India Telecom Regulators Looking at OTT Regulatory Framework

A decade and a half after its widespread emergence, over the top VoIP and messaging continue to raise sustainability issues for regulators and business model issues for service providers in a “redefined market” that has separated “carriage and content; ” applications and access; and revenue from usage.

Whether telecommunications regulations must change to reflect the fundamental changes is an issue India’s Telecommunications Regulatory Authority of India now is considering.

The dimensions of the problem are easy enough to illustrate.

Revenue earned by a communications service provider providing one minute of traditional voice is 50 paisa (one paisa is 1/100 of one rupee) on an average, compared to data revenue earned for one minute of VoIP usage which is of 4 paisa.

The average revenue earned by a service provider for a single text message is around 16 p, when compared to 1p of data usage charges when an OTT app is used, instead.

So the fundamental problem for service providers is an order of magnitude reduction of revenue.

Still, In India, service provider overall revenue is expected to reach $46 billion to $49 billion
by 2020, up from $28 billion in 2013, TRAI reports.

Data revenues will grow from 10 percent to 12 percent in 2013 to 35 percent to 40 percent of total by 2020. That implies data revenues of about $16 billion to $20 billion in 2020.

Voice might then represent between 56 percent and 61 percent of total revenues.

Other revenues from text messaging, traditional value added services and new services are expected to remain at $2 billion between 2013 and 2020, representing four percent of total revenues.

The cloud services market in India especially the public cloud stood at $632 million in 2014, which is expected to touch $838 million by 2015 end and $1.9 billion in 2018, growing at about 33 percent, TRAI notes, perhaps representing four percent of total revenue by 2020.

In a broad sense, TRAI is tackling the tricky issue of whether robust, healthy communications networks can exist if the revenue to support investment continues to migrate away from network operators and to app suppliers.

Service providers no longer profit from most apps, and generate revenue “solely from the increased data usage,” says TRAI. The revenue implications are profound.

App providers, On the other hand, app providers require use of the communications networks and therefore impose most of current network costs, while competing directly with services sold by the service providers, TRAI also notes.

In a profound understatement, TRAI notes that “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.”

Perhaps the biggest issue is the ever-present dilemma of how to equalize the regulatory framework. Two fundamental approaches exist: lighten regulations on incumbents or increase regulations on new providers.
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