Guest Post: Apurva Agarwal- TRAI Consultation Paper on OTT in India

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I am pleased to bring to you our next guest post by Apurva Agarwal. Apurva Agarwal is a lawyer with technology background having earned a Bachelors in Computer Science Engineering. She pursued her LL.B. from Campus Law Centre, Delhi University and then went on to earn an LL.M. from UCLA School of Law, California where she earned a specialization in Entertainment, Media & IP Law. Currently she is settled in Vancouver, Canada where she working to get her licence to practice law in British Columbia. She has experience working with organizations like KPMG India and law firms like Shardul Amarchand Mangaldas & Sons, AZB & Partners among others.

TRAI Consultation Paper on OTT in India

Apurva Agarwal

 

TRAI recently released another Consultation paper for regulation of OTT in India. The purpose of this paper is to get a response from the industry as to the requisite regulatory framework for OTT services which are same or similar in nature to TSPs. TRAI hopes that with this consultation, industry experts would be able to guide them towards a regulation which would be in the best interest of the economy and efficiency of all the players involved. There are six sections in the paper with each section ending in a query to which a response is awaited by 10 December 2018.

The proposed regulatory framework intends to level the playing field. It has been noted that OTTs earn revenues from alternate sources using data of their subscribers and have the opportunity to offer services which may be prohibited to TSPs due to their agreed-upon obligations. Moreover, OTTs do not incur licensing and regulatory obligations in the form of fees and other obligations under Indian Telegraph Act, 1885 and TRAI Act, 1997 which TSPs do. This is the primary bone of contention in seeking to regulate the OTTs and bringing them in par with their counterpart TSPs.

This Consultation Paper comes after a series of Consultation Papers and recommendations in the form of regulations released by TRAI on Net Neutrality, TSPs and OTTs from 2015 to the present. The objective of this earlier consultation was to analyse the implications of the growth of OTTs and consider whether or not changes are required in the regulatory framework.1

It has been established that the major contributor to the growth of OTTs is the infrastructure developed by TSPs for which TSPs pay a considerable amount of money as required under their regulatory obligations. In contrast, OTTs have no obligation to pay for licensing fees of any kind for use of broadband spectrum or development of infrastructure. Moreover, services provided under the OTT umbrella typically relate to media and communications and are, generally, free or lower in cost as compared to traditional methods of delivery2. The growth in smartphone technology and use of internet means that OTT services have percolated into every sphere of modern life and its effects in loss of revenue are felt by local businesses of every kind. TSPs have also faced a decline in usage and hence, loss in revenue due to the low cost and high value services provided by the OTTs.

The recent consultation paper focuses primarily on the need for regulating OTTs keeping the above-mentioned issues in mind. The earlier consultation included elements of net neutrality and since a separate consultation process was undergone for net neutrality in 2015, recommendations on that issue have already been released through a press release in 2017.

In order to justify regulating the OTTs, TRAI has noted that Information Technology Act, 2000 places certain regulatory obligations on corporate bodies and intermediaries including OTTs and TSPs which include: Lawful Interception Obligations, Takedown Obligations, Privacy & Cybersecurity Obligations and Encryption Obligations.

TRAI has raised security concerns regarding OTTs considering that there is no record of the user with the governing company. This could lead to misuse and exploitation. TRAI has also addressed certain functional issues with OTTs especially regarding jurisdiction when certain expectations/obligations are not met, especially in cases of criminal and tax nature and how this issue can be resolved through measures like data localization, Treaties under CLOUD Act and the Budapest Convention on cybersecurity. However, the matters of jurisdiction and gathering of evidence in the world which is exploding with new technology are not easily resolved and hence, the security concerns remain.

Several other jurisdictions are on their way of subjecting OTTs to regulations in the following way:

  • Europe: Europe is revising its ECS sectoral regulation such that playing field can be leveled through the means of deregulation and sector specific rules for OTT services. ECS would be expanded to include various digital communication services. The proposed definition would exclude broadcasting, websites, content, web hosting, gaming and unidirectional information services (such as Twitter), while it would include VoIP services, video calls, text messaging (Whatsapp, SMS, FB messenger etc) and emails. EU has applied the test of whether the functionality forms a ‘substantial’ or ‘ancillary’ part of the service/platform.

United Kingdom’s Telecommunication Regulator, Ofcom in its reply to the European consultation suggested the specific regulation of OTTs whose functioning is substitutable for traditional electronic communication services. Ofcom also suggested that any new regulatory obligations should be proportionate and continue to support innovation and market entry3. Other suggestions include- conformity to consumer protection rules and end-user rights, provision of access to emergency services numbers, and compliance with law enforcement legislations.

