Indian telecom companies are lobbying the government to get large internet and streaming platforms to pay up for using their infrastructure, taking cues from international markets where such arrangements are beginning to take shape.
A leading telecom industry body has written to the finance ministry claiming that the government was forgoing about ₹800 crore in potential annual revenue from licence fees and other levies from telcos if such an arrangement was in place.
“All we’re saying is that please recognize that this payment has to be made, that the government recognizes that this requirement is there, and make both parties sit at the table and negotiate with each other,” said S.P. Kochhar, director general of the Cellular Operators Association of India. “Government need only be an arbiter that only intervenes if the parties can’t come to a conclusion.”
COAI, which represents private Indian carriers including Reliance Jio, Bharti Airtel Ltd and Vodafone Idea Ltd, has written a letter on the demand addressed to Union finance secretary T.V. Somanathan, apart from a white paper. Mint has seen both.
In the white paper, COAI has stated that telecom companies had spent about ₹10,000 crore in additional capital expenditure over 2022-2023 to enhance their infrastructure to support 4-5 large traffic generating platforms or apps, without naming them.
While these platforms benefitted from the increased infrastructure, corresponding monetary accruals haven’t flowed to the telcos and consequently to the government, COAI said.
“These accruals to telcos (as per the proposed fair share) would have resulted in enhancing AGR-related licence fees and USOF levies. This loss to the government alone would equal to (about) ₹800 crore for 2023. Additionally, there would be loss of goods and service tax earnings to the government, if any,” Kochhar said.
USOF refers to the Universal Service Obligation Fund, a pool of funds generated by charging a levy on telecom fund operators on their adjusted gross revenues, or AGR.
The association has argued that the additional capex towards increasing the infrastructure should be borne by the large traffic generating platforms, but startups, and medium, small and micro enterprises should be excluded from the proposed arrangement.
COAI in its white paper states that the telecom industry’s capex on network infrastructure rose to ₹73,922 crore in March 2023 from ₹53,661 crore in March 2022, a 37.3% increase, far steeper than the 15% increase seen in the previous financial year.
Data traffic increased from about 12 GB a month per subscriber in 2020 to 18.4 GB in June 2023, it added.
While COAI’s white paper and letter do not name any of the large traffic generating platforms or apps, Facebook, Instagram, WhatsApp, Google Search, YouTube, Netflix and Amazon are among the top traffic generators globally, as per global telco body GSMA.
“Six companies are consuming 60% of the traffic. The (apps) are not going to invest trillions of dollars. The telecom industry is going to put $1.5 trillion in 5G. Somebody has to contribute towards that,” Bharti Enterprises chairman Sunil Mittal told Mint in a recent interview, when asked about the telcos’ demand of a fair share of revenues.
“All we are saying is contribute towards the infrastructure-building; we can’t be the only ones responsible.”
To be sure, telcos have been demanding for fair share from streaming, or over-the-top (OTT), platforms for some time.
IAMAI, which represents Indian internet companies, reiterated its stand that such demands for imposing revenue-sharing mechanisms “smacked of rent-seeking” and would “disincentive growth for OTT-based businesses”.
The demand for a ‘fair share’ of revenues from internet and streaming platforms follows a global pattern, with telecom carriers in the US, Europe and Southeast Asia asking large internet companies to pay up for using their infrastructure.
The most prominent example of such an arrangement is that between South Korea’s SK Telecom, SK Broadband and Netflix. The streaming giant has agreed to share revenue for network usage while also offering its products to be bundled for consumers without any increase in tariffs.
The agreement that ended a three-year litigation has set a global precedent.
“We don’t have a desire to drive prices (consumer tariffs) up and further disenfranchise people. We need to be thinking about the players that benefit the most and what role they’re playing and investing in the countries in which they’re making money,” John Giusti, chief regulatory officer at GSMA, told Mint on the sidelines of the Mobile World Congress in Barcelona last week. GSMA represents more than 750 telecom service providers globally.
Giusti pointed to a February white paper from the European Commission that hints at fair share from big tech players while noting an investment gap of €200 billion required to meet Europe’s 2030 connectivity targets. The commission has sought comments from stakeholders by June.
The US government has also proposed a Lowering Broadband Costs for Consumers Act of 2023, which aims to make large internet apps contribute to infrastructure costs to help lower broadband costs for consumers.