August 5, 2014: The TRAI Seminar on OTT Regulation

A few days before this, someone had messaged me about a seminar that the Telecom Regulatory Authority of India was planning. A day before, I was forwarded an email about a discussion that the TRAI had planned, covering “Regulatory issues for online services” in Delhi.

The discussion was to have 3 focus areas, according to a notice on TRAI’s website: 

Session 1: New Developments in OTT
Session 2: Impact of OTT on TSPs and their counter measures
Session 3: Legal and Regulatory framework for OTT

I had been writing about Net Neutrality concerns, in terms of what telecom operators had demanded, and wanted to figure out a way to attend the session. I ended up landing up at the PHD Chambers of Commerce, where the discussion was being held, and the TRAI folks at the counter thankfully allowed me in. I had attended several TRAI open house discussions in the past, and had been reporting on them for a few years, so they let me in because they knew me.

Regulation of OTT services was a part of the five point agenda pushed by the telecom lobbying group COAI in August, after the NDA government came to power in May.

That this was a telecom agenda was not surprising. However, for the TRAI to pick this up this quickly was worrying for me. I understood the concerns that they had, and had expected this: on an almost 14 hour layover at Dubai (the cheapest flight I could get), I had penned down my thoughts on what would happen after Whatsapp voice became a reality.

The open house began with an angry Rahul Khullar ranting about Telecom CEO’s speaking with him about the problems that OTT’s (Online apps) will cause for their business, saying that he wants nothing to do with this, and it’s better to have a seminar where these issues can be aired, rather than do a pre-consultation (and subsequently a consultation followed by a regulation).

(Was Rahul Khullar ever not angry? In the 8 years that I had been attending TRAI open houses, this was the first Chairman that had seen actually interrupting people, and at times berating them for their comments and questions. He had done that at a discussion at the India International Centre earlier that year, and I found it most distasteful and disconcerting.)

I sat on the upper tier at the fairly large auditorium: I found a charging point, and around me I remember some folks from the Centre for Internet and Society, and Raman Jit Singh Chima from Google. I type really fast, and this looked like this was very serious for the Internet industry, so I took furious notes on my laptop.

Khullar said, and I quote: 

“Robert Ravi (of the TRAI) indicated, that the OTT applications hurt Telcos the world over. Voice and messages is obvious for telcos, and video is another stream that is hurting them. The question that is, what did the rest of the world do? the rest of the world looked on. Tech is good for consumers, tough luck. If telcos aren’t able to recover investments. On the other side, the telcos made the arguments that are we just pipe providers? I don’t know the answer.”

I remember getting quite angered by some of the comments, especially those from Reliance Communications. After a session, I raised my hand. I didn’t often speak at TRAI events, but this time I was really riled up, and called the TRAI out for even considering this discussion, given that any kind of revenue share would be a net neutrality violation, and would be a freedom of speech issue.

I remember how I struggled to justify my point then, but it was a start of something: I had to figure out why I felt this was bad for the Internet, terrible for Indian startups, and why it was even a net neutrality issue. Raman pushed back on a panel he was on.

 Subho Ray was particularly articulate in response. 

I wrote 8 articles about that day, a few days later on August 8th, and it remains the only public documentation of the proceedings.

March 2014: Early warnings from the Mobile World Congress

At the Mobile World Congress in Barcelona, the telecom operators use the stage to highlight their regulatory and business agendas for the year. In 2014, like every other year, telecom operators took to stage to complain about the impact of the Internet on business, especially in terms of concerns of voice based apps.

There were several voice apps around, especially in India, including and Nimbuzz, Viber, but we knew the world would change once Whatsapp launched voice. I ended up speaking with Neeraj Arora, WhatsApp’s head of business development, about Net Neutrality.

Most companies don’t let their senior execs speak with me because I end up asking challenging questions, but Neeraj was an old friend, and he could take his own decisions on whom to speak with. He had gone to college with my cousin Vivek. When we met for the first time at TiEcon in the late 2000’s, he had been with Times Internet then, as a part of their M&A team.

He then joined Google, and eventually moved with Google to Mountain View, once they wound up their product management and M&A teams in India around 2010. Neeraj had met the WhatsApp team in San Francisco, loved their approach, focus and vision, and ended up pitching a job for himself to them: as their first business hire. He handled telecom deals, and I remember him complaining once about Indian telecom operators, that they’re trying to fight WhatsApp, whereas a South-East Asian telecom operator had seen the writing on the wall, and told him – help me kill my current business model faster.

WhatsApp had done telecom deals in India, it worked for both WhatsApp and the telecom operators: Whatsapp was a primary reason for users to sign up for Internet packages. However, we knew what was coming. I spoke with Neeraj a day after WhatsApp announced it was launching voice, and I had some hard questions for him, that helped inform the Net Neutrality Campaign:

MediaNama: How does this change with voice, because it’s one thing to drive data…?
 Arora: That is a better question. I would say, if you go back two and half years, when we started doing carrier deals, and this question was asked in every meeting: You want to work with us, we want to work with you, but it cannibalizes SMS. And now I don’t even get that question anymore. I’m predicting that the same thing will happen with voice. We’ll launch voice, and hopefully users will like it…I hope they like it. And, if they end up using our voice product, it drives data, and it will be the same curve again. First carriers will say…

MediaNama: But it’s a completely different thing when you’re impacting around 8% of revenue (SMS) versus when you’re impacting 60-70-80% of revenues, right? The danger they feel is greater.
 Arora: To be very frank, I’ve not talked to carriers after this announcement*. I will see how they feel. Jan on stage said yesterday that the future is about data, and there were two more carriers on stage on the same keynote with him, and they also said it’s about data. (If) it’s all about bits and bytes and not about messages and calls, then we’re aligned. This phase from when VoIP is not commonly used to a phase when hopefully everything flows through the data pipe…I’m sure there are lots of smart carriers who are thinking of that transition and planning for it, and pricing correctly. Why does India have such a low data penetration? It should be like 10x of what it is today, and I think we can help that. Google, Facebook, Twitter, these companies provide services that can speed up data penetration, and if we can work with carriers to do it, why not?

