Abstract
Communication and entertainment are our fingertips, thanks to the recent proliferation of Over-the-Top Platforms ( hereinafter, “OTT” ). Especially since the pandemic, they have mushroomed both in number and volume. As per a CII-BCG report titled ‘Shaping the Future of Indian M&E,’ the Indian OTT market could grow at of 20-23 percent rate from 2022 to 2030 in terms of revenue, amounting to 11-13 billion dollars by the end of this decade. Their rapid rise, however, posed a new challenge to the regulatory authorities, who have struggled to devise an adequate regulatory framework to govern the same. The recent partial coming in force of the Telecommunications Act, 2023 and its ambiguity on whether OTTs fall within its ambit or not has once again directed the focus towards the shortfalls in their regulation. In this light, this article aims to first offer a brief description of what exactly OTT platforms are and their current legal status quo. Further, this article will critically analyse the arguments advanced by Telecom Service Providers (hereinafter, TSPs), who have relentlessly argued for OTTs to be bought within the same regulatory ambit they are subject to. Next, the article will critically analyse the approach of Telecommunications Act, 2023 and various draft bills promulgated by the legislature towards OTT platforms. The ultimate aim of this piece is to offer suggestions towards framing an ideal regulatory framework for OTT platforms, based on shortcomings of the current status, and creative inspiration from other jurisdictions.
Introduction- What is OTT?
An OTT media service is one that is offered to viewers directly via the internet. While the traditional means of dissemination of content used by telecom service providers (hereinafter, TSPs) and broadcasters include cable, broadcast, and satellite television, OTT bypasses all of them by using the internet to reach viewers. OTT platforms can roughly be divided into two– OTT communication services such as WhatsApp, Telegram, etc and OTT application/broadcasting services such as Netflix, Amazon Prime, etc. However, there can be an overlap between the two, as many applications have integrated communications channels despite communication not being the primary function, for e.g., Paytm or Zomato. Nevertheless, the term currently lacks a legal definition in India. The Telecom Regulatory Authority of India (hereinafter, ‘TRAI’) in its Consultation Paper on OTTs released in 2023 endorsed a broad array of definitions. For the purpose of this paper, the definition of the UK Office of Communications is significant. It defined OTT as a type of service provided ‘over the top’ of an existing data network connection such as a fixed or wireless broadband connection. This definition highlights the important fact that OTTs do not own or operate their own physical network infrastructure, they rely on existing internet infrastructure provided by TSPs or Internet Service Providers (hereinafter, ISP). In the next section, the article will explore the current regulatory status of OTT platforms in India.
Current Regulatory Status of OTTs in India
Where content regulation is covered, OTT Platforms do not function in a complete regulatory void. Content regulation for OTT platforms is dealt with under the Information Technology (Intermediary Guidelines) Rules, 2021 (hereinafter, IT Rules, 2021) which covers them under the category of ‘publishers of online curated content.’ The IT Rules mandate OTT platforms to adhere to a Code of Ethics, undertake self-classification of their content into groups based on their level of age-appropriateness, and ensure that parental locks are in place. The IT Rules also mandate these platforms to establish a three-tier grievance redressal mechanism. The first level being self-regulation of grievances by the OTT publisher itself, the second being self-regulation by a body of OTT publishers, and finally an oversight mechanism at the level of the Ministry of Information & Broadcasting. Thus, where content regulation and oversight are concerned, the IT Rules impose numerous obligations on OTT platforms, mostly in line with the principles of self-regulation.
However, for other aspects, there appears to be a gap in the regulation. In its October 2023 order in the case of All India Digital Cable Federation v. Star India Private Limited, the Telecom Disputes Settlements and Appellate Tribunal clarified that OTT platforms will not be classified as ‘TV channels’ and hence fall outside its jurisdiction, and that of the TRAI. Consequently, unlike TSPs, they do not need a license or authorisation from the central government to operate. Further, TSPs as a part of their licensing obligations, are required to maintain and upgrade the networks they have ownership over. OTTs, operating without a license, face no such obligations, while being reliant on the TSPs networks for their operation. By virtue of being outside the licensing regime, OTTs do not also have to comply with security requirements such as lawful interception, furnishing call details, providing traceable identities of users, etc. Further, while TSPs need to adhere to spectrum allocation rules and bear related costs, OTT platforms do not. Additional obligations required to be undertaken by TSPs but not OTTs include space related charges, bank guarantees to the government, quality of service obligations, consumer protection measures, etc. Thus, it is the view of the TSPs that there is a regulatory imbalance that exists between them and OTT platforms. In the section below, the article will critically analyse the arguments of the TSPs to subject OTTs to the same regulatory apparatus they are subject to, as a means of restoring the regulatory balance.
Same Service, Same Rules?
Ever since the TRAI released its first ever consultation paper on OTTs in 2015, debates have raged on regarding whether there is a need to restore the regulatory imbalance between OTTs and TSPs. Citing the principle of ‘same service, same rules,’ the TSPs have strongly advanced arguments for bringing OTT communication services under the same regulatory framework that they are subject to. TSPs argue that OTTs not only ‘free ride’ on the infrastructure provided by the them, but also compete with them, as they prima facie provide the same service. And yet, they are not subject to any of the costly obligations described above that apply to TSPs, nor do they share any of their profits with the same. As such, due to the gap in regulation, there appears to be a lack of level playing field between the two entities.
