This article is written by Harshita Shah who is pursuing a Diploma in Cyber Law, Fintech and Technology Contracts from LawSikho.
Post introduction of Internet and launch of internet services in mobile phones, many telecom service providers were under the impression that Internet services had threatened their business operations, such as making calls was replaced with OTT applications that allow making calls, sending messages, sending videos and images. Telecom operators were witnessing major changes in their businesses with the onslaught of the Internet. The Internet had covered more than what telecom operators were facilitating, such as communication, entertainment, social media, commerce and trade, etc. And thereafter many telecom operators expanded their operation to cater as Internet service providers to customers.
However, the amount spent by these ISPs and TSPs in creating infrastructure to access the internet is higher and reduces their profit margin. Secondly due to OTT platforms, telecom operators are losing out their revenues because customers are now increasingly preferring chats over calls, and using OTT platforms to make video calls/voice calls. India counted 200 million active users of WhatsApp in India in 2017. Currently in India there are around 200-300million active users of WhatsApp (see here). Hence, in 2014 Bharti Airtel started charging internet calls made by the user and it launched Airtel zero plan where Airtel offered certain websites and OTT platforms free of charge for use (See here). However, after much backlash, Bharti Airtel had to pull out from the scheme. This led to the emergence of debate on Net Neutrality in India. Net Neutrality is the principle that Internet services providers should treat all networks equally and should not charge differently for access to different websites or OTT.
How Net Neutrality is affecting common man
Telecom service providers can affect net neutrality in various ways such as by blocking content, throttling Internet speed or by prioritizing content of websites and OTT applications that pay them. In the Airtel Zero plan Airtel had offered partnership to E-commerce platform Flipkart so that Flipkart could enjoy free access by users. Under the arrangement flipkart would have to pay Airtel a subscription amount to remain free for users and to enjoy privilege over other ecommerce platforms. All the end users who have subscribed to the Airtel network would then have free access to Flipkart but would have to pay for access to other e-commerce platforms or services by such other e-commerce platforms could not be availed altogether.
If prioritization by payment becomes much sought, then telecom service providers will be benefitted by big media and other OTT run platforms, leaving minimal chances for the new ones to make entry. Paid prioritization will only become anti-competitive and create a monopoly. For e.g. Netflix which is an OTT run platform may be in a position to prioritize its application over others such as Voot, Hotstar, etc. which can affect the growth of country based OTT platforms. If Telecom service providers charge differently for different services that can be accessed through the internet, common man will have to avail and subscribe to different packages to avail this offer. For e.g. if you want to connect and engage with social media platforms such as Facebook, Instagram, WhatsApp, you might be charged differently in order to access either of them. So every time we successfully do recharge in our phones we will have to separately avail these packages. It is very similar to the cable services where you have to pay for channels that you wish to see. And you give up your right to see other channels. Imagine a giant E-commerce Company such as Amazon who is into E-commerce but now a whole web service that has the potentiality to pay telecom service providers to prioritize its content over most others. This would fundamentally affect small businesses who want to launch their e-commerce website, thus it would undermine and restrict indigenous growth.
Net neutrality is not restricted to OTT platforms and e-commerce websites; it extends to all and everything that is accessed through the internet. If net is not neutral for all kinds of content, it would fundamentally curtail freedom of speech and expression. Today, individuals, victims, civil society, small business owners, students, associations, and all other classes of people are able to voice their opinion and find like-minded people with whom they can collaborate and enter into ventures. Recently Internet Freedom Foundation recorded 134 instances of blocking of various sites by ISP over a period of 2 weeks (see here). However TRAI and DOT have not reported any net neutrality violation from their side.
Stakeholders in Net Neutrality
Telecom service Providers, Internet service providers, OTT platforms, platforms that provide voice, video and text services over the Internet such as Facebook and What’s app, government, civil society and finally the end users are the primary stakeholders in the debate of net neutrality. Post the launch of Airtel Zero plan, Telecom Regulatory Authority of India sought a consultation paper directing different stakeholders to answer certain questions. TRAI had sought suggestions regarding three questions namely,
- Whether Internet regulation is required in India?
- Should ISP companies have the right to charge on apps or other internet enabled services?
- Should ISPs create separate bundles of data charges for separate Internet enabled services and OTT platforms?
