The net can’t be neutral if regulators are biased against voice-over Internet

The Department of Telecommunications’ new report (PDF) on net neutrality is a deceptive piece of work. Drawn up by a committee set up in January 2015, it was perceived as a reaction to the Telecom Regulatory Authority of India’s consultation paper in May on implementing the principles of net neutrality in Indian telecom regulation. While the TRAI document triggered a controversy by appearing ambiguous about its intentions, the DoT report presents half-measures with the aim of creating a level playing field for telecom service providers (TSPs).

What are the more contentious issues in the DoT report?

On the question of regulating domestic VoIP calls made through over-the-top (OTT) services like WhatsApp, Viber and Skype, the report appears confused. The committee writes that while app-to-app calls made internationally should be unregulated, local calls ought to be regulated by the issuance and revocation of licenses. This has prompted the Indian telecom industry to ask why the DoT wants to spare international VoIP calls. When you call your sibling in Princeton from an Airtel number in Chennai, the TSP that picks up and relays the call in the New Jersey area takes the bulk of the fee you pay to make the call – not Airtel. Likely because of this arrangement, the DoT is not concerned about regulating international VoIP calls. Of course, acknowledging the need for regulatory balance on the one hand but ignore it on the other lays it open to the charge of  double-standards.

However, given that it wants to regulate domestic VoIP calls in the interest of creating what it thinks is a level playing field within the country, why not protect a level playing field among TSPs abroad as well? Moreover, WhatsApp, Skype and Viber are all foreign companies and data made via their apps could be routed through foreign servers – further lightening the distinction between domestic and international calls.

Another issue is centred on zero-rating, the practice of ISPs routing some traffic through the network at subsidised rates based on its sources. The DoT committee writes, “if government wants to give services free on the internet (like zero rating), it is considered as positive discrimination and not seen as violation of Net Neutrality. Therefore, it should be permitted in public interest. Government can provide zero rated channels to citizens for essential services (public interest zero rating), based on clear public policy and principles and on non-commercial terms.”

Because zero-rated traffic is qualified based on agreements entered into with the TSPs/ISPs, small players who can’t afford it perceive it as ‘negative discrimination’. However, the DoT report retorts that such agreements will be overseen by anti-competitive laws and that their ability to participate in the ecosystem will be protected by those laws. Overall, in fact, the report also encourages passing on the burden of accomplishing zero-rating’s goals, such as increasing access to the Internet among the masses, to solutions like free Wifi and providing vouchers paid for by the government.

Will regulating VoIP be a direct violation of net neutrality?

There is a difference between making licenses the minimum requirement to operate a business and using licenses to regulate a business. The big bullet was going to be whether OTT and OTT-VoIP services would be banned if they didn’t come under a licensing regime. This is no longer going to be the case for OTT-application services (like Facebook), but for OTT-communications services, the DoT committee is resurrecting an argument that has been around for years.

For example, in November 2014, it was at TRAI’s behest that Skype suspended its app-to-phone calling service. One of the demands then – when the debate on net neutrality hadn’t yet kicked off in India – was not to suspend OTTs but to subject them to the same regulatory bindings that applied to TSPs. Vodafone Essar’s T.V. Ramachandran had told NDTV, “We can do a lot more if a level playing field is given to us”.

And within the limitations of net neutrality, one possible way out of the Gordian knot now is to extend restrictions on features like call-switching and do-not-disturb to OTTs as well. This could even out the regulatory imbalance as well as encourage innovation in the sector, but inevitably also impose some costs on WhatsApp that could be transferred to subscribers.

Such a regulatory environment would be similar to the one in the US, where the Federal Communications Commission doesn’t regulate VoIP calls but requires compliance with a set of law enforcement rules, contributions to a fund that pays for “communication services in high-cost areas”, maintenance of call-records, providing local number portability, and providing special services for people with speech or hearing disabilities. Some other countries – like the UK and Italy – don’t regulate VoIP either but allow differential pricing. In fact, should TRAI and DoT agree on using licenses to regulate OTTs’ domestic VoIP services, India will become the first country to do so.

Why is regulation necessary?

Whether any of these should be regulated at all defers to a deeper conflict: the advent of VoIP is a consequence of technology’s natural disruptive capacity that’s so prized by entrepreneurs, while on the other hand it is perceived as an unfair form of arbitrage by those already invested in the sector. For example, a VoIP call costs 12.5 times less than a call made via a TSP on average – while TSPs like Airtel, Vodafone and others have already sunk in Rs.7.5 lakh crore to develop infrastructure that furthers their business in the country.

An intervening regulator has to decide whom to side with, the consumer or the investor, and he is answerable to both (Is this what prompted the DoT’s recommendation to regulate domestic VoIP calls but not text-messages?).

The answer isn’t straightforward from anybody’s perspective. Because of their low costs, TRAI could let VoIP calls remain unregulated and relax the tariff scheme for TSPs/ISPs to compete with the OTTs. On the other hand, TSPs/ISPs incur significant infrastructural costs when expanding into new areas and have to make that up. And finally, while TRAI can regulate local players but not OTTs like Facebook and WhatsApp that are based abroad, the DoT suggests it can regulate VoIP calls through a licensing regime – which can be long-winded and arbitrary.

(With inputs from Anuj Srivas.)

The Wire
July 21, 2015