DoT – Indian Competition and Anti-Trust Blog

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At the very outset, in all fairness, India as on date does not have a program similar to the “Lifeline Program” of the F.C.C., but it doesn’t hurt to put out a pre-emptive rant to make sure they never even consider one in the future.

BACKGROUND

As per the website of the F.C.C., the Lifeline Program for Low Income Consumers has since 1985, provided a discount on phone service for qualifying low-income consumers to ensure that all Americans have the opportunities and security that phone service brings, including being able to connect to jobs, family and emergency services. Lifeline is part of the Universal Service Fund. The Lifeline program is available to eligible low-income consumers in every state, territory, commonwealth, and on Tribal lands. The Lifeline program is administered by the Universal Service Administrative Company (U.S.A.C.). The U.S.A.C. is responsible for data collection and maintenance, support calculation, and disbursement for the low-income program. Cellphone subscriptions were included in 2005. Furthermore, On 31st March, 2016, the F.C.C. adopted a comprehensive reform and modernization of the Lifeline program. In the 2016 Lifeline Modernization Order, the Commission included broadband as a support service in the Lifeline program. The Commission also set out minimum service standards for Lifeline-supported services to ensure maximum value for the universal service dollar, and established a National Eligibility Verifier to make independent subscriber eligibility determinations.

PROBLEMS

The program is definitely a laudable initiative, and considering the high cost of mobile service in the U.S., probably a much needed initiative which recognises digital communication service as an essential service. Maybe it even implies it as a human right, though the same is no where expressly mentioned. However, the pitfalls of the program have led to severe criticism against it, with the current dispensation more than happy to cut its budget and probably let it die a slow death.

The problems with the Lifeline program are the same which so many government subsidy programmes and poverty alleviation programmes In India suffer from: inflated costs, allegations of fraud, lack of access to key systems and data to weed out inefficiences and fake enrollments. and the hard reality is, the deficiencies in such a program can never be fully eradicated. All one can constantly focus on is the benefits out weighting the costs. But the core reason why the program suffers from so many issues because it chooses to focus on individual benefits rather than provide macro solutions to the problem of affordable access.

UNIVERSAL SERVICE OBLIGATION IN INDIA: THE WAY TO CONTINUE ONWARDS

This is where we in India are fortunately doing a better job under the Universal Service Obligation Fund.

The Universal Service Obligation Fund (U.S.O.F.) is the primary scheme administering spread of broadband connectivity in rural areas. According to the Department of Telecommunications (D.o.T.), “…apart from the higher capital cost of providing telecom services in rural and remote areas, these areas also generate lower revenue due to lower population density, low income and lack of commercial activity. Thus normal market forces alone would not direct the telecom sector to adequately serve backward and rural areas. Keeping in mind the inadequacy of the market mechanism to serve rural and inaccessible areas on one hand and the importance of providing vital telecom connectivity on the other, the New Telecom Policy – 1999 (NTP’99) provided that the resources for meeting the Universal Service Obligation (USO) would be raised through a ‘Universal Access Levy (UAL)’, which would be a percentage of the revenue earned by the operators under various licenses. The Universal Service Support Policy came into effect from 01.04.2002. The Indian Telegraph (Amendment) Act, 2003 giving statutory status to the Universal Service Obligation Fund (USOF) was passed by both Houses of Parliament in December 2003. The Rules for administration of the Fund known as Indian Telegraph (Amendment) Rules, 2004 were notified on 26.03.2004. As per the Indian Telegraph Act 1885 (as amended in 2003, 2006 and 2008), the Fund is to be utilized exclusively for meeting the Universal Service Obligation.” In summary, the U.S.O.F. uses

The recently cabinet approved National Digital Communications Policy, 2018 further pushes four initiatives to be funded by USOF:

(i) BharatNet: Providing 1 Gbps to Gram Panchayats upgradeable to 10 Gbps
(ii) GramNet: Connecting all key rural development institutions with 10 Mbps upgradeable to 100 Mbps
(iii) NagarNet: Establishing 1 Million public Wi-Fi Hotspots in urban areas
(iv) JanWiFi: Establishing 2 Million Wi-Fi Hotspots in rural areas

These targets are ambitious, and they may not even be achieved during the duration of this policy at all, but achieving even fifty percent of this target would be a fantastic growth in internet access to the underprivileged.

