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No Easy Way – Net Neutrality and Ott Players

Mehul Kumar, Student, NALSAR University of Law, Hyderabad

Introduction

When Tim Wu coined the term “Net Neutrality” in 2003, he probably did not envisage that the concept one day would assume an importance of gargantuan proportions, and capture the world’s attention at large.[i] Since the FCC mooted the idea of reversing its stand on net neutrality on 23 April 2014,[ii] the discussions around the idea of net neutrality have exploded, with entities as diverse as the Harvard Law Journal and the All India Bakchod talking about it. One of the most important modalities to be decided in this quest for net neutrality, however, is the position of companies providing over-the-top content (OTT). This is of special significance to India, with news coming of major carriers like Airtel mooting over charging companies like WhatsApp and Facebook extra to allow their users access to them.[iii]

In order to find an educated, informed opinion on whether such regulation violates the terms of net neutrality as understood by the general vox populi, it is important to conduct a thorough analysis on how this OTT content is provided to its consumers, and what roles the telecom companies and carriers play in the distribution of the content. That is what the first section of the paper attempts to do. Subsequently, it analyses the various dimensions of a net neutrality paradigm, and opines on how these OTT players can be regulated without straying away from the core concepts of net neutrality.

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Way Over The Top

OTT Content is an alternative to the traditional content by Internet Service Providers (ISPs); it refers to delivery of audio, video, and other media over the Internet without the involvement of a multiple-system operator in the control or distribution of the content.[iv] The Internet provider in this case only acts as a carrier; it is not responsible for, nor able to control, the viewing abilities, copyrights, and/or other redistribution of the content. For instance, companies like Hulu or Netflix act as third-party content providers that cater to end users, leaving ISPs only in the role of carrying IP packets. The Federal Communications Commission (FCC) defines an Online Video Distributor (OVD) as “any entity that offers video content by means of the Internet or other Internet Protocol (IP)-based transmission path provided by a person or entity other than the OVD”.[v] Consumers can access OTT content through internet-connected devices such as desktop and laptop computers, gaming consoles, set-top boxes, smartphones, smart TVs, and tablets.

The characteristics of OTT services are such that the Telecom Service Providers (TSPs) realise revenues solely from the increased data usage of the internet-connected customers for various applications, a feature which, for obvious reasons, make TSPs a bit reluctant to support them unqualifiedly, without any regulation. The TSPs do not make any other revenues, whether it is for carriage or bandwidth. They are also not involved in planning, selling, or enabling OTT apps. On the other hand, OTT providers make use of the TSPs’ infrastructure to reach their customers and offer products and services that not only make money for them but also compete with the traditional services offered by TSPs. For example, OTT messaging services like WhatsApp or Viber are in direct competition with traditional text messaging offered by these TSPs.

How OTTs ride over TSPs/ISPs.

These OTT services ride over the top of the telecom pipe which is connected to the user device through mobile networks or fixed line. In this case, the TSP also acts as an Internet Service Provider (ISP) providing last mile connectivity and bandwidth; however, as mentioned before, they have no control over the content of the services provided by these OTT companies.

Based on the function they provide, OTTs can be classified into 3 categories, which are subsequently attempted to dealt with differently by TSPs –

  • Messaging and voice services, dealing mainly in communication;
  • Application services, dealing with commerce and other activities; and
  • Audiovisual content

As can be imagined, all of the above, especially the first two, are in direct competition with TSPs/ISPs. Unfortunately for the TSPs, the OTT applications are winning, and winning handily. That is because these OTT apps are much cheaper and more convenient to use than the traditional services offered by the telecom providers. For example, an average domestic call by a Voice over Internet Protocol (VoIP) costs around Rs. 0.06 per minute, which is far lower than revenue realisation from conventional calls – Rs. 0.36. A one per cent shift in voice traffic from conventional voice calls to VoIP calls results in Rs. 1,200 crore revenue loss for telcos.[vi] This becomes particularly pertinent in the light of the next section, where the collective Indian experience with such services are discussed.

The Indian Experience

Under the current telecom licensing paradigm, voice and messaging services can be offered only after obtaining a license. Apart from traditional voice and messaging, IP based voice and messaging services can also be offered by TSPs as unrestricted Internet Telephony Services, which are permitted under the scope of the Unified Access Service (UAS) license in terms of the UAS Guidelines dated 14th December 2005.[vii] According to the Cellular Operators Association of India (COAI), voice services provided by OTT players act as a substitute for the PSTN/ Internet Telephony Services offered by licensed TSPs. In the present licensing regime, Internet Telephony is a licensed service permitted only under the UAS/ISP or Unified License granted under Section 4 of the Indian Telegraph Act 1885.[viii] Hence, according to the COAI, companies offering OTT voice services without holding a telecom license in India circumvent the Indian telecom licensing provisions and provide services that are otherwise permitted only under a telecom license.