TSPs want to regulate the OTT business in a similar way as they are being regulated for voice calls and messages. Telecom service provider has to obtain and comply with different license requirements. For example, when issuing a new SIM card they have to strictly comply with Know Your Customer policy, they have to bear charges of toll free numbers, they have to ensure there are no network blockages, they have to develop infrastructure such as raising mobile towers, expanding broadband cables and creating the whole set of infrastructure that could provide seamless connectivity. Under section 4 of Indian Telegraph Act, voice, text and video in any form is to be regulated and licensed. As per Telecom service providers, all OTT platforms are providing the services without any license and regulation. They are the parasites who are unjustly enriching themselves at the expenses of infrastructure set up by ISPs and Telecom service providers. Civil society organisations propagate that charging prices would curtail the entry of new inventors, start-up entrepreneurs and is anti-competitive. They contend that Service providers are merely infrastructure providers of the internet and that the internet is not a product that they sell. Hence they should not act like gatekeepers regulating and deciding the entry of users.
In India, where 1 billion populations are still not connected to the internet and where the internet is a medium to connect the rural villagers to the global economy and policies and schemes launched by the government, regulating the internet would be like restricting freedom of trade, freedom of expression. Under the lure of promoting brands if platforms start paying TSPs, it would abruptly give power to TSPs to recover their investments in infrastructure. For example many telecom companies have raised the issue for charging the use of WhatsApp which is a form of over the top (OTT) application. OTT application basically provides the product or service through the internet and access to OTT applications merely requires good internet connection and android device. Hence, the stakeholders such as telecom service providers claim that OTT applications demotivate the telecom market`s invention and hence access to such services shall be priced.
Business Loss of TSPs
Since 2012 when the Supreme court cancelled licenses of 122 Telecom service providers for their involvement in 2G spectrum case in Subramanian Swamy vs. A. Raja (S LP Crl.) No.1688 of 2012, it led to the exit of many operators and somewhat discouraged entry of new operators. In the present scenario, there are mainly 4 dominating market players viz, Airtel, RJio, BSNL and Vodafone-Idea. Jio’s free services saw the exit of Telenor, RCOM, Teleservices and Aircel. Jio’s free services have also affected leading players such as Vodafone-Idea, Airtel. The financial health of this sector does justify the intent and rationale behind major TSPs opposing net neutrality.
a) As of 2017-18 gross revenue has dropped by 15% to 20% for the dominant and all others.
b) There is 74% decline in net profits of Airtel.
c) Interest costs are at 20% to 25% of gross revenue
d) Voice revenue per minute has come down by 50% to 18p per minute.
e) Data revenue per MB has come down by 90% to Rs 1.5 per MB
f) Voice Usage per user has gone up by 40% while data usage has gone up by 600%.
Net neutrality rules in India
The market of Telecom service providers and Internet service providers was dominated by few giant players. However within a span of 5years, Reliance Jio has badly hit the giant players and has secured the top position, followed by Airtel. Post Facebook buying 10% stake in Reliance Jio, concerns regarding net neutrality have raised again. Post 2016, because of cheap data plans launched by jio, overall data consumption for the whole country has risen and it was around that time that most of the people had bought Jio SIM and had ported from other SIM cards to Jio. Since then, Jio has disrupted the telecom market and is near to make its monopoly. Already the duopoly is evident with Jio and Airtel. This position of Jio can lead to abuse of its dominant position if the regulatory body under net neutrality fails to implement the checks and balances under the regulations.
Regulator of net neutrality in India
In 2016, TRAI published Prohibition of Discriminatory Tariffs for data services regulations, 2016. Section 3 prohibits distributors from offering or charging discriminatory tariffs for data services on the basis of content. Section 5 deals with consequences of contravention of such regulation where service providers can be asked to withdraw discriminatory tariff. TRAI released another set of recommendations on 28th November 2017(see here) which were accepted and incorporated by DOT on 31st July, 2018. The following recommendations by TRAI were incorporated by DOT-
- It stated that Internet service providers should not use any discriminatory tactics with respect to hosting of content.
- Internet service providers shall not charge different rates from different applications, websites and other content providers over the Internet to host their content and to make it accessible to the general public.
- The terms of various license agreements governing provisions of Internet services shall be amended to include provisions of Non-discriminatory treatment, applications, exclusions and exceptions.
- The terms of license agreements shall also include necessary traffic management practices as formulated by DoT
- All specialized services as prescribed by the government, such as automatic driving, remote diagnosis and all services running on IoT are excluded from the applicability of Net Neutrality. These services can be prioritised for faster internet lanes.
- All content delivery networks shall not be included within scope of any restriction unless directed by the government.
- All monitoring and enforcement functions shall rest with DoT.
- The licensee is prohibited from entering into any agreement or arrangement having effect of discriminatory treatment of content.
- The internet service providers shall not engage in blocking, throttling or paid prioritization of any website or any content.
