, this might place a load on OTT applications if the government brings in a regulatory framework and licensing regime as discussed above, which may in turn stifle innovation. If not, the classification of OTT apps under BUTS is acceptable.

To begin with, the government might be well-advised to keep indigenously produced or India-specific apps unregulated and unlicensed for the time being. As stated above, the Indian market is one that is as yet to achieve anywhere close to its full potential, and if OTT service providers are made to share revenue as envisaged by TRAI, or otherwise be circumscribed in any form, this will discourage entry-level players who are right now are free to experiment in the web domain and might not possess the wherewithal needed to navigate bureaucratic procedure.

Given the open nature of Internet, there should be no need to regulate subscription charges since the trend is that competition levels the playing field; if a particular OTT service starts charging users according to different pricing models, it compels other providers to follow suit. These tactics also help increase efficiency in service provision, and further innovation. Prices also tend to self-regulate; it is not uncommon for users to shift allegiance from one service provider to another based on economy.

The government should classify them into appropriate service categories on case by case basis and apply the rules which make evolutionary sense should the off-line counterparts of those services turn to the Internet. Thus, e-retailing and traditional retailing are classified as ‘retailing’, with a view that the retailers who once owned shops in the real market are now setting up shops in the virtual market also. This would allow bidirectional movement. For example will receive oestrogen, an e-retailer wants to set up a real showroom in the market, (like Lenskart did) it should be easy for him such that he does not have to pay additional licensing fees but only the rent.

Likewise, if an off-line retailer wants to start an online shop, he should not have to do anything more than buying a domain and getting a website made, and of course, making agreements with the courier service.



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