COAI further argues that the licensed telecom providers in India are subject to various licensing fees such as Entry Fee, License Fee and Spectrum Usage Charges. They are also subjected to various statutory regulations such as Quality of Service Regulations, Tariff Regulations and, Consumer Protection Regulations. They also need to ensure emergency services, confidentiality of customer information, privacy of communication, undergo regular audits and ensure proper lawful monitoring and interception. However, much to the chagrin of the traditional market players, the ‘unlicensed’ OTT providers are not bound by any such conditions. Thus they freely ride on the network of these telecom providers and offer their services at a much cheaper rate without facing any licensing. This, they state, results in a significant disruption to the existing business of TSPs and could substantially derail their investment capability. Such a situation would jeopardize the national objective of affordable and ubiquitous telephone and broadband access across the country. Further, the proliferation of OTT communication services would lead to a significant loss of revenue for the exchequer.

OTT applications are not mandated to adhere to any service or Quality of Service standards or regulations, but they still make profits through delivery of these services because of the different business models they use. There may not be any guarantee of quality; but the OTT player’s position is that end-users are aware of this before they start using the app. Moreover, it is in the OTTs’ interest to upgrade and deliver quality for fear of loss of customers, notwithstanding the absence of a quality of service guarantee. However, what they do not address is the security concerns that arise because of the bypassing of conventional regulating schemes. As the TRAI consultation paper on the same puts it succinctly, the differences between regulations for VoIP and conventional voice service have implications for telephone number management, public safety, emergency number access and national security. Without secure connections through TSPs, they present various cyber security threats.[ix] Lawful Intercept (LI) reposes an obligation on TSPs to grant Law Enforcement Agencies (LEAs) access to their network and services. However, no such provision exists for OTTs.[x] For instance, during a terrorist attack, it becomes extremely complex to intercept such calls which appear to have originated from other countries from virtual numbers. In case of messaging, certain players indulge in special encryption, which becomes extremely difficult to intercept as these encryption keys are not made available easily to law enforcing agencies.[xi]

To fully understand the steps needed to regulate these players without compromising the core tenets of freedom of the internet and the choices available to consumers, it is necessary to take a look at how other countries, especially the developed ones, around the world, manage to do both.

Regulation In Other Countries – Net Neutrality?

To understand how other countries, especially the U.S.A deals with such regulation, it is imperative to understand what net neutrality exactly means. Net neutrality, to put it simply, means that TSPs must treat all internet traffic on an equal basis, no matter its type or origin of content or means used to transmit packets. All points in a network should be able to connect to all other points in the network and service providers should be able to deliver traffic from one point to another seamlessly, without any differentiation on speed, access or price. The principle simply means that all internet traffic should be treated equally. In the U.S.A, the F.C.C has defined net neutrality as another way to refer to open internet principles. The open internet is the internet where consumers can make their own choices about what applications and services to use, and where consumers are free to decide what content they want to access, create, or share with others.

At one level, the concept of net neutrality is being linked to the right to freedom of expression and the right to information. The underlying idea of an open internet is that all internet resources and the means to operate on it are easily accessible to all. It effectively renders the network carrier a “dumb pipe”, i.e. intelligence of management and operation of communication lies at the end points of the network and not in the network. This is also called the “end-to-end” principle.

All over the world, countries are grappling with this new form of technology and how to deal with it. There are logically two separate regulatory issues involved. The first is the treatment of communication OTT players vis-a-vis TSPs offering similar licensed services. The second is the treatment of non-communication OTTs vis-a-vis existing service providers of their respective trades.

The U.S.A attempts to harmonize OTT regulation with net neutrality. For the longest time, the U.S.A never had any formal structure to disallow violations of net neutrality by ISPs. The most famous example was when the F.C.C sanctioned and prohibited Comcast from throttling peer-to-peer networking applications like BitTorrent. In the subsequent case that followed,[xii] the Court of Appeals vacated the F.C.C’s order to Comcast not to interfere with its users’ peer-to-peer networking. The Court ruled that the F.C.C had no jurisdiction in the field. However, the D.C. Circuit hinted that the court would accept separate jurisdictional arguments under other titles of the communications act.[xiii]

Following that, in December 2010, the F.C.C approved of another set of similar rules, codified in an order.[xiv] While these rules did not reclassify a broadband service as a communications service under the Title II regulation, they would have forbidden cable and DSL Internet service providers from blocking or slowing online service. They would also have prohibited mobile carriers from blocking VoIP applications such as Skype and blocking websites in their entirely.[xv] It established three orders on fixed and mobile operators of Internet access, thus affecting OTT services as provided by the carriers. Briefly elucidated, the Order hinged on three prongs: transparency; blocking; and unreasonable restriction. The first two applied to both fixed and mobile carriers, while the third applied only to fixed operators.

