10 December 2018

Dawn of the regulatory regime for Over-The-Top services

By Prashant Phillips

The Telecom Regulatory Authority of India (TRAI) had recently released a consultation paper on regulatory framework for Over-the-Top (OTT) Communication Services. The ever-increasing accessibility of Internet has been fuelled by a more advanced infrastructure and lower tariff costs. This has led to a number of mobile applications (or apps) that rely on this information highway for providing a wide variety of services, which range from simple communication to providing high quality media content on the go.

The scope of the present consultation paper is restricted to only communication services which may be provided using OTT services. With telecommunication services already being regulated under various statutory schemes under TRAI, the present consultation paper is an attempt to assess the regulatory measures that need to be in place for such communication services which may be provided over networks other than the convention radio telecommunication networks. The consultation paper also touches upon a possible imbalance between the obligations of conventional telecommunication service providers (TSPs) and the Over-the-Top Service Providers (referred to as OTPs).

The mobile penetration and consequent access to Internet has made it possible for masses to use Internet-based messaging services as opposed to traditional SMSs. It is reported that WhatsApp is the most preferred and used messaging app in India. Despite its popularity, WhatsApp has also been at the centre of recent controversies involving fake news and inflammatory messages being circulated on their platform. This coupled with the immense growth of such services, and their similarity with the existing communication services necessitated the need for a regulatory framework for the OTT-based communication services.

The present article touches upon the above-mentioned issues and attempts to highlight some of the challenges which any OTP is likely to face.
Basic Overview of OTT Communication Services

OTT may be considered as any digital service which may be provided directly over the Internet. Examples of such services include, but are not limited to, messaging or communication over the Internet. Such services are typically provided through applications, which may be either be installed on mobile phones/communication devices or standalone computers. OTT services may again be classified under two broad headings: communication and content. One of the best examples of OTT based communication application is WhatsApp Messenger which is one of the most widely used applications for communications. WhatsApp has notably displaced native SMS and is now used as a preferred platform by the masses.

OTT-based communication services differ from the conventional communication services primarily on two fronts:
  1. Platform – OTT-based communication is enabled through a software based platform, such as an application which may be installed on a computing/mobile device. Conventional communication services such as SMS is not dependent on such a software-based platform.
  2. Infrastructure – Traditional communication services require a dedicated network whereas the OTT-based communication services function on the Internet and as such do not require any dedicated network for implementing such communication services.
As also noted in the consultation paper, there is no formal definition for OTT-based communications services. However, as a notional basis, an OTT-based communication service may be considered any internet enabled communication service which may be used as a substitute for conventional/traditional communication services.
Regulatory Framework – Possibly mismatched obligations?

Broadly, the TSPs and the telecommunication services being offered fall within the scope of the Indian Telegraph Act, 1885, the Telecom Regulatory Authority of India Act, 1997 and the appropriate rules or regulations. Furthermore, the TSPs are also governed by the terms and conditions of the Unified License Agreement and/or Unified Access Service License Agreement (as per the Indian Telegraph Act), under which such TSPs are licensed to operate.

The present regulatory framework was primarily intended for providing a level playing field amongst different TSPs who intended to utilize the air-waves, and for protection of their interests along with the interest of the consumers.

On the other hand, the OTPs despite providing similar communication services (which however are provided over the Internet) are, presently, not subject to any regulatory provisions. As per the TRAI Act and the Indian Telegraph Act, a Licensee is any person who licensed to operate a ‘telegraph’ [see End Note 1]. In the strictest sense, the OTPs do not maintain or work a ‘telegraph’ as they only provide the communications services over the Internet. To that extent, if the provisions of the TRAI Act and the Indian Telegraph Act are to be construed strictly, OTPs would be outside their respective purview and hence may not be obligated under the existing scheme, despite the OTPs providing services similar to that of conventional communication services.

However, it should also be noted that a number of players providing OTT-based communication services do exist presently in the market. Presence of such a number of players also ensure sufficient degree of competition and ensures that the customers receive the best quality and experience while using their applications. Furthermore, nearly all such applications are offered without any costs to customers. Moreover, customers may switch between different applications with ease. As per the consultation paper, even though a mismatch in regulatory obligations exists, it may be the case, that the competition alone may be sufficient to keep a check on the different OTPs.  
Proposed Way Forward – What will work and what won’t!

The consultation paper proposes different models based on which a regulatory framework for OTT-based communication services may be developed.
  1. Similar treatment of similar services
  2. Relax/reduce obligations on TSP instead of proposing equal regulations for OTP
  3. No regulatory framework required for OTP
  1. Similar Treatment of Similar Service
There does exists an obvious mismatch in the obligations that are to be discharged by the TSP as opposed to the OTP. As mentioned above, the TSP have to comply with the different legislations and licensing conditions for implementing telecommunication services. For example, the TSP also have to make substantial capital investments in terms of license fees and towards infrastructure, an obligation that arises due to statutory requirements. On the other hand, the barriers for entry for OTP are less inhibiting, with little or no capital obligations, with such OTP providing services which are similar to traditional telecommunication services.

To such an extent, it may be argued that despite such similarity of services being provided, absence of similar obligations for OTP may amount to unequal treatment. In this regard, even though a similar treatment may be desired, it may not be possible to extend so under the present framework and a parallel regulatory mechanism may have to be developed for OTP.

However, this may have certain inadvertent impact on technological development. OTT-based services are in its nascent stage and the true potential of such services is yet to be realized. Applications like WhatsApp, which started as small businesses, would have virtually no chance of success if an immense regulatory burden is imposed for sake of parity with the conventional communication services. Any regulatory scheme which mirrors the scheme applicable to the telecom sector may throttle the technological development which OTT is experiencing. 
  1. Relaxation of Regulations for TSP
The telecom sector in India have experienced a lot of legal disputes in its initial stages. Certain issues still persists, but the core issues pertaining to the telecom sector stand largely settled to some extent. 

Relaxation in the regulatory requirements may achieve ease in regulation of OTT-based as well as traditional communication services, but it may again increase the likelihood of disputes within the telecom sector.
  1. No regulatory mechanism for OTT-based communication services
Considering that OTT is in its nascent stage, this may appear to be a plausible option at this stage. For example, it may be possible that over the coming years the manner in which OTT as a service is being provided evolves so dramatically, that any regulatory provisions may become outdated or inapplicable onto such services. The regulatory provisions would have to be equally extensible so they remain relevant irrespective of any technological development. For example, already we have mobile applications which in addition to providing a wide variety of e-services, also include features which enable users to chat/communicate with other users. Technologies based on IoT, Industry 4.0, AI, may substantially rely on and utilize communication over the internet through such applications. It is still unclear to what extent such regulatory mechanisms would be enforceable as new facets of technologies become evident. 
Challenges which lies ahead

The regulatory framework for OTT-based communication services should be such that it implements sufficient regulatory control without inhibiting technological development within this field. The dynamic nature of the OTT technology also makes it difficult to draw a line which will cleanly segregate applications which are providing communication services. For example, applications such as LinkedIn® and Facebook® provide a social networking platform along with a communication feature. With more applications allowing such messaging related features, the regulatory burden would also increase. Greater convergence of functionality within applications will further increase such challenges.

It appears that no single legislation or regulatory framework may be sufficient to address all such concerns at the same time. A combination of different legislations may be required to sufficiently reach the desired regulatory objective for OTT-based communication services.

[The author is a Partner in Commercial Dispute Resolution practice, Lakshmikumaran & Sridharan, New Delhi]

End Note: 

1. Section 2(1)(e) of the TRAI Act, and Section 4(1) of the Indian Telegraph Act.

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