net neutrality

Why the telecom regulator's plan to make you pay for Whatsapp is bad in theory and practice

Services like Whatsapp are not eating into their revenues. Yet.

The Telecom Regulatory Authority of India has begun to test the ground on the so-called net neutrality debate, which centres around whether internet service providers should be allowed to charge customers differential rates for using applications and web services.

At a seminar held by the TRAI earlier this week, telecommunication companies openly asked firm providing so-called Over The Top services to pay them if they want mobile-phone users to be able to access them. Over The Top services, such as Whatsapp and Viber provide audio and video data over the internet, often replace traditional telecom company services such as messaging and voice.

Cell-phone operators contend that they need to charge app companies a service fee to maintain the service levels mandated by the TRAI. But this is difficult to do when several customers access a network at the same time, said Rajan Mathew, director general of the Cellular Operations Association of India, a telecom company lobbying organisation.

If, for instance, a Facebook video goes viral, and several mobile phone users rush to access it, the website will slow down. On the other hand, if Facebook were to pay the telecom company for an extra server, users would be able to maintain steady access.

“We don’t want mandatory [revenue] sharing,” said Mathew. “This should be left to operators to negotiate. We are asking the regulator to look at this matter and determine what type of regulatory environment should be appropriate.”

Resistance app firms

As is to be expected, those who run application companies stoutly resist the idea that their services should face regulation.

“It is not done anywhere in world,” said Vijay Shekhar Sharma, CEO of One97, a company best known for its Paytm online wallet application. “This is anti-business and a very short-sighted thought.”

The TRAI, he said, should get involved only to ensure that no telecom operator throttles an Over The Top application.

But the real source for the telecom industry’s concerns should actually be TRAI and not application manufacturers.

According to an industry official who did not wish to be named, telecom companies have been losing revenues from their messaging services since 2012, when the TRAI put a cap on the number of messages a single SIM card could send. This solved customers’ problem of unsolicited spam messages, but it also meant a dip in messaging revenues for telecom companies. Despite this, the overall revenues of telecom companies have risen since then.

This was because messaging never formed a large part of service revenues. The largest source of income for telecom companies has always been voice services. Even though voice service replacement applications of the kind offered by Viber and Skype are now available, the prohibitively high cost of data usage on mobile devices deters users.

Loose precedents exist

It isn’t as if Over The Top application firms have not made payments to telecom firms before. Some have done so to ensure that service providers prioritise their services. Bharti Airtel, for instance, closed a deal with Whatsapp in May by which users could pay a nominal monthly amount to access only that application. They would need to subscribe to an independent data package to access other online resources.

But the crucial difference with deals such as this is that users still have the option of accessing other applications at the same speeds and rates as they used to, regardless of whether an application company has paid a telecom company to provide superior access.

“When telcos and OTTs want to jointly promote [their services], it is a business deal between two parties,” wrote Shekhar. “[There is] nothing to regulate and nothing to take as business precedent either.”

According to the industry official, TRAI representatives at the seminar that they were simply seeking opinions. They have, however, noted the question of how Over The Top applications might hurt telecom company revenues in a public consultation paper released on July 31. These papers, published on the TRAI website, are the basis on which the regulator decides to implement new rules. For now, this seminar will only mean something if the TRAI calls for a consultation paper to examine the net neutrality debate further.

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