This is an old Article and should have been published a long time ago. Nevertheless, better late than never.:-

As a follow up to my previous article on the T.R.A.I. Consultation Paper on the Regulatory Framework for O.T.T. Services, (hereinafter referred to as the Consultation Paper), I decided to do a similar piece on the recently released Department of Telecommunications (DoT) Committee Report on Network Neutrality (hereinafter referred to as the Committee Report) and also at the same time conduct a comparison between the two documents to present a picture of where the bureaucracy (to put it bluntly) of our Country stands today.

If the Committee Report is to be described in a few words, it would be positive but ambiguous. While one may not go so far as to say that choosing between the Committee Report and the Consultation paper is like choosing the bad from the worse, the Committee Report gives its own share of jittery mistrust to anyone in favour of Network Neutrality. This is the biggest canyon which has emerged between the pro and anti neutrality sides in every jurisdiction where it has been debated – a deep distrust of any proposal of bridging the gap between the extreme points of view. As is highlighted from the comments below, any such middle path generally fails to appease either side for two reasons. Firstly, it leaves any such centrist proposal wanting in safeguards. Secondly, the solution to Network Neutrality in the Indian context cannot lie solely with drafting a set of rules or regulations to ensure that the principles of network neutrality are observed. One will be required to delve deep into the economics of the Telecom Sector, the past, the present and the future to draft not just a regulation, but also prepare an adequate roadmap to create an economic atmosphere in favour of Network Neutrality. (The same is not the scope of this article and therefore shall not be elaborated upon further, but suffice to say, the path taken to ensure growth in the sector was one destined to lead to the present controversy.)

WHAT ARE THE “CORE PRINCIPLES OF NETWORK NEUTRALITY”??

The most novel brainwave in the entire Report, and yet sadly the one to definitely receive the most criticism can be summarised by quoting two paragraphs from the Report verbatim below:

“2.8 The crux of the matter is that we need not hard code the definition of Net Neutrality but assimilate the core principles of Net Neutrality and shape the actions around them. The Committee unhesitatingly recommends that “the core principles of Net Neutrality must be adhered to.”

“13.6 The Committee, therefore, recommends the incorporation of a clause in the license conditions of TSP/ISPs that will require the licensee to adhere to the principles and conditions of Net Neutrality specified by guidelines issued by the licensor from time to time. The guidelines can describe the principles and conditions of Net Neutrality in detail and provide applicable criteria to test any violation of the principles of Net Neutrality. Suggested guidelines are given in Annexure IV”

At first glance, this looks like a brilliant solution to one of the biggest problems concerning Network Neutrality – Defining it. Annexure IV to the Report lists out various guidelines/criteria which can be used to determine whether a license holder is violating any “perceived” conditions of Network Neutrality. However, the predicament soon becomes evident. Any violation of Network Neutrality will require a case by case adjudication of the alleged individual violation. In fact, the Report itself contemplates an adjudication based approach wherein any policy would be deemed to be in compliance and that the DoT would be the original side adjudicator of any complaint of violation with a specialised expertise cell to be set up to deal with all such cases. The only natural outcome of such a policy can be endless litigation (definitely right up to the Supreme Court, considering the stakes involved), and the development of a considerable number of precedents, all of which will be argued as being differentiable as they would have been based on the individual facts and circumstances of each case! Also, It will always be the deepest pockets who will be able to afford the best lawyers, and naturally, since the private sector will be more than happy to shell out the currency, it is not Orwellian to hypothesise that in the future, we could actually see the law on Network Neutrality “bent away” from the principles of Network Neutrality as we accept them today. Another potential issue which may arise is early on is a jurisdictional conflict between T.R.A.I. and any such specialised cell of D.o.T.

2. THE GOVERNMENT’S AGENDA IS A TOP PRIORITY.

Annexure – I to the Report is the Notification constituting the Committee and Terms of Reference for it. The very first Term of Reference for the Committee was as follows:

“1. To examine the pursuit of Net Neutrality from a public policy objective, its advantages and limitations.”

This itself is enough indication that the primary intent behind the formulation of the Committee was single fold – examine how to satisfy the proponents of network neutrality and the protesting public (a major chunk of the present governments electorate) and ensure that it does not result in the dilution of the aims and objectives of the government, primarily “Digital India”. Since such schemes heavily depend upon private sector investment, it was natural that the Report would draw a line somewhere towards protecting the most important objectives of telecom operators: grow revenue to reduce debt and invest in the development of infrastructure (both as a natural corollary, important dispensations for the present government as well.)

