It would be bad enough if TRAI was merely interested in protecting telecom operators at the cost of consumer interests.
India’s regulators work in mysterious ways. Take the Telecom Regulatory Authority of India (TRAI), which has suddenly decided that it wants to regulate internet services. As its name clearly suggests, TRAI’s job is to regulate the telecommunications industry. These are the companies that own and operate the “pipes”, like fibre-optic cables, towers, base stations, satellite transponders, undersea cables, switches and networks. TRAI also regulates companies that provide some basic services that run on these “pipes”, namely telephony and internet.
Like its counterparts around the world, it does not, thankfully, regulate services that run on these “basic” services. That’s why you don’t need to apply for a license when you set up a website or launch an app.
Looking at TRAI’s ‘Consultation Paper on Regulatory Framework for Over-the-Top (OTT) Communication Service’ that closed Monday, I’m left wondering just why would it want to introduce a digital licence-permit raj by asking whether “over the top” (OTT) services ought to be regulated, and if so, which ones and how.
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At this time, it seems to be concerned with services that could be “regarded as same or similar to service as being provided by” telecom operators. This very much smells like one or more telecom operators lobbying TRAI to protect them from competition arising from technological innovation. For instance, consumers prefer to use the free WhatsApp than the exorbitantly priced SMS. Telecom operators, therefore, would be thrilled if TRAI were to regulate WhatsApp and other messaging providers.
It would be bad enough if TRAI was merely interested in protecting telecom operators at the cost of consumer interests. The problem is that once one internet service, say instant messaging, falls under regulation, others will follow sooner or later.
The reasons offered will be different – from encouraging homegrown innovation, to defending against sinister foreign companies, to national security – bureaucrats can easily find excellent reasons to acquire power over the private sector. The inevitable consequences will be compliance coercion, cronyism and corruption. Instead of having thousands of technology start-ups building innovative apps and services, we will have a few large conglomerates that know how to ‘manage’ the regulators, dominating the internet landscape. From my perch in Bengaluru, India’s technology entrepreneurship hub, that sounds like disaster.
TRAI should back off from this ill-considered move to regulate internet services. Given that its mandate is to regulate telecom pipes and the basic services, it might not even have the legal standing to regulate internet services. Even if legal standing can be acquired with the stroke of the pen, it should remember that its mandate is to regulate the telecom industry to promote the public interest. The public interest clearly lies in consumers enjoying unfettered, affordable access to advanced technologies and in entrepreneurs creating prosperity, jobs, growth and development.
To be sure, having a healthy and resilient telecom industry is also in the public interest, for they form the backbone of the modern economy. Many telecom operators complain about very thin profit margins, given that they need to continuously invest in upgrading their infrastructure while having to lower consumer prices due to market competition, regulatory price caps and disruption from “over the top”.
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Now, nowhere is it the regulator’s mandate to assure them of a profit margin. Even so, if the regulator does want to relieve the industry of some of this pressure, it could lower license fees, especially for spectrum. It could stop interfering in how they price their services. After all, if the market is competitive and the regulator is guarding against collusion, why impose price caps at all?
Further, it is neither here nor there to suggest, as the TRAI appears to be doing, that because WhatsApp and SMS are similar, they should be regulated in a similar manner. First, they are not similar: internet-based messaging services are far more advanced than the rudimentary SMS/MMS that comes as part of the telephone service.
Second, such regulations would hobble and disrupt apps and services which use messaging, voice and video calling as components of their overall service. For instance, the Ola taxi-aggregator app has a chat feature enabling users to contact customer support. Thousands of apps have such features, from movie ticket booking to food delivery to geriatric healthcare services. Getting all of them to get a license from TRAI is absurd. When Prime Minister Narendra Modi is passionate about improving Ease of Doing Business, TRAI is heading in the opposite direction.
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We would have found it absurd if in the late-1990s, the telegraph department had demanded that then-new SMS be regulated the same way as the telegraph service, citing the “same service, same rules” principle. Or, if newspapers had demanded that news websites be regulated by registrar of newspapers. Or, if TV channels now demand that YouTube be regulated as they are. They are entitled to complain that new technologies are taking away business from them. That doesn’t mean that the government has to succumb to their calls for protection.
TRAI has a lot of more important things to do: India does poorly in terms of internet penetration and quality of service. When it has yet to meaningfully fix the age-old problem of dropped calls and sluggish internet speed, it really ought not to go over the top and chase wild geese.
Nitin Pai is director of the Takshashila Institution, an independent centre for research and education in public policy.