Friday, April 3, 2015

Part 1 : Review of Chapter 1 of TRAI Paper on Regulatory Framework for OTT services

Before I started reading latest TRAI Consultation Paper on Regulatory Framework for Over-the-top (OTT) services i had thought of responding on the questions posed by TRAI. But as i started reading chapter 1 I realized its really one-sided and whole argument from Telecom Providers perspective is shaping up as a flawed story. In fact the language and points used in this TRAI paper gives a feeling that TRAI has already agreed with Telecom Service Providers complaints and made up its mind about which party is guilty in this whole issue of TSPs vs OTT Players.

So I am trying to share my thoughts chapter by chapter and point by point within each chapter.

Chapter 1: Introduction

This chapter is like a brief background of why this consultant paper has been released. This sets the tone for whole paper basis some ridiculous & illogical reasons. Hence picking some points from chapter 1 and trying to rebut them with the help of some personal views.

Point 2: ...It is becoming increasingly difficult for consumers to know if there is an economic difference in connecting various networks via a land phone, cell phone, or a computer...
Response: I doubt consumers are facing any difficulty here. In fact data charges of fixed broadband and mobile broadband are easier to understand and compare vis-a-vis highly complex tariff plans operators have had for voice calls. 

Data charges simply have two parameters to compare - bandwidth and data transfer limit. I am sure most of the users of OTT services know fixed broadband typically gives cheaper option both on bandwidth & data transfer limit. And that's why we have set our smartphones to switch to wifi automatically at home or/and office. I don't know which consumers TRAI is talking about here then.

Point 2:...In fact, young users find it difficult to distinguish among these three networks; from their perspective, all that matters is connectivity. They visualize these not as a layered and interconnected series of discreet networks, but as an organic whole.
Response: There is no other statement so contradictory in nature than above in whole paper. Why would a user want to distinguish among networks, if their perspective is connectivity to services as a whole without bothering about layered & discreet networks. In fact this is the biggest factor why internet services have progressed so much and so much innovation has happened. Ubiquitous access to same service/data irrespective of underlying network.This is what Net Neutrality ensures for consumers. 

Consumers don't want to worry about heterogeneity of data networks. They want seamless experience when they move from one network to another network without any restriction on internet services. If consumer is paying for certain level of access connectivity then access to all internet services must be same and impartial, period.

I believe if TRAI understands the depth of this point they have written, there should not be any argument against Net Neutrality. Story ends here. But alas!, TRAI is already sold out to TSPs.

Point 3: Carriage is separated from content in internet networks, enabling OTT content and application service providers to deal directly with end users. TSPs are excluded from the said transactions, with no control over the content or the application...
Response: In my view whole debate around Net Neutrality and regulation for OTT services can become much simpler if we just discuss about above statement. Here is my view on this.

A Telecom Service Provider entity as mentioned in TRAI paper is actually in itself has two logically separate businesses - Telecom Network Owner/Operator and Communication Service Provider. Telecom Network Operator is an entity, which lays, maintains and evolves the physical telecom network. These are Mobile Network Operators, Cable Operators, Fixed Line Operators (PSTN), Wifi/Hotspot Operators etc. And these physical telecom networks are Infrastructure Commodities like highways, buildings, ports etc. 

On the other hand Communication Service Provider is an entity, which uses physical telecom network to provide certain communication services to other customers. So in true sense Telecom Service Provider (TSP) is one, which provides Communication Services like Voice Calls, Video Calls, Text Messaging, Data Packs etc through any physical telecom network. And it’s not necessary that TSP should also be having its own physical telecom network. Do we know such TSPs ?, yes they are plenty in form of MVNOs (Mobile Virtual Network Operators). Once we have this understanding clear then we know all OTT players are also nothing but some kind of Service Providers and OTT players which provide voice, video, messaging services can also be called Telecom/Communication Service Providers.

In fact I can bet MVNOs are not the party to this whole argument of TSPs, as MVNOs don’t invest huge capital in physical telecom networks. Hence it’s a Telecom Network Owner/Operator who is worried about return on huge capital investment like any other kind of infrastructure owner.

So in my understanding, TRAI has completely failed to make this distinction clear so far in this argument on Net Neutrality and Regulation.

Point 4: The characteristics of OTT services are such that TSPs realise revenues solely from the increased data usage of the internet-connected customers for various applications (henceforth, apps). The TSPs do not realise any other revenues, be it for carriage or bandwidth. 

Response: Having said my previous argument, Telecom Network Operator/Owner asking for right/control/differential pricing on kind of services/content being offered through its network is as bizarre or absurd as a highway operator asking different toll charges based on what is being carried inside a car or a truck over its highway.

I am going to use Highways Operator as an example again and again to analyse expectations of Telecom Network Operators.

