Mumbai: There is no official word about this from the world’s largest social networking site Facebook Inc., but many users who have the upgraded WhatsApp installed on their Android phones can now make voice calls to their friends or contacts who also have the app.

This development makes India’s over-a-decade long debate over Voice over Internet Protocol, or VoIP—the ability to make a voice call over the Internet—almost redundant since most companies anyway use a closed user group (CUG) network for VoIP calls which is legal.

However, it will surely give Indian telecom services companies that are already burdened with high spectrum charges more cause for heartburn as they worry about a dent in their data revenue from over-the-top, or OTT, services providers like WhatsApp, WeChat, Line and Hike.

OTT refers to delivery of instant messaging, video, audio and other media over an open Internet connection directly to user, without the need for carriage negotiations and without any infrastructure investment on the part of the provider.

They have numbers that telcos need to reckon with.

WhatsApp, which was acquired by Facebook for $19 billion in February 2014, had 700 million global users as of March, according to online statistics company Statista Inc. Of these, an estimated 10% users are from India. Facebook Messenger, on its part, has 600 million global users. Facebook.com itself has around 1.3 billion global users and about 110 million in the country.

As of now, a voice call made from WhatsApp will depend on the bandwidth that your data plan offers. It is similar to how you would use similar OTT applications and services like Skype, that is now a Microsoft Corp. product, Facebook Messenger or even Google Hangouts.

But how long will the party last? Much will depend on how India’s telecom regulator handles the debate of security and telcos losing potential revenue to OTT services providers.

Whatapp’s voice calling feature has been launched at a time when the Telecom Regulatory Authority of India, or Trai, is seeking comments on its consultation paper on ‘Regulatory Framework for Over-the-top (OTT) services’ that it released on 27 March. All comments and counter comments have to reach Trai by 8 May.

There are 20 questions that Trai has raised.

These include: Is it too early to establish a regulatory framework for OTT services; Should OTT services providers that offer communication services (voice, messaging and video call services) through applications (resident either in the country or outside) be brought under the licensing regime? Is the growth of OTT impacting the traditional revenue stream of telcos? If so, is the increase in data revenues of the telcos sufficient to compensate for this impact?

Should OTT services providers pay for use of the TSPs (telecom services providers) network over and above data charges paid by consumers? How should the security concerns be addressed with regard to OTT services providers that offer communication services? What are your views on Net Neutrality in the Indian context—should telcos be allowed to implement non-price based discrimination of services?

Net Neutrality is the principle that Internet service providers, or ISPs, and governments should not discriminate online data by user, content, site, platform, application, type of attached equipment, or mode of communication.

There’s a clear context for Trai raising those questions.

In its consultation paper, the regulator notes that telcos are “currently being overwhelmed by online content, known as over-the-top (OTT) applications and services". It cites the examples of threat from OTT services providers like Skype, Viber, WhatsApp, Chat On, Snapchat, Instagram, Google Talk, Hike, Line, WeChat, Tango, and even ecommerce sites like Amazon.com and Flipkart.com beside taxi apps like Ola.

Trai points out that OTT application service providers deal directly with end users and adds that the move to 4G (fourth generation) Long Term Evolution (LTE) technology’s all-IP (Internet Protocol) architecture “will further facilitate this delinking of delivery of services from the underlying network".

Trai also notes that the affordability of smartphones because of declining prices, and the upgradation of access networks by telcos “are among the important factors contributing to OTT growth". “It is thus becoming clear that, in future, the provision of services by OTT players will impact revenues of network operators insofar as their current business models are concerned," argues Trai.

The question is why would telcos want to invest continuously in upgrading their networks if OTT service providers make money of it? For instance, a voice call on WhatsApp or Skype that bypasses a telco is foregone revenue. Similarly, instant messages have eaten into telcos’ revenue from their SMS services.

In its paper, Trai points out that the impact on voice services is not considerable in India, at least till date, because the country has one of the lowest voice calling rates in the world. Second, the mobile internet penetration is currently only around 20%, that too predominantly on 2G (second generation) networks.

Third, the Quality of Service (QoS) of such OTT apps is not as good as traditional voice services offered by telcos. But the quality is bound to get better over time.

However, Trai does admit that there is “some amout of cannibalisation on international calling, where rates are substantially higher". But the paper adds that the revenue from international calls is less than 10% of an Indian operator’s total revenue.

The worldwide user base of OTT messaging services has grown to more than one billion.

According to the Global Web Index Study, as cited in the Trai paper, WhatsApp topped the messaging application market in December with 52% of all the users using OTT messaging services, followed by Facebook Messenger with 42%, Skype with 37% and WeChat with 26% share. Viber stood at fifth spot with 18% share and Line stood at sixth position with a 12%.

However, the messaging (SMS) traffic fell from 5.35 billion in June 2013 to 4.37 billion in June 2014, a decline of 18.3%. This decrease can be attributed “almost entirely to an increase in traffic of OTT messaging apps", according to Trai.

The fact is that India is the second-largest wireless market in the world after China, and the world’s second-largest Internet user base. Today, India has nearly 970 million mobile phones, of which over 95% are wireless phones and over 22% are smartphones on which OTT services providers thrive.

India also has more than 80 million broadband connections, and nearly 300 million Internet users, of which about 190 million access the net on their mobiles.

Data is undeniably going to be the key driver of the Indian mobile market in the years to come, say analysts, even though the Indian mobile market remains largely a voice market with data revenue accounting for less than 20% of the total mobile revenue, against close to 30% in China.

Research firms project that the growth rate for voice services revenue in the Asia-Pacific region (excluding Japan) will slow down while data connectivity or mobile broadband revenue will grow. With smartphones available for even less than 5,000, 3G and 4G LTE technologies becoming more prevalent, and mobile users opting for OTT services like WhatsApp, WeChat, Line and Hike, the market is bound to grow further.

But so will the threat to telcos.

Telcos will continue to argue that the OTT business model, with low or zero tariffs, impacts “legitimate" revenue of both licensed operators like telcos and the government too. OTT services providers offering communication services, on their part, will continue to contend that such services (voice call, chat, messaging) are offered to users through the Internet services provided by licensed telcos for which the latter levy applicable usage charges—and hence they are offering communication services over the Internet for which the telco is paid by an end user.

The best way forward would perhaps be a partnership with OTTs on a revenue-sharing model.

Regardless, when Trai takes a final decision after receiving all comments and debating economic compulsion of telcos and weighing net neutrality concerns, it will have to keep the Internet’s young and mobile user behaviour in mind too.

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