As per the policy directives, monitoring and enforcement functions concerning net neutrality rests with the department of telecommunication. TRAI released a new consultation on issues relating to Traffic Management Practices and on the possibility of setting up a multi-stakeholder body. DOT has sought additional recommendations from TRAI with respect to necessary traffic management practices and composition, functions, roles and responsibilities of multi-stakeholder bodies. Traffic management practices are essential and reasonable if they do not alter the basics of net neutrality. Due to surge in number of Internet users and data, there is surge in internet traffic and sometimes traffic is artificially induced by malwares. Hence TRAI has come up with recommendations which may require managing traffic by applying some restrictions such as putting cap in terms of maximum throughput, blocking traffic of particular class and nature of applications in a manner which is transparent and reasonable with principles of net neutrality. Multi-stakeholder body shall comprise of members representing different categories of TSPs and ISPs, large and small content providers, representatives from research and academia, civil society organisations and consumer representatives. MSB shall assist DOT in monitoring net neutrality violations and setting up best practices for reasonable traffic management. This Multi stakeholder body shall also assist Dot in handling net neutrality complaints.
Net Neutrality rules in Foreign Countries
The body of European Regulators for electronic communications in consultation with all National Regulatory Authorities has issued regulations for net neutrality (EU) 2015/2120. As per the regulation ISPs should not engage in throttling or blocking or prioritization of content, service, platform on the Internet. However, they could engage in Zero rating of certain services under the agreement and with certain regulations. ISPs could also engage in reasonable traffic management practices, however the member states in the union are independent to lay down provisions for reasonable traffic management practices and formulate and implement their own regulations for zero rating agreements.
However, recently the Court of Justice of European Union in ECLI:EU:C:2020:708 has pronounced a judgment on zero rating after the concerns arose in data subscription of Telenor in Hungary.
Facts– Telenor offered two types of zero-rated subscriptions. The first was the My Chat subscription. This subscription included a data limit of 1 GB that could be used for all Internet applications. As soon as that limit was reached, the entire Internet access became considerably slower. However, the data traffic that belonged to certain social media and messaging applications did not count towards the data limit. In addition, once the data limit was reached, the speed of all data traffic was slowed down, except for the zero-rated applications. For the My Music subscription most of the same applied, except that the data limit varied for that subscription.
Judgment– In Article 3(1) of the The EU regulation (EU) 2015/2120 on net neutrality states that “ end-users have the right to access and distribute information and content, use and provide applications and services, irrespective of the end-user’s or provider’s location or the location, origin or destination of the information, content, application or service, via their internet access service”. The ECJ notes that the “end users” referred to in the Net Neutrality Regulation includes parties requesting internet access, as well parties who rely on internet access to provide content, applications and services. Also, as per article 3(2) the agreements between ISPs and end users on grounds of commercial, technical or any other service related to Internet access such as data price, volume or speed shall not limit exercise of rights of end users. The ECJ also finds that it is likely that these packages will increase the use of certain specific applications and services, namely the zero-rated applications and/or services. The ECJ thus concludes that such agreements, if concluded with a significant part of the market, are liable to limit the exercise of end users’ rights, within the meaning of Article 3(2) of the Net Neutrality Regulation.
Portugal is a part of European Union and like other members of EU Portugal has net neutrality in place that prohibits and discourages throttling and blocking of data. However, providers are free to engage and offer zero rating plans to subscribers. In zero rating data from specific apps or websites isn’t counted towards the user`s monthly data limit. This allows providers to forge partnerships with particular websites and applications.
Australia has no formal net neutrality laws. ISPs keep offering Zero rated plans. However, they cannot throttle, disable the content provided by other service providers. The Internet is regulated by Australian communications and media authority, and any instance of throttling or blocking is taken seriously under Australian consumer protection laws.
Net neutrality is intrinsic to the idea of freedom of speech and expression. Hence, any discriminatory treatment to any content has to be avoided at all costs. However, the concerns of TSPs shouldn`t go unheard. This is a call of the dwindling state of the telecom sector where only few players have remained to cater to 574 million active internet users. This also highlights the fact that the Internet is no more a luxury but a primary necessity and the sellers of same are merely facilitators to various kinds of services that the internet shall assist to get in. Hence it is necessary that the sector shall not tend to become monopolistic but a liberal market. If the sector shall have few access providers, it would be difficult to harbour net neutrality in its entirety.
Monopoly will tend to violate net neutrality without any fear of punishment and violations will go unreported. A single dominant player in the market with its throw away prices is restricting the entry of new comers and the other existing are probably unable to thrive in R&D and other innovation because they are already in debts and some in losses. The equal pay for equal service as demanded by some TSPs where they are seeking to be given liberty as other OTT players in the licensing and tax regime shall be looked into if the sector has to be renovated.
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