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Things to know about net neutrality

MUMBAI: Net neutrality, which has pitched fixed-line and wireless providers such as Comcast and Verizon against big bandwidth users such as Netflix in the US, has remained the dominant discourse in the Indian media for the past few weeks.

While the issue has been in focus ever since the telecom operators met the Telecom Regulatory Authority of India (TRAI) to bring over-the-top (OTT) services like WhatsApp, Viber and WeChat under the regulatory ambit, it became a hotly debated subject ever since the regulator came out with a consultation paper on it.

On one side are the pro-net neutrality hawks and OTT platforms that want the internet to be open and transparent so that there is an even playing field. On the other side are the telecom operators who contend that the OTT platforms are hurting their traditional businesses like voice and messaging and that it is time the regulator did something about it.

The proponents of net neutrality argue that even though the revenue of telcos from messaging and voice services might have come under pressure, their data revenues have seen exponential growth and this growth in data owes largely to the growing popularity of OTT services.

The telcos counter this by arguing that the OTT platforms use their pipe to reach the consumer completely bypassing them. While telcos are part of a licensing regime to provide different kinds of telecommunication services, OTT services have no such obligation. In brief, the telcos argue that the OTT services use their infrastructure and eat into their revenue.

There is also an argument that net neutrality would allow start-ups and young apps developers to mushroom in India.

TRAI’s consultation paper on OTTs

Looking at the sensitivity of the issue, the regulator first held an open house meeting (OHM) with all the stakeholders in August 2014 and followed that up by coming out with a consultation paper in March on whether there is a need to bring OTT services under the regulatory framework.

Some of the important issues discussed in the consultation paper include the following: policy and regulatory environment and need for regulation; current policy dispensation for OTT players vis-a-vis telecom service providers (TSPs); security concerns of OTT players providing communication services; issues related to security, safety and privacy of the consumers; issues arising from net neutrality; network discrimination and traffic management practices; non-price-based discrimination of services and ensuring transparency to consumers; and pricing-related issues, including differential pricing for data access.

OTT TRAI

The regulator has reportedly received over 800,000 mails since it floated the consultation paper to protect net neutrality.

Based on the kind of service they provide, the regulator has put OTT apps into three types, namely (i) messaging and voice services (communication services), (ii) application eco-systems (mainly non-real time), linked to social networks, e-commerce; and (iii) video/audio content.

The main competition for telcos is coming from communication services like WhatsApp, Viber, WeChat, and Skype and social media/e-commerce services like Facebook, LinkedIn, Twitter, Instagram and WeChat, various e-commerce apps including m-payments, m-wallets like Amazon, Flipkart, Snapdeal and Alibaba.

The third category of services like YouTube and other OTT video platforms are more of a challenge for traditional television channels rather than the telcos. In India, the traditional television channels still dominate the scene despite the growth of OTT platforms. However, the younger TG is steadily shifting to mobile to consume content.

This is unlike the US market where OTT services like Netflix and Hulu have led to cord cutting, thereby disrupting the business models of cable TV service providers.

The emergence of OTT services has been a challenge for regulators around the world. However, most regulators have leaned towards net neutrality and non-discriminatory access to all services.

DoT to decide on net neutrality

In January, the Department of Telecom (DoT) formed a six-member committee to examine the economic impact of implementation of the net-neutrality principle on the sector. The panel will submit its recommendations next month, following which s final view will be taken on net neutrality.

Batting in favour of net neutrality, telecom minister Ravi Shankar Prasad had said, “We feel that the internet is the creation of the human mind. It should have linkages to the common man in a non-discriminatory manner.”

He also said that the government’s views on the issue would be independent of what TRAI recommends. “We are doing so [coming out with a report] independent of TRAI. This is happening for the first time because of the gravity of the matter,” he had stated.

Regulatory scene in US

On 12 March 2015, US communications regulator Federal Communications Council (FCC) released the new internet rules, further strengthening the network neutrality concept in the US. This came in the backdrop of president Obama calling for tougher net neutrality rules.

