Leaving OTT Communication Services To Their Own Devices

Ashima Obhan & Shivam Patanjali

13 Oct 2020 7:55 AM GMT

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    On September 16, 2020, the Minister of State for Communications, Education and Electronics and Information Technology during a session in the Lok Sabha, informed the Parliament that the Telecom Regulatory Authority of India ("TRAI") had published its recommendations for the Department of Telecommunications ("DOT") to regulate Over the Top ("OTT") Communication Services[1].

    OTT communication services are those services that provide real-time communications solutions that operate over the internet. These services, which include voice calls, video calls, instant messaging, audio messaging, have been designed as an alternative to the traditional forms of communications provided by telecommunication operators. These OTT communication services are considered to actively use the infrastructure of telecommunication operators, but not contribute to their revenue. However, given that these OTT communication services require an active internet connection, telecommunication operators are able to generate revenues by making consumers subscribe to data packs. OTT communications services such as WhatsApp, with a reported active user base of 400 million in India[2], are a prime example of the sheer popularity of these OTT services. These OTT communication services have increasingly made telecommunication operators concerned that they may replace the traditional communication services offered by them.

    Power to Make Recommendations

    The TRAI has been empowered under Section 11(1)(a) of the TRAI Act, 1997 to make recommendations, either suo motu or on a request from the licensor[3] on issues such as the: (i) need and timing for introduction of new service provider; (ii) terms and conditions of license to a service provider; (iii) revocation of license for non-compliance of terms and conditions of license: (iv) measures to facilitate competition and promote efficiency in the operation of telecommunication services; (v) technological improvements in the services provided by the service providers; (vi) type of equipment to be used by the service providers after inspection of equipment used in the network; (vii) measures for the development of telecommunication technology and (viii) any other matter relatable to the telecommunication industry in general.

    Therefore, in accordance with the powers granted to TRAI to make recommendations, the DOT vide a reference letter dated. March 03, 2016, sought TRAI's recommendations on net neutrality including traffic management and economic, security and privacy aspects of OTT communication services. In pursuance of the same, the TRAI issued a consultation paper on the residual issue, i.e., regulatory framework for OTT communication services, and raised various issues for comments and counter-comments from stakeholders. After having received 89 comments and 12 counter-comments on the consultation paper, two open house discussions were held where the stakeholders participated and deliberated on the issues.

    The Issues

    Functional Substitutability

    As discussed, the services provided by these OTT service providers are considered similar to the ones provided by telecommunication operators. As a result, during the discussions held by TRAI, some of the stakeholders were of the opinion that services providing "functional substitutability" such as voice telephony, messages, video calls and instant messaging service should be made the primary criterion for regulatory norms. However, it was brought to TRAI's attention that these OTT communication services are completely dependent on the telecommunication operators. The telecommunication operators have exclusive rights like spectrum, network infrastructure and operate in different layers as compared to OTT communication services.

    Non- Level Playing Field

    It was argued that a non-level playing field that existed between telecommunication operators and OTT service providers could only be leveled by ensuring that OTT communication services are subject to regulatory requirements. Additionally, it was also argued that reducing the regulatory barriers (license fees, spectrum usage charges, other levies and taxes) for telecommunication operators would improve their business and assist in leveling the field. Furthermore, the telecommunication operators also emphasized on entering into commercial arrangements with these OTT service providers to allow them to offer users special OTT data packs.

    As a response to the non-level playing field argument, it was pointed out that OTT service providers operate in an extremely competitive market. In an extremely competitive market these OTT service providers do not exercise any control over the infrastructure, and it is only the telecommunication operators that can directly use the spectrum. It was also pointed out the use of these OTT communication services had also boosted the revenue of telecommunication operators due to increase data usage by users.

    Interoperability and Security

    There was a common agreement amongst the stakeholders that there was no need to mandate interoperability, i.e. the ability of systems and software to create, exchange and use of data. It was felt that interoperability was best governed by market forces. However, when it came to data security, there was a difference in opinion with respect to interception of OTT communications. The fact that most OTT service providers collect and store personal information of their users in servers located abroad make it difficult to retrieve such data owing to jurisdictional issues. It was further argued that having these servers abroad could lead to interception of such communication. However, it was pointed out that through the Clarifying Lawful Overseas Use of Data Act of USA[4] and the Budapest Convention[5] the issue of interception of OTT communications could be resolved as they provided effective solutions for data transfer.

    International Position

    Across the world, there is yet to emerge a clear approach that should be adopted by countries with respect to regulating OTT communication services. While some jurisdictions such as Argentina, Israel, South Korea, South Africa, and Sri Lanka[6] do not have any formal regulatory framework for OTT communication services, the European Union has enacted the European Electronic Communication Code ("EECC")[7]. The EECC clearly defines electronic communications services[8] and interpersonal communications services[9] and establishes a harmonised framework for the regulation of electronic communications networks, electronic communications services, associated facilities and associated services[10]. There are also countries across the world such as China and Russia that have decided to ban certain OTT Communication services altogether[11][12].

    The Recommendations

    The Economic Effect

    TRAI took note of the fact that as a result of OTT communication services, telecommunication operators have seen an exponential growth in data usage. The telecommunication operators being fully aware of the growth in data traffic have also modified the various packs offered to users and have even launched tariff plans with unlimited voice usage as a part of such packs. TRAI recognized that there were various studies undertaken, including those by the International Telecommunication Union ("ITU)[13] for developing enabling policies and/or regulatory frameworks to foster fair competition between network operators and providers of OTTs were already under consideration. Therefore, any regulatory intervention recommended by TRAI in haste could have an adverse impact on the industry as a whole. It was however clarified by TRAI that while they would let market forces respond without prescribing any regulatory intervention, they would monitor all developments and would intervene if needed.

    Security and Privacy Issues

    TRAI recognized that the structure of OTT communication services was evolving, and more and more service providers were deploying encryption technology to protect users from intermediaries who may intercept the communication. It was felt that any changes imposed on these service providers could lead to these service providers to change their entire structure. There were fears that the structural changes brought about by the regulations may not provide the same level of protection currently provided. It was also noted that this issue was under examination in various international jurisdictions and no satisfactory solution had emerged yet. In light of the same above, TRAI recommended that presently, no regulatory interventions were required with respect to issues related with security and privacy of OTT communication services.

    Regulatory Framework

    TRAI recognized that regulating OTT communication services was at a nascent stage across the world and other jurisdictions and the ITU were still studying various aspects with respect to OTT communication services. Given that the ITU deliberations were at a study level, TRAI was of the opinion that it would be appropriate to take consultations in the future once a clear framework approaches.

    Ashima Obhan is a Partner and Shivam Patanjali is an Associate at Obhan and Associates. Views are personal.

    [3] Under Section 2 (ea) of the TRAI Act, the term "licensor "means the Central Government or the telegraph authority who grants a license under Section 4 of the Indian Telegraph Act, 1885.

    [8] Article 2(4) of the EECC.

    [9] Article 2(5) of the EECC.

    [10] Article 1 (1) of the EECC.

    [13] ITU is a specialized agency of the United Nations responsible for all matters related to information and communication technologies.

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