MediaNama: So what are the things you hear from carriers in India when it comes to messaging conversations? What are the challenges you face with telco partnerships in India?
 I think we’re doing fine. There are no challenges any more. I think the first was the biggest barrier because they didn’t know what will come out of it, and the first one we did with RCOM, has done exceptionally well, and that’s why we launched the second one with Tata (Docomo). There are a couple more in the pipeline. On the messaging side, I see no challenges. People get it, the carriers get it now. Also, there’s a very strong pull from the end users. Both of us serve the same users, and we have to listen to what the users want. We are providing a service, and they’re providing the data underlying it. If we go to the market combined and provide something which is better than what users can get if they just take some data connection off the shelf. Or, if people ask why do I need data connection, and they can say that you need it because we’ll give you unlimited Whatsapp, it makes a lot of sense.

Voice, we’ll see how it goes.

On the way back from MWC, I had a 14-16 hour layover at Dubai Airport. With nothing much to do, I got time to think about the impact of WhatsApp voice on telecom.

August 2012: An early meeting with Airtel

This was unexpected: Airtel reached out to me for an interview with K. Srinivas, its President of B2C businesses. The name was familiar, and looked up MediaNama to land upon something I had written a couple of years prior: Airtel Broadband doesn’t want to be a dumb pipe. This was a critique in response to a statement that Srinivas, then the President of Telemedia at Airtel had given to the Hindu Businessline, where he said that “Within the next 6-12 months, we are working on moving a dumb pipe to an enriched pipe.” I had pointed out how ISPs can be a gateway to the Internet, in a manner that AOL had been one in the US, but also that there’s a dark side to it: that an ‘enriched’ or ‘smart’ pipe cab impact the neutrality of access to the Internet. I was reminded of my experience with Airtel Live, which was an early mechanism for mobile Internet Access, where access to some services was blocked. I wrote then, that 

“Telecom operators in India, including Airtel, Videocon, MTS and Tata Docomo have, over the last six months, offered access to certain sites for free, as promotional initiatives, providing preferential treatment to a few sites over others, in terms of cost of access. On Broadband, Airtel Broadband did upgrade the access speed for its users for YouTube during the Indian Premier League. Verizon and Google recently announced a joint proposal to allow content companies looking to deliver bandwidth heavy services, through a separate set of pipes, for a fee.”

This was tricky for me: When I had pointed out what MTS was doing in terms of giving access to some sites for no data cost was a net neutrality concern, Sumant Srivatsan, a friend in Advertising had said that Net Neutrality was about speed of access, not cost. I had looked up Wikipedia about Net Neutrality (the concept was new to me), and it appeared that the idea of cost of access was not seen globally as a net neutrality concern. However, for me, the speed of access really didn’t matter: mobile Internet was expensive, and access was slow on 2G/Edge anyway. The cost mattered in India.

I remember Srinivas being fairly open and pleasant when I met him. In an interview that spanned across connectivity, data pricing, carrier billing, digital money and app stores, when I asked him about Net Neutrality concerns, he laughed and said “I knew you were going to ask about this.”

Excerpts from the interview:

“The notion is that everything on the Internet is free. So Google doesn’t charge the customer, Facebook is free. There are billions of dollars of investment going in. This is not just an Indian issue, it’s a global issue. We’d not even rolled out 3G, and 4G has dawned upon us. The industry, and the costs of rolling out, building a backhaul. Backhaul costs in India are backbreaking. In South Bombay, if you want to put up a kilometer of fibre, the Right of Way cost is almost about Rs 1 crore. Show me one business model, with the data consumption going up, that supports these continuously increasing costs. The data ARPU the world over is flat to declining. The notion that telecom operators are making tons of money is incorrect. Show me one company in India or anywhere in the world that is thriving on data. You need to have the right kind of model. There is no free lunch.” 

MediaNama: But as a customer, I’m paying you for this access.
Srinivas: If you’re paying me 100 bucks for 1 gb, but beyond that you’ll have to pay.

MediaNama: So don’t charge me Rs 98 for 2gb.
Srinivas: At some stage, Rs 98 will become Rs 200 for 2gb.I’m not getting into whether this pricing is right or wrong. Even on voice, the current rates are not sustainable. Every single operator is sitting on huge sets of investment. This pricing for data or voice is not sustainable. Lets build the right business model. On one side you compete, and on another you collaborate. The point you were making (in your post) was that I need Google and Google needs me. Very true. The issue is that the amount of investment that goes behind. Tell me one product or commodity in the country which has not changed its price upwards in the last 10 years, or even the last one year. You’ve seen everybody drop prices. I pay in dollars for all my investments and I earn in paise. There is significant investment.

MediaNama: How would you respond to a situation in 2013, where Reliance comes in and drops prices?
Srinivas: We have dealt with that more than adequately. I don’t want to talk about what we will do, and we’ve dealt with it in the past, and there is a solution going forward. If there is one company which can survive and sustain, and there are bigger issues in the market.

One other thing I wanted to talk to you about was that a lot of guys actually believe that speed doesn’t cost money. It’s completely untrue.