As can be expected, this did not go unchallenged either; in January 2011, Verizon filed an appeal in the United States Court of Appeals for the District of Columbia Circuit.[xvi] In Verizon v. F.C.C,[xvii] the Court of Appeals ruled against net neutrality once again; in effect, it vacated the parts of the Order regarding blocking and unreasonable restriction, whilst leaving the transparency requirement intact.

As a response, a dispute developed as to whether net neutrality could be guaranteed under existing law.[xviii] While the F.C.C maintained that Section 706 of The Telecommunications Act of 1996 gave it the authority to regulate ISPs, others, including President Obama, supported reclassifying ISPs as common carriers under Title II of the Communications Act of 1934.[xix] On November 10, 2014, the President stepped in again amidst a lot of discussion surrounding net neutrality and regulation of internet companies, and recommended that broadband internet service be reclassified as a telecommunications service to preserve net neutrality.[xx] The same was done by the F.C.C on 26 February 2016 in a historic 3-2 vote; the vote was to apply common carrier of the Communications Act of 1934 and Section 706 of the Telecommunications act of 1996 to the internet. As prior history shows, it may take a few years before they are promulgated, and there will probably be many lawsuits on the way.

These rules, called as bright-line rules are: a) No Blocking; b) No Throttling; and c) No Paid Prioritization. Departure from net neutrality leads to several problems for consumers, as can be seen in the next section.

The Position In India

In May 2015 the Department of Technology (DoT), government of India, came up with its report on net neutrality after analysing the position of various stakeholders. In this report, the government affirmed its intent to adhere to the core principles of net neutrality.[xxi] However, with respect to OTT players, there are some mixed reports. It rejected the demand for regulation of OTT messaging services, but was essentially with subjecting VoIP calls within the country to regulation, whilst calling for a liberal approach on OTT VoIP international call services.[xxii] What is unclear is how the government plans to make the distinction between VoIP OTTs and Messaging OTTs, as these two spheres are the same now. The committee also said that while messaging on an OTT service like WhatsApp should not be regulated, if the same app also offers voice-calling services, they should be subject to regulations that are already in place for TSPs/ISPs.[xxiii] In general though, the Committee refused the demand of the TSPs to regulate the OTT players and their content.

The Committee also said that “content and application providers cannot be permitted to act as gatekeepers” and go against the principles of Net Neutrality. Based on this, it appears clear that apps like Wikipedia Zero or Airtel Zero or internet.org, which rely on the concept of “positive discrimination” will not be allowed, since that amounts to a violation of the principles of net neutrality.

The Committee foresaw two kinds of licensing regimes to be put in place for security concerns and to ensure that no flouting of net neutrality norms happen. They are –

  • Ex-ante determination – Before a licensee launches any tariff plan, the same would need to be filed before TRAI within a reasonable period prior to the launch of the plan. TRAI would examine each such tariff filing carefully to see if conforms to the principles of Net Neutrality principles and that it is not anti-competitive by distorting consumer markets.
  • Ex-post determination – Complaints on tariff plans may be dealt with on a case by case basis through an adjudicatory process to be specified by the regulator and after giving a reasonable opportunity of being heard. Imposition of penalties or financial disincentives could be considered if the principles of Net Neutrality are violated.

While the report is in favour of “legitimate traffic management practices”, it says that TSPs/ISPs must make adequate disclosures to users about their traffic management policies. Additionally, traffic management that is “exploitative or anti-competitive” should not be allowed. That means that if the TSP is providing a specific music streaming app, for instance, then it cannot deliberately throttle the speed of any other music streaming websites.

However, it must be mentioned that these are just recommendations, and are yet to be adopted by TRAI. They can also be challenged in lawsuits at some point of time in future, much like similar orders were challenged in the U.S.A.

Conclusion And Suggestions

It is suggested that positive discrimination that has a negative impact on effective competition should not be permitted, since in such cases it is equivalent to negative discrimination. Other kinds can be permitted, since it would be beneficial to consumers’ interests. Taking a few concepts from constitutional jurisprudence, discrimination between various groups should only be permitted if there is intelligible differentia between various classes, and there is a rational nexus between the differential treatment and the aim of such discrimination.

