What Happened to the Consultation on Licensing of WhatsApp-like Applications?

Sources believe that two recent developments will allow TRAI and the Department of Telecommunications to revisit and finish the regulatory process on licensing of over-the-top applications.

Should the regulatory imbalances between OTT applications and TSPS be solved through a licensing regime? Credit: PTI

Should the regulatory imbalances between OTT applications and TSPS be solved through a licensing regime? Credit: PTI

New Delhi: The question of whether over-the-top communication applications such as WhatsApp need to be licensed and regulated – an issue that was first addressed by the Telecom Regulatory Authority of India (TRAI) and the Department of Telecommunications (DoT) over a year ago – may be looked at again in the coming months depending on how the dynamics of the incoming Reliance Jio-VoLTE/VoIP battle and the US-India cyber relationship framework play out.

In January 2015, the DoT and TRAI kicked off separate processes that were aimed at analysing over-the-top (OTT) applications, such as WhatsApp and Viber, from two different angles: firstly from the perspective of net neutrality and secondly from the perspective of licensing OTT apps to deal with the regulatory and so-called economic arbitrage between companies like WhatsApp and telecom service providers (TSP) like Airtel.

In March and July 2015, they put out the initial results of these processes. The DoT issued a report in July that backed the principles of net neutrality, but stated that OTT applications needed to be licensed in order to do away with the regulatory arbitrage – such as not being required to comply with anti-spam/do-not-disturb/national security requirements – that they currently enjoyed. TRAI, on the other hand, put out a consultation paper that asked similar questions but appeared to bat for licensing of OTT applications far more strongly than the DoT report.

The only problem was that after much public consultation, nothing came out from these two processes. Both reports and papers had a public comment process, after which TRAI was supposed to issue a set of recommendations, based on which the DoT would take a call. While the question of differential pricing of data and net neutrality was eventually solved earlier this year, after a separate consultation paper on net neutrality on zero-rating was issued, nothing happened on the OTT licensing front; the government and TRAI did not come out in favour or against the concept of licence regime.

According to multiple people with direct knowledge of the matter, the issue of OTT licensing was put into cold storage because both TRAI and the DoT weren’t able to take a definitive call on how it should be tackled.

“There were a number of missteps that muddied the water around OTTs such as the draft encryption policy which was a disaster. But ultimately, the view was that while telecom companies were perhaps wrong with their ‘OTTs are free-riding’ argument, there existed other regulatory arbitrages and national security concerns around OTT applications that still needed to be solved. While licensing may have been overkill, to state it would never happen would be closing that door forever. “So things just stalled,” an industry source, who declined to be identified, told The Wire.

Another factor that has affected the year-long delay on the government’s stance on OTTs is the change in leadership at TRAI: while the telecom regulator’s initial consultation was spearheaded by Chairman Rahul Khullar, who was more open to “levelling the playing field between” OTTs and TSPs. Khullar’s tenure ended a few months after the consultation paper was put out, with R. S. Sharma taking over as the head of TRAI.

Two developments

In the last few months, however, there have been two developments that sources believe will allow TRAI and the DoT to revisit and finish this consultation/regulatory process on OTT licensing.

The first is that if VoLTE (voice over LTE) calls and VoIP/VoLTE calls to and from traditional phone (non-IP based) networks become popular, as some believe they will, the DoT and TRAI are already trying to reduce some of the arbitrage that exists between OTT players, like WhatsApp (which doesn’t allow its users to call landlines or mobile phone numbers yet) or Nanu (which does), and telecom companies such as Airtel and Reliance.

In April this year, the DoT amended the Unified Access Service license agreement to allow VoIP/VoLTE interconnection. This would, for instance, allow Reliance Jio and WhatsApp users to make calls using data (VoLTE/VoIP) to call a traditional landline number. Last week, TRAI put out a consultation paper on Internet telephony that lays the groundwork for how these type of calls would work in terms of interconnection agreements, termination charges and numbering systems.

However, both these developments favour TSPs over OTT applications such as WhatsApp or Nanu.

“From our reading, we believe that while calls from from IP-based networks to non-IP based networks used to be part of a grey area legally speaking, if you wish to do VoLTE/VoIP interconnection in India you now need a unified license, which costs Rs. 15 crore and asks a company to have a presence in India with local servers etc,” Nanu CEO Martin Nygate told The Wire.

There’s some evidence to show that making VoIP/VoLTE calls to traditional phone networks such as a landline or mobile phone will be popular in India. One of Reliance Jio’s unique selling propositions, for instance, is that its Lyf smartphones will allow users to convert an “ongoing voice call to a data call at a single command without interrupting or disconnecting the call”.

Also, the more typical VoIP smartphone call (Whatsapp-to-Whatsapp or Viber-to-Viber) still hasn’t eaten into the revenues of telecom players.  Idea CEO Himanshu Kapania for instance has said that only “0.1-0.2 of the company’s traffic is moving on VoIP”. However, there is, obviously, a strong likelihood that this could change in the future. WhatsApp for instance recently announced that its users were making 100 million (WhatsApp-to-WhatsApp)

“We don’t believe it will [change]. A typical WhatsApp-to-WhatsApp call, while it may be very cheap, is still not of good quality and requires both the data services of both parties to be turned on. Our Indian users make almost 700,000 calls every and a vast majority of is that people who are using our application (and therefore data) to make calls to traditional mobile phone numbers or landlines,” said Nygate.

Secondly, one of the long-standing arguments in favour of licensing OTTs is the national security card. While telecom service providers are required to maintain call data records and the like, OTT players such as WhatsApp are not mandated to do so and usually do not cooperate very easily when it comes to law enforcement requests.

However, over the last year after much dialogue between both parties, the US and India have started drafting a framework that will include “shared principles for a cyber relationship”. Some of these principles, as commentators have pointed out, lay the groundwork for a mutual legal assistance treaty that would allow the Indian government access to electronic data for law enforcement purposes.

“The logic within TRAI and DoT is that if some of the so-called imbalances between OTT and telcos are smoothened out, and law enforcement requests can be handled in a better manner, the question of OTT licensing could be looked at in the next three to four months without telcos breathing down their neck. Whether OTTs are incentivised into applying for a stripped down license if they want to call landlines from their application, or in order for them to adhere quality of service standards or anti-spam legislation, some decision will hopefully be taken,” said one source with direct knowledge of the matter.

Too many obstacles

And yet, despite this logic, many of the core arguments that telcos put forth over a year ago have still not gone away.  Telecom operators still, misguidedly, believe that OTT players such as WhatsApp ride ‘for free’ over their networks and thus are entitled to some sort of revenue share because of the investment they have put into network infrastructure.

Furthermore, while the US-India cyber relationship and future legal assistance treaties may result in easier law enforcement access, it doesn’t solve the high-stakes issue of consumer encryption and how that will impact law enforcement.

Multiple DoT and TRAI officials The Wire spoke to acknowledged this, but remained confident that over the next three-to-five months the OTT licensing consultation process could be re-visited this time hopefully with a concrete outcome.