Telcos at odds with OTT communication providers over licensing regime

OTT vs telcos

Indian private telecom operators have countered OTT communication providers on the licensing regime, asserting that streaming and messaging services fall under the new Telecom Act as access services.

Their position challenges the stance of OTT communication providers like WhatsApp, Google’s RCS, and Telegram, who maintain that their apps are governed by the Information Technology Act of 2000.

Earlier this week, industry bodies representing OTT players responded to the Telecom Regulatory Authority of India (Trai) consultation paper, which sought input on service authorisations under the new Telecommunications Act. They cautioned against imposing additional regulations on these apps.

The Cellular Operators Association of India (COAI), representing telecom companies, said that to resolve the issue of an uneven playing field and to uphold the principle of 'same service, same rule', these competing and substitutable services should be included under the access services authorisation in the new regulatory framework.

“The COAI expresses concern with the recent media reports suggesting a distinction between Telecom Service Providers (TSPs) operating solely at the network layer and Over-The-Top (OTT) applications functioning exclusively at the application layer. This characterisation is fundamentally flawed and misrepresents the technical reality of modern IP communications. As per our understanding, OTT Communication services are covered under the new Telecom Act as an access service,” said SP Kochhar, director general of COAI.

COAI said OTT platforms primarily function at the application layer, relying on the telcos' underlying infrastructure and services.

In response to the consultation paper, the Internet and Mobile Association of India (IAMAI) stated that telecommunications companies (TSPs) operate on the network side. In contrast, OTT service providers operate on the application layer. As a result, there is a clear distinction in the operational and technical nature of OTT service providers and telcos.

In countering IAMAI’s comments, COAI said on August 20 that telcos operate across all seven layers of the Open Systems Interconnection (OSI) model. In the 4G/5G era, they deliver their services through applications that span the entire OSI stack.

“Conversely, OTT platforms primarily function at the application layer, relying on the underlying infrastructure and services provided by TSPs. These platforms leverage the robust network architecture and OSI layers established and maintained by telecom operators to deliver their services. This mischaracterisation overlooks the complex, multi-layered nature of telcos; operations and underestimates their crucial role in enabling the digital ecosystem.” Kochhar said.

Reliance Jio, Bharti Airtel, and Vodafone Idea earlier called on Trai to overhaul the existing telecom licensing regime and bring a pan-India single licence, demanding that even communication OTT players be regulated under the same since they provide similar services to the carriers.

COAI, which represents Reliance Jio, Bharti Airtel and Vodafone Idea, emphasised that telecom companies play a critical role in enabling the digital ecosystem, especially as the country enters the 5G era.

Opposing the stance taken by telcos, the Broadband India Forum (BIF) stated that different services require different terms and conditions. They argued that a single authorisation would be arbitrary and significantly damage the regulatory framework. Such a move would create a completely different category of 'super authorization,' which would be anti-competitive and would result in the imposition of unnecessary regulatory burden for service providers who only wish to offer a specific service or operate in a specific licensed area.

BIF added that the move would consolidate power within the hands of a few, undermining the intended benefits of liberalisation and market expansion.

The Asia Internet Coalition (AIC) said the telcos’ arguments around ‘level playing field’ and ‘same service, same rules’ are unfounded and cannot apply to fundamentally different services.

IAMAI clarified that OTT services do not enjoy a free ride on telco networks, as they significantly contribute to driving revenue for the telcos.

“It is the demand for online content and applications provided by OTT providers that is driving an increase in the demand for internet access. The monthly average revenue per user for wireless service providers grew nearly 90 percent - from Rs 74.38 to Rs 141.14 from 2019 to 2022 - on the back of 156 times increase in data consumption from 92.4 million GB to 14.4 trillion GB from 2014 to 2022," IAMAI said in its comments.

In its counter comments, software industry body NASSCOM said the final definition of “telecommunications services” excluded OTT services from the scope after former union minister of telecom Ashwani Vaishnaw publicly clarified this in December 2023.

“Any additional regulatory intervention (like a licensing/authorisation framework) will negate these (increase in TSP revenues from data consumption) advantages by imposing entry costs, increase the cost of service which could be passed on to consumers, and thereby stymie the virtuous economy OTTs are contributing to," NASSCOM said.

The software industry body said that the Indian telecom industry is an example of how burdensome regulation could result in limited consumer choice, with only two or three alternative service providers and high switching costs.

The US-India Strategic Partnership Forum (USISPF) separately said that creating a controlled licensing and pre-authorisation regime for OTTs may have a vitiating effect on the Indian internet ecosystem, as it may prevent the organic entry and operation of OTT platforms in India.

“Given that a large number of OTT platforms are startups or small-sized, the effects of the introduction of the pre-authorisation regime on the Indian digital space may be compounded,” the industry body said, adding that the Ministry of communication should issue an official clarification that OTT platforms are not covered under the ambit of the Telecom Act.

Trai will host an open discussion on the paper on August 21.