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Business News/ Industry / Telecom/  Telcos seek level playing field with over-the-top services firms
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Telcos seek level playing field with over-the-top services firms

Companies say move necessary to maintain Net neutrality principles by all firms providing voice and data services

The Indian telecom sector is highly competitive, with 12 operators across 22 operating areas. Photo: Pradeep Gaur/MintPremium
The Indian telecom sector is highly competitive, with 12 operators across 22 operating areas. Photo: Pradeep Gaur/Mint

New Delhi: India’s top telecom operators on Friday sought a level playing field so that the principles of Net neutrality can be maintained by all firms providing voice and data services.

There are a few services such as Skype and WhatsApp, also known as over-the-top (OTT) services, that do not have to share revenue with the government, and thus have an advantage over licensed telecom service providers such as Bharti Airtel Ltd, Vodafone India Ltd, Idea Cellular Ltd, Aircel Ltd, Telewings Communications Services Pvt. Ltd (Uninor) and Videocon Telecom.

The country’s telecom regulator has floated a discussion paper on whether to regulate the OTT service providers.

This has sparked a public outrage and activists say this violates Net neutrality, the principle that all data should be treated equally on the Internet.

The regulator has been flooded with more than a million comments advocating Net neutrality.

Friday was the last day for submission of comments on the Telecom Regulatory Authority of India’s consultation paper. The chief executives of the telecom companies were speaking at an event on Net neutrality organized by lobby group Cellular Operators Association of India.

The situation is in many ways unique to the Indian market where the telcos want OTT applications that are responsible for driving data use on the telecom network to pay to offer their services. The Indian telecom sector is highly competitive, with 12 operators across 22 operating areas. Coupled with the fluid regulatory regime in the country since the introduction of wireless calling in 1994, this has led to limited pricing power.

“India has the lowest voice rates in the world at 37 paise per minute. This is lower than neighbouring Bangladesh or any of the African countries," said Gopal Vittal, CEO of Bharti Airtel. “The sector has invested around 7.5 trillion over the last 20 years and has a cumulative debt of around 3 trillion. This means a return of investment of 1%. Many operators are making negative returns. The sector has to invest another 5 trillion in the next five years to bring the Internet to India."

Himanshu Kapania, managing director of Idea Cellular, compared mature markets like the US where data is sold at around $30 per GB and has some free voice minutes bundled in. In India, it’s closer to $3-5 per GB, which is bundled with voice services, Kapania said.

“This means that for the same amount of voice, the data equivalent would cost six times more," Vittal said.

The cost of capital expenditure was almost the same as most of the equipment has to be imported at the same price paid by telcos across the world, Kapania said.

The executives clarified that telcos were not asking for a licensing regime for anybody but only that the same rules should apply for the same services. This would only apply to those few services that provide the same product.

“The industry loves OTT as they are the main drivers of usage," Vittal said.

India has approximately 86 million broadband users and around 950 million mobile phone users.

On zero rating, Vittal said it was a completely different issue from the Net neutrality debate. It was more akin to sampling, a tool used to market a product, which in this case is an Internet-based service, he said.

Zero rating refers to the practice of telcos charging Internet applications a fee in order to provide the consumer access to those applications for free.

“Zero rating is not a game-changer," said Sunil Sood, CEO of Vodafone India. “It’s just a way to drive more usage."

Globally, the cannibalization of voice services with data has been picking up but India is yet to catch on due to poor penetration of data services. Given the low rates in the country, once canibalization hits, the telcos will face a unique challenge, according to a Tuesday report by Rajiv Sharma, telecoms analyst with HSBC Securities and Capital Markets.

Voice cannibalization refers to the phenomenon where data-based services like Voice over Internet Protocol (VoIP) eat into the revenue market share of pure voice services provided by telcos.

“Data revenues account for around 15% of revenues for incumbent telcos and likely to be 20% of revenues over the next few quarters as per our estimates. However, despite this, voice minutes have been growing at the sector level at around 7% annually," the report said. It suggests that “Indian telcos have so far been insulated from the data-driven voice cannibalization."

It also said that this is likely to change in the coming quarters for various reasons such as the launch of voice calling on WhatsApp that has more than 70 million users in India as well as the increasing roll out of Wi-Fi services that may hurt data monetization and encourage extensive use of OTT services.

“This is where Indian telcos will need to innovate and move rapidly towards data only plans (and do away with metered calling concepts)," the report said.

Net neutrality activists refuted claims made by the telecom companies.

“The telecom operators like Airtel already provide video and music, among other things, as mobile value-added service. This would mean that OTT applications that provide video and music are also competitors. If you look at it, anything can be called a competing OTT," said Nikhil Pahwa, who runs Medianama.com, a technology news website. “Instead of asking for lesser regulation on themselves, they are asking for regulating the Internet."

“The telcos are already making money from providing the Internet, which is seeing phenomenal growth in India. Now if they also expect OTTs to pay, which would get passed on to the consumer, it would mean double charging the consumer for the same service," Pahwa said. “Then...how do you treat applications within applications. For instance, Google Chat, which is part of Gmail. Would it mean Gmail would have to get a licence for providing chat services?"

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Published: 25 Apr 2015, 12:50 AM IST
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