The summary to the Report gives a frank opinion of the rationale it would like to follow to protect the “core principles of network neutrality”:

“1. The primary goals of public policy in the context of Net Neutrality should be directed towards achievement of developmental aims of the country by facilitating “Affordable Broadband”, “Quality Broadband” and “Universal Broadband” for its citizens.”

3. A FLAWED AND ARBITRARY CLASSIFICATION OF O.T.T. SERVICES.

The contentious issue regarding O.T.T. applications which directly compete with the primary sources of revenue of telecom operators still remains, and the Report has done absolutely nothing to help improve matters in any manner whatsoever. It has only churned to water to create more froth on the issue by attempting to create a classification among the various services by recommending as follows:

OTT application services have been traditionally available in the market for some time and such services enhance consumer welfare and increase productivity. Therefore, such services should be actively encouraged and any impediments in expansion and growth of OTT application services should be removed.
Specific OTT communication services dealing with messaging should not be interfered with through regulatory instruments.
In case of VoIP OTT communication services, there exists a regulatory arbitrage wherein such services also bypass the existing licensing and regulatory regime creating a non-level playing field between TSPs and OTT providers both competing for the same service provision. Public policy response requires that regulatory arbitrage does not dictate winners and losers in a competitive market for service provision.
The existence of a pricing arbitrage in VoIP OTT communication services requires a graduated and calibrated public policy response. In case of OTT VoIP international calling services, a liberal approach may be adopted. However, in case of domestic calls (local and national), communication services by TSPs and OTT communication services may be treated similarly from a regulatory angle for the present. The nature of regulatory similarity, the calibration of regulatory response and its phasing can be appropriately determined after public consultations and TRAI’s recommendations to this effect.

In simple terms, O.T.T. applications are fine, as long as they don’t interfere with the lucrative (and maximal earning) voice revenue stream of the telecom operators. The previous sentence may be cynical, but the so called “public policy” only begs for the same. There is simply no sound basis for the classification proposed by the DoT in its Report. One need not bother to interfere with O.T.T. messaging services (which, coincidently, are today of little relevance to Telecom Operators since messaging constitutes less than ten percent of their revenue and as O.T.T. messaging services consume relatively little internet Bandwidth), but one needs to specifically regulate O.T.T. “verbal communication” services (which give them serious competition in revenue). Despite the fact that all these services have one major base as common – they all use the same internet/data connection to operate. Even among VoIP services, there is a differentiation which needs to be created between international and domestic services, which begs for the display of reason. The above recommendations are strong potential Article 14 and Article 19 violations in the making, not to mention that they will require many O.T.T. applications to bifurcate their services in order to comply. For example, Skype within India would be the subject of strict regulation, whereas for an international call, it may be a liberal or no regulation. Also, WhatsApp messaging services may be subject to no regulation, but WhatsApp (since it has now also begun VoIP services) domestic calls are subject to strict regulation while WhatsApp international calls may be subject to a liberal regime. Confusion and unnecessary complication, to say the least!!

4. ZERO RATING – PROPOSAL INVITES MISUSE

As a follow up the above mentioned point on Government Agenda, when it comes to Zero – Rating, while the DoT Committee has come down hard on the likes of Internet.Org, stating that “content and application providers cannot be permitted to act as gatekeepers and use network operations to extract value, even if it is for an ostensible public purpose. Collaborations between TSPs and content providers that enable such gatekeeping role to be played by any entity should be actively discouraged”, it has at the same time approved the carving out of exceptions for “desirable” public services and government services on a case by case basis. The phraseology invites arbitrary decision making and misuse, and it would be desirable to take a concrete stand on zero – rating (preferably against it) rather than try to carve out exceptions in “public interest”.

This is still not the final word, and at the time of writing, the T.R.A.I. is yet to release its final list of recommendations pursuant to its Consultation Paper. Also, Shri Ravi Shankar Prasad, the Minister of Communications & Information Technology (and Law & Justice as well) has made a categorical statement in Parliament this week that a final call shall be taken only after the release of the T.R.A.I. Report. But the way things are looking; Network Neutrality advocates may have to start preparing for an aggressive legal battle ahead.