Most logical and obvious business model for a Telecom Network Operator is the current model of charging the consumers solely on the basis of volume of load on its network. And that load can be of any kind - voice, video, data, file, messaging, images etc. Operator has no right to know the what kind of load is traversing its network. Only an authorized security agency can have a right by virtue of a law to know what's inside a data packet very much like authorized people can check what's inside a truck crossing a highway. This right to know the load should be the part of regulation.

Today mobile data consumer is already paying charges to a Telecom Network Operator based on kind of connectivity she is using - 4G is costlier than 3G, which in turn costlier than 2G(GPRS/EDGE) and Fixed line broadband and then there are additional charges based on total mobile data transfer. Once paid by consumer for a particular kind of connectivity and mobile data limit, its completely consumer's prerogative to use that connectivity for any kind of content. So what's the problem here ?

Otherwise if we allow a Telecom Network Operator to raise a hue and cry on the kind of content following through its network, a day is not far when a Highway operator will also ask for more toll charges for a truck carrying steel than charges for same truck carrying garbage.

Now if Telecom Network Operator is not able to handle the cost burden of network infrastructure, they are free to play around with their mobile data pricing. No body is stopping them from doing so.

Point 4: ...They are also not involved in planning, selling, or enabling OTT apps. On the other hand, OTT providers make use of the TSPs’ infrastructure to reach their customers and offer products/services that not only make money for them but also compete with the traditional services offered by TSPs...
Response: By the way, is TRAI sleeping ? Don't they know Airtel has an OTT application called 'Wynk' music streaming service and Airtel owned Bharti Softbank has 'Hike' messaging service. And who is stopping TSPs from building their own OTT applications.

Secondly doesn't TRAI know ? most of the OTT apps are offering free services. And even OTT services, which are competing with tranditional services of TSPs, are free.

And whats the concern about competition ? If competition is so bad then why did they allow so many Telecom players in India at the first place, which resulted in such a bad financial situation of TSPs.

Point 4: ...Leave aside TSPs, these apps also compete with brick and mortar rivals e.g. e-commerce sites, banking etc.
Response: Where does this brick and mortar vs ecommerce story come from into this paper ? TRAI is simply crossing its authority. How does ecommerce relate to Telecom domain ?

This shows how one-sided TRAI is thinking. It seems all traditional business owners are using this opportunity to influence TRAI against internet based disruptive applications.

Point 7: ...Paradoxically, the broadband networks provided by incumbent TSPs are used as a platform by the OTT players for the development of new businesses...

Response: What is paradoxical here ? I am amazed at the choice of word by TRAI. Why are Telecom Network Operators building networks, just for hobby ? Every infrastructure in an economy becomes a platform to provide some services or products and conduct some kind of business. 

Imagine an Highway Operator complaining "using highways laid by me several manufacturers are able to do huge business transporting and selling goods across cities". How ridicules this argument would be ?

Point 7: ...The growth of traffic apart, the OTT applications have created an increasing demand for faster broadband speed, which translates into a need for huge investments in network up-gradation by the TSPs.
Response: Why is TRAI offering shoulder to operators on the issue of huge investment ? Don't TRAI and Telecom Network Operators see demand for faster broadband as an opportunity ? I am sure nobody is forcing operators to investment money. They can choose not to. They must be preparing a business case for huge investment. Operators invest money because they know if they don't someone else will. Google and Facebook are already preparing to create their own network to provide internet to remote areas. So my question is why create a helpless sentiment here ?

TSPs, if you are listening, you have a choice. Don't investment huge sums if you have a problem with demand for faster broadband speed.

Point 8: 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...
Response: Has TRAI already made a judgement ? Did TRAI look at following data points ?

ARPU of data users is much higher than ARPU of voice only users and it has been increasing at an unprecedented rate. See following charts of Airtel and Idea I picked up from GSMA Intelligence. I will not be surprised if data ARPU touches USD 5-6 mark in a year's time. 

Year 2013 & 2014 : Airtel's Voice & Data ARPU comparison

Year 2013 & 2014 : Idea's Voice, Data & 3G ARPU comparsion

If three times and two times increase of data ARPU in two years for Airtel and Idea respectively are not enough positive business indicators, TSPs can adjust their data pricing to have better ROI. Consumers will pay higher data charges if that's the business reality. Its not that operators have never increased rates. They have and consumers got used to increased prices over a period of time.

I know many of my friends who used to pay post-paid monthly bills in the range of Rs 300-400 3-4 years back are now paying bills above Rs 1000 almost every month. And they are not complaining.

Summary of Chapter 1

Chapter 1 started with an one-sided view of whole situation. It was least expected from a regulatory authority of a nation. The kind of supportive words TRAI used in their paper to highlight TSP's business plight were not used at all to show how consumers, technology world, innovation and entrepreneurship have benefited with current scheme of things. Secondly TRAI has failed to distinguish the issues of regulation from that of net neutrality.

So those were my views, what are yours ? Please do leave your comments and lets have a dialogue to evolve consumer side of defence in this battle, which is must for us to win.

1 comment: