OTT profit share debate: How it could impact your wallet

Over-the-top (OTT) apps and telecom operators have been engaged in a multifaceted conflict for over five years now. The telcos are demanding a legal framework that would require internet platforms to pay for their network infrastructure. 

Communication over-the-top (OTT) applications like Facebook Messenger, Telegram, and WhatsApp have not been included in the Telecom Regulatory Authority of India's (Trai) most recent recommendations for authorization or licensing regimes.Trai released a set of comprehensive suggestions to revamp the current telecom service licensing system; the recommendations do not include OTTs.

To accomplish "One Nation - One Authorization" across services and service zones, "Unified Service Authorization" has been created under the new framework.

With this authorization, an organization can offer all of the following services: mobile, internet, broadband, landline, long distance, satellite communication, machine-to-machine (M2M), and internet of things (IoT) services across India. These organizations will be able to route their domestic traffic whichever they like.

Trai has established three broad kinds of authorizations that will encompass the entire range of telecom services offered in the nation: main service authorizations, auxiliary service authorizations, and captive service authorizations. As part of the licensing regime's revision in accordance with the new Telecom Act of 2023, the new service authorization guidelines have been implemented.

Telecom companies want to share revenue with OTTs

Telcos united for the first time in a long time and reaffirmed their position that "internet companies should compensate them for their networks."

Jio, the largest telecom provider in the nation and owned by Reliance Industries, led the charge, proposing that OTT companies "contribute" to network expenses according to the volume of bandwidth they use.

Jio asserted that this "contribution" would aid in re-establishing level playing fields, but pointed out that it can be contingent on a number of factors, like traffic volume, turnover threshold, or user count.

Although it seemed a bit exact in its approach, Bharti Airtel, the second-largest cellular provider in India, too expressed a similar view. In its submissions, Airtel argued that OTT providers should directly contribute to telecoms by using network traffic as a metric to calculate these fees.

To ascertain the "fair share" that major OTT companies contribute to telecoms in relation to network expenses, Vodafone Idea (Vi) also advocated for a traffic-based methodology. Vi, however, placed the burden of determining the amount of fees that OTTs must pay providers on the government.Vi initially advocated for a government-regulated strategy that might be revisited in a few years.

It's interesting to note that state-owned Bharat Sanchar Nigam Limited (BSNL) also believed that OTT platforms ought to be subject to the same laws and regulations as telecom companies.

Concerned about igniting a debate about net neutrality, the three telecom operators asserted in unison that any attempt to regulate and impose a licensing regime on over-the-top (OTT) services would not contravene net neutrality principles.

Critics, meanwhile, noted numerous net-neutrality problems with the planned revenue-sharing scheme.The Broadband India Forum (BIF), which denounced any proposal for revenue-sharing as being in violation of the net neutrality principle, claimed that requiring a network fee from OTT players is a tactic used by telcos to "extract monopolistic rents" and could have a detrimental effect on the development of OTT innovation in the nation. 

Anticipated impact on customers 

At the moment, India does not have a specific regulatory structure for over-the-top (OTT) platforms. OTT services are, nevertheless, subject to a number of laws and regulations in India, such as, The Information Technology (Intermediaries Guidelines) Rules, 2021, must be followed by OTT service providers, some provisions of the Indian Penal Code apply to OTT services, certain provisions of the Criminal Procedure Code apply to OTT services. Sectoral laws also apply to OTT services. 

What is going to happen, then, and why should you pay attention? It all boils down to you, the customer, if you give it some serious thought. The money is made from the customers themselves. Netflix, WhatsApp, Disney+ Hotstar, and other over-the-top (OTT) services all profit off you. In the same way, telecom carriers sell mobile plans to customers and make money. 

As a result, you will be impacted when the telcos raise tariffs in an attempt to increase their direct revenue. However, raising tariffs is only a temporary fix; the problem doesn't end there. When telcos claim to want a share of the money made by OTT players, they are essentially requesting a portion of the funds you are providing to these businesses.

Although OTT applications actively use telecommunications operators' infrastructure to deliver their services, they do not immediately contribute to their revenue. The services do, however, demand a data subscription, thus this is how the money is made. 

Customers might think, they won't be impacted if a situation arises where OTT players are willing to split profits with the telcos. As previously said, no business would want to give up a significant portion of its revenue. The money that the OTT players contribute to the telecoms will eventually be recouped from the customers. Simply raising the subscription costs will keep all of these businesses satisfied. Customers must pay for it ; otherwise, the OTT businesses wouldn't have any incentive to split their profits. 

The danger OTT services pose to the services provided by telcos worries a lot of telecom carriers. For example, numerous over-the-top (OTT) applications being created as substitutes for prevalent "classic" communication forms like SMS. Because of this, operators are losing money even while they are making money from the data bundles. This is because fewer people are using their own core services.

Network providers must change to stay in business in order to handle this impact on voice and messaging income.

Core network services don't offer many of the functionalities seen in OTT applications. We may observe the distinct difference in the needs of customers being met, WhatsApp for example offers features different from those of normal operator SMS that are available on contemporary networks. 

For network operators, a significant part of responding to the rise of OTT services has become reactive. However, are there longer-term solutions to the problems that service providers are facing? Will they have to give in to customer pressure, or can they regain control?

The industry is now debating this, and it will be important to observe if the government requires OTT companies to give the telcos a portion of their profits. It should be noted that no OTT player has stated outright that they would raise prices if customers were requested to split a portion of their profits. Essentially, this is predicated on the idea that, in the end, the customer will always recoup the business's expenses, and this scenario would not be an exception.