  • Indonesia: The Ministry of Communication and Informatics issued 2017 Draft OTT Regulation. These regulations require OTT service providers to comply with laws on consumer protection, data protection, content regulation, advertisement, finance, tax, guarantee access for lawful interception and extracting evidence for investigative purposes4.
  • France: The French telecom regulator ARCEP (Autorité de Régulation des Communications Électroniques et des Postes) does not currently regulate OTTs in general but VoIP providers who connect to Public Switched Telephone Networks (PSTN) are required to follow registration requirements imposed on traditional TSPs5.
  • Germany: The Federal Ministry for Economic Affairs and Energy published a white paper on Digital Platforms on the 20 March 2017 which proposed measures like ensuring a level playing ground in the telecommunication market by subjecting OTTs to the same rules of consumer protection, data protection and security as applicable to telecommunication service providers (TSPs)6.
  • Commonwealth Telecommunications Organisation (CTO): A study was conducted on OTT services in order to understand the market dynamics in the context of their impact on traditional business models and the opportunities for innovation as well as the potential of these services in stimulating economic growth. It recognized challenges like Licensing Obligations, Jurisdiction issues in case of Taxation, Quality of Service/Quality of Experience Standards, Data protection and privacy, Net neutrality, Interconnection, and Universal service fund (USF)7.

Overall, the following key practices emerge:

  • Separate regulatory practices for communication services and non communication services. (e.g. Germany, France)
  • Use of price discrimination on traffic to ensure development of broadband infrastructure. (e.g. United Kingdom, Korea)
  • Use of a FRAND approach in dealing with regulatory issues concerning OTT players. (e.g. Korea, ETNO)
  • Another approach is to relax the regime governing TSPs and make it sector-neutral instead of proposing equal regulation for OTTs8.

A study conducted by GSMA has suggested following three principles for a new regulatory framework that is market -and technology neutral9:

  1. Regulation should be functionality-based rather than based on structure or technology.
  2. Regulation needs to be flexible to accomodate rapidly changing markets and technologies.
  3. Regulatory policies need to be rethought from the ground up.

An open online consultation was held by ITU Council Working Group on International Internet-related Public Policy Issues (CWG-Internet) on 18 September 2017 which discussed submissions by various organizations around the world regarding five issues:

  1. What are the opportunities and implications associated with OTT?
  2. What are the policy and regulatory matters associated with OTT?
  3. How do the OTT players and other stakeholders offering app services contribute in aspects related to security, safety and privacy of the consumer?
  4. What approaches might be considered regarding OTT to help the creation of environment in which all stakeholders are able to prosper and thrive?
  5. How can OTT players and operators best cooperate at local and international level? Are there model partnership agreements that could be developed?10

ITU-APT Foundation of India, Broadband India Forum and Internet & Mobile Association of India also participated in this consultation by turning in their suggestions. It would be interesting to note that ITU-APT Foundation of India suggested regulatory neutrality but also that partnership agreements between OTT players and operators must not be enforced through regulation. Additionally, Broadband India Forum also held a similar opinion about the negative impact of regulation on innovation and growth of OTTs and fragmentation along national boundaries.

It would be interesting to note what industry experts suggest in December, considering TRAI is specifically meaning to regulate only those OTTs who function in the same or similar sphere as TSPs such that they are directly competing with them.

 

Endnotes

  1. TRAI Consultation Paper on Regulatory Framework for Over-the-Top (OTT) Services, 27 March 2015, available at https://trai.gov.in/sites/default/files/OTT-CP-27032015.pdf
  2. Ibid.
  3. Ofcom, Response to Commission public consultation on the review of the regulatory framework, 2015
  4. Part 3 Clause 3, Draft Provision of Application Service and/or Content Through Internet(2017), available at https://chambermaster.blob.core.windows.net/userfiles/UserFiles/chambers/9078/File/ICT/ 2017/OTT_Public_Hearing/ApplicationandContentServiceMinisterRegulationDraftFinal002.pdf.
  5. Practical Law, Communications: regulation and outsourcing in France: overview, available at https://chambermaster.blob.core.windows.net/userfiles/UserFiles/chambers/9078/File/ICT/ 2017/OTT_Public_Hearing/ApplicationandContentServiceMinisterRegulationDraftFinal002.pdf.
  6. Federal Ministry for Economic Affairs and Energy, White Paper on Digital Platforms of the Economic Affairs Ministry, available at https://bit.ly/2K8CKMF
  7. Commonwealth Telecommunications Organisation (CTO) conducted a study on Over-The- Top (OTT) services, available at https://cto.int/wp-content/uploads/2018/06/CTO-OTT-Study_ Report-Final-Stakeholders-Copy-18-Jun-2018.pdf
  8. TRAI, Consultation Paper on Regulatory Framework for Over-The-Top (OTT) communication Services, available at https://www.trai.gov.in/sites/default/files/CPOTT12112018.pdf
  9. GSMA, A new regulatory framework for the digital ecosystem, 2016, available at https://www.gsma.com/publicpolicy/wp-content/uploads/2016/09/GSMA2016_Report_ NewRegulatoryFrameworkForTheDigitalEcosystem_English.pdf
  10. CWG-Internet: Online Open Consultation (June-September 2017), available at https://www.itu.int/en/council/cwg-internet/Pages/consultation-june2017.aspx