These new rules apply to both fixed and mobile broadband services recognising advances in technology and the growing significance of mobile broadband internet access.

The three practices banned by this rule are blocking, throttling and paid prioritisation. Called bright-line rules, these rules are: a) No blocking: Broadband providers may not block access to legal content, applications, services, or non-harmful devices; b) No throttling: Broadband providers may not impair or degrade lawful internet traffic on the basis of content, applications, services, or non-harmful devices; c) No paid prioritisation: Broadband providers may not favour some lawful internet traffic over other lawful traffic in exchange for consideration of any kind—in other words, no ‘fast lanes’.

According to the FCC, the retail internet is not merely an information service but also an “edge service”. It is, in other words, the consumer-facing part of the vast telecommunications network.

The net neutrality rules cover the mobile devices. So there is no distinction between the landline and the mobile devices.

However, the FCC has not entirely equated the internet with that of an utility service. It is not regulating the price of broadband.

Impact of OTTs on telcos

According to a Global Web Index study, WhatsApp topped the messaging application market with 52 per cent of all the users using OTT messaging services in India, followed by Facebook Messenger with 42 per cent, Skype with 37 per cent, and WeChat with 26 per cent share as on December 2014. Viber stood at the fifth spot with 18 per cent share and Line ranked sixth with 12 per cent.

WhatsApp’s subscriber base in India has risen to 70 million and it has a free subscription model (unlike in developed markets where the annual fee is $1). Similarly, the homegrown Hike messenger in India claims to have a subscriber base of around 35 million as of August 2014 sending 0.5 billion messages per day. Interestingly, 83 per cent of Indian internet users access the net through a mobile phone.

The SMS traffic for the TSPs have shown declining trends in the recent past. The messaging traffic fell 18.3 per cent to 4,367 million in June 2014 from 5,346 million in June 2013. This decrease has been attributed entirely to an increase in traffic of OTT messaging apps.

According to the rating agency CARE, the share of SMS revenue in the total revenue of TSPs in the country in the case of GSM operators has decreased from 5.84 per cent in October–December 2012 to 3.39 per cent in October–December 2013. For CDMA operators, the decrease was from 1.80 per cent to 1.66 per cent.

This decline in SMS revenue has an implication of approximately Rs 3,700– 4,000 crore (Rs 37–40 billion) per annum.

Airtel at the receiving end for anti-net-neutrality schemes

Even as the regulator was preparing to come out with a consultation paper on OTT services, Bharti Airtel came out with a separate tariff plan for VoIP calls that would have resulted in consumers shelling out more to use calling apps like Skype and Viber.

As per the tariff plan launched by the telco in December last year, the VoIP exclusive pack was priced at Rs 75 for 75 MB with a validity of 28 days for prepaid users. This, the telco said, will allow customers to make between 200 and 250 minutes of calling.

However, within two days of announcing the pack, the telco withdrew the plan following howls of protest from consumers. The company said that it rolled back the plan since TRAI was planning to issue a consultation paper on issues relating to services offered by OTT players including VoIP.

Following TRAI’s consultation process, the telco introduced a new marketing platform called Airtel Zero that allowed customers to access mobile applications at zero data charges. Now the catch is customers would only be able to access mobile apps that signed up with the platform.

While the company claimed that the objective of Airtel Zero was to revive interest of dormant customers, net-neutrality activists smelled a grand conspiracy behind the move.

What followed was a concerted campaign forcing the telco to issue a clarification that the platform is not a tariff proposition and is an open marketing platform available to all companies.

Under fire for signing up with Airtel Zero, e-commerce platform Flipkart walked away from the platform contending that the concept of zero rating does not meet its standards of net neutrality.

Following Flipkart’s pull-out, Airtel quickly issued a statement saying that Flipkart’s statement is consistent with its stand that Airtel Zero is not a tariff proposition.

Airtel Zero is a technology platform that connects application providers to their customers for free and is open to all application developers, content providers and internet sites on an equal basis, the company clarified.

It added that the platform would remain open to all companies that want to offer toll-free data services to their customers on a ‘completely non-discriminatory’ basis.