While it is in the national interest to want to hold VoIP services to account if they do not follow legitimate regulations, it is far better to do this through ex-post regulations rather than an ex-ante licensing scheme. Thus, pre-licensing of OTT players is not a very progressive idea, and should be done away with. Also, the report also doesn’t say how one would distinguish between OTT communication services and OTT application services, when many apps such as personal assistance apps like HelpChat, are centred on communications. It also does not mention what regulatory distinction exists between text communication services and video/voice communication services, or between purely domestic and international video/voice communications. Finally, zero-rating can be non-discriminatory in nature, and such zero-rating should not be prohibited. Rather, this should be treated on a case-to-case basis, keeping in mind the unique factual matrix of each case.

Every once in a while, a development comes which marks an epoch in the history of humankind. The development of these OTT apps is arguably one of them. To wit, they should be encouraged and allowed to innovate as much as humanly possible, without throwing in their path needless hurdles to overcome. Radio cried foul when television came, and it wouldn’t have served humankind well to have indulged those complaints. Of course, valid concerns such as security and consumer interests must be looked after, but in general, it should be ensured that the path forward for innovation is as smooth as welcoming as possible, so that it does not become the road not taken.

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[i] Tim Wu (2003). “Network Neutrality, Broadband Discrimination”. Journal on telecom and high tech law. Available at – https://www.jthtl.org/content/articles/V2I1/JTHTLv2i1_Wu.PDF. Last accessed on 16 September 2015.

[ii] Wyatt, Edward (23 April 2014). “F.C.C., in ‘Net Neutrality’ Turnaround, Plans to Allow Fast Lane”. New York Times. Available at – https://www.nytimes.com/2014/04/24/technology/fcc-new-net-neutrality-rules.html. Last accessed on 16 September 2015.

[iii]https://indianexpress.com/article/technology/tech-news-technology/net-neutrality-report-assocham-calls-for-regulating-all-messaging-voice-calling-apps/. Last accessed on 16 September 2015.

[iv] ITU Secretary General’s Report for the Fifth WTPF- 2013. Available at – https://www.itu.int/en/wtpf-13/Pages/report-sg.aspx. Last accessed on 16 September 2015.

[v] Available at – https://www.fcc.gov/document/fcc-adopts-15th-report-video-competition-0. Last accessed on 16 September 2015.

[vi] https://www.businesstoday.in/magazine/technology/internet/net-neutrality-dot-recommendations-pose-problems-for-ott-players/story/222094.html. Last accessed on 16 September 2015.

[vii] Available at https://www.auspi.in/policies/FINAL-UASL-GUIDELINES-2005.pdf. Last accessed on 16 September 2015.

[viii] The Indian Telegraph Act, 1885. Available at – https://www.ijlt.in/pdffiles/Indian-Telegraph-Act-1885.pdf. Last accessed on 16 September 2015.

[ix] TRAI Consultation Paper. Available at – https://www.trai.gov.in/WriteReaddata/ConsultationPaper/Document/OTT-CP-27032015.pdf. Last accessed on 16 September 2015.

[x] Available at – https://tra.org.bh/media/document/Study_Policy_Regulatory_Framework.pdf. Last accessed on 16 September 2015.

[xi] Supra n. 9, Page 41.

[xii] Comcast Corp. v. FCC, 600 F.3d 642. Available for perusal at – https://www.cadc.uscourts.gov/internet/opinions.nsf/EA10373FA9C20DEA85257807005BD63F/$file/08-1291-1238302.pdf. Last accessed on 16 September 2015.

[xiii] Ib.

[xiv] Available at – https://apps.fcc.gov/edocs_public/attachmatch/FCC-10-201A1_Rcd.pdf. Last accessed on 16 September 2015.

[xv] Available at https://www.wired.com/epicenter/2010/12/fcc-order/. Last accessed on 17 September 2015.

[xvi] https://www.nytimes.com/2011/01/21/business/media/21fcc.html. Last accessed on 17 September 2015.

[xvii] 740 F.3d 623 (D.C. Cir. 2014). Available at – https://www.cadc.uscourts.gov/internet/opinions.nsf/3af8b4d938cdeea685257c6000532062/$file/11-1355-1474943.pdf. Last accessed on 17 September 2015.

[xviii] Available at – https://www.dailydot.com/politics/what-is-title-ii-net-neutrality-fcc/. Last accessed on 17 September 2015.

[xix] Available at – https://www.nytimes.com/2014/11/11/technology/obama-net-neutrality-fcc.html. Last accessed on 17 September 2015.

[xx] Ib.

[xxi] Net Neutrality DoT Report, Available at – https://mygov.in/sites/default/files/master_image/Net_Neutrality_Committee_report.pdf. Last accessed on 17 September 2015.

[xxii] Ib.

[xxiii] https://indianexpress.com/article/explained/dot-panel-for-net-neutrality-but-what-conditions-apply/. Last accessed on 17 September 2015.

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