It also clarified that no site is blocked, throttled, or provided any form of preferential access under any circumstances irrespective of whether it is on the toll-free platform or not.

Facebook’s Internet.org

After claiming its first victim in Airtel, the fire of net neutrality spilled over to Facebook’s Internet.org initiative that aims to take internet services to under-privileged people in developing countries.

After launching the initiative in countries including Zambia, Indonesia, Tanzania, Kenya Colombia, and Ghana, social networking site Facebook partnered Reliance Communications to launch Internet.org in India in February.

As part of the partnership, RCom users in Tamil Nadu, Maharashtra, Andhra Pradesh, Gujarat, Kerala and Telangana would be given free access to more than three dozen services ranging from news, maternal health, travel, local jobs, sports, communication and local government information.

Aaj Tak, AccuWeather, Amar Ujala, AP Speaks, Babajob, BBC News, Bing (search engine), Cleartrip, Daily Bhaskar, Dictionary.com, ESPN Cricinfo, Facebook, HungamaPlay, IBNLive, India Today, Jagran, Maalai Malar, Maharashtra Times, NDTV, Newshunt, OLX, Reliance Astrology, Reuters Market Lite, Times of India, TimesJobs and Wikipedia were few of the services that joined the network.

However, a day after Flipkart walked out of Airtel Zero on net-neutrality grounds, Cleartrip, NDTV and Newshunt followed suit by moving out of Internet.org. The Times Group later pulled out TimesJobs and Maharashtra Times from the initiative and said it would withdraw completely if its competitors including India Today, IBNLive and BBC also decided on the same.

Times Internet Corporate Blog stated, “In the case of the group’s properties such as TimesJobs and Maharashtra Times, where its competitors are not on zero-rate platforms, these properties will pull out of internet.org. As for the Times of India itself, the group commits to withdraw from internet.org if its direct competitors – India Today, NDTV, IBNLive, NewsHunt, and BBC – also pull out. The group also encourages its fellow language and English news publishers – Dainik Jagran, Aaj Tak, Amar Ujala, Maalai Malar, Reuters, and Cricinfo – to join the campaign for net neutrality and withdraw from zero rate schemes.”

NDTV founder Dr Prannoy Roy tweeted, “NDTV is committed to net neutrality and is therefore exiting, and will not be a part of Facebook’s Internet.org initiative.”

‘Save the Internet’ and net neutrality issues picked up so much momentum that Facebook founder Mark Zuckerberg had to clarify his company’s position.

In a blog post Zuckerberg said, “Internet.org doesn’t block or throttle any other services or create fast lanes—and it never will. We’re open for all mobile operators and we’re not stopping anyone from joining. We want as many internet providers to join so as many people as possible can be connected.”

“By partnering with mobile operators and governments in different countries, Internet.org offers free access in local languages to basic internet services in areas like jobs, health, education and messaging. Internet.org lowers the cost of accessing the internet and raises the awareness of the internet’s value. It helps include everyone in the world’s opportunities,” he added.

As per Internet.org’s ‘zero-rating’ policy, telecom operators do not charge for the data so that consumers get these services for free. This makes it difficult for those who are out of Internet.org to compete.

Zuckerberg feels that “if someone can’t afford to pay for connectivity, it is always better to have some access than none at all.”

Rahul Khullar says corporate war between a media house and a telco has clouded debate on net neutrality

Giving a new turn to the controversy over net neutrality, TRAI chairman Rahul Khullar remarked that the corporate war between a media house and telco has muddled the debate on net neutrality.

“There are passionate voices on both sides of the debate. And if that was not enough, there’s a corporate war going on between a media house and a telecom operator which is confounding already difficult matters,” TRAI chairman Khullar had told The Indian Express.

Net neutrality  in the strictest sense is not practiced in UK and parts of Europe. Even in the US ‘zero-rating’ plans are permissible, Khullar pointed out.

TRAI has requested stakeholders to comment by 24 April and to offer counter comments by 8 May.

Whatever happens, at this stage it looks like the net neutrality side is winning.