While this argument appears to be reasonable, it needs to be critically examined. The argument regarding OTTs and TSPs being competitors operates on the assumption that the services provided by TSPs and OTTs are perfect substitutes. This, however, is a flawed assumption. The first crucial difference between them is interconnectivity. TSPs are required to be interconnected, which is defined as the linking of networks so that users of one network can communicate with users of another, without the need to subscribe to multiple networks. This becomes essential for a number of uses, such as enabling communication over the public telephone network and provision of emergency services. OTTs, on the other hand, do not have interconnectivity between them- subscribers of one application cannot communicate via the same to subscribers of another. Further, OTT communication services provide a completely different set of features, beyond what is provided by the traditional voice/messaging services provided by the TSPs. These range from the ability to group chat or group audio/video call, sending emojis and gifs, lack of character limits for texts, and so on.
Moreover, a crucial difference is the layer on which these two entities operate. TSPs operate in the network layer and control the infrastructure therein. On the other hand, the OTTs function on the application layer, providing content to be viewed over the public internet. This distinction is important as operating on the network layer requires using a scarce public resource, i.e., spectrum. Spectrum refers to the range of radio frequencies used for communicating. For its efficient usage and management, licensing and other obligations become necessary, which TSPs are subject to. Since OTT platforms do not access or utilise this scarce resource, bringing them under the same licensing mechanism as TSPs would be conceptually flawed.
Beyond these differences, it is also important to acknowledge that OTT services are dependent on the TSPs. Since they rely on the infrastructure created by the TSPs who also control the same, a consumer cannot even utilise OTT services before first purchasing internet access from a TSP. Thus, empirical data reveals that growth of OTTs can be seen to be expanding, and not eating away at the TSPs profitability. Thus, not only are there numerous functional, technical, and structural distinctions between OTTs and TSPs, they can also be conceptualised as being in a symbiotic and complementary relationship. However, despite the major differences between TSPs and OTT applications, there appears to be an unwarranted legislative insistence on bringing the two under the same ambit. The next section will explore the approach of the Draft Indian Telecommunication Services Bill, 2022, the Telecom Act, 2023, and the Draft Broadcasting Services (Regulation) Bill, 2023, in this regard.
The Legislatures’ Approach Towards Regulating OTT Platforms- Mixing Oil and Water?
The first legislative attempt at clubbing TSPs and OTT platforms under the same ambit was the Draft Indian Telecommunication Services Bill, 2022. It sought to replace the Indian Telegraph Act, 1885, the Indian Wireless Telegraphy Act, 1933, and the Telegraph Wires (Unlawful Possession) Act, 1950 which regulated telecommunication services in India. It sought to provide a licensing mechanism for providers of telecom services. Interestingly, the definition of ‘telecommunication services’ therein expressly included OTT communication services. Its revised version, the Telecommunications Bill, 2023, which has now been passed by both the houses of the Parliament and is an Act, does not include OTT communication services within the definition of telecommunication services. However, concerns have been raised that the aforesaid definition is still broad enough to bring OTT platforms within this ambit. The Act defines telecommunication as the “transmission, emission or reception of any messages, by wire, radio, optical or other electro-magnetic systems, whether or not such messages have been subjected to rearrangement, computation or other processes by any means in the course of their transmission, emission or reception.” It further defines a message as “any sign, signal, writing, text, image, sound, video, data stream, intelligence or information sent through telecommunication.” The mention of ‘data stream’ within the definition of ‘message’ has led commentators to point out that the scope of the Act is broad enough to include OTTs within its ambit. While the government has reiterated that OTT Platforms are excluded from the new law, ambiguous statements from ministry officials have added to the confusion. Thus, there is reasonable concern ambiguous wordings of the Telecom Act, 2023, may act as a ‘trojan horse’ of sorts and may subject OTT communication services may be subject to the same licensing and other obligations as TSPs.
However, all is not dismal. One welcome development under Telecom Act, 2023 from the perspective of OTT platforms is the administrative assignment of satellite spectrum. Section 4(4) of the Act gives the central government the power to assign satellite spectrum via an administrative assignment process, as opposed to terrestrial spectrum which would continue to be allotted via an auctioning process. This is significant because OTT platforms have traditionally objected to the assignment of satellite spectrum via the auctioning process. Again, as with terrestrial spectrum, OTT platforms themselves do not utilise satellite spectrum. However, integrating with satellite technology operators that need this spectrum to operate becomes important for OTT platforms for faster, more efficient, and seamless delivery of OTT content. The reason they object to auctioning satellite spectrum is because it has key differences as compared to terrestrial spectrum. Satellite spectrum, unlike terrestrial spectrum, is international in nature, and is thus managed by the International Telecommunications Union (hereinafter, ‘ITU’). The international guidelines established by the ITU permit the reuse of satellite spectrum many times at the same geographic location, and thus, it is a resource that is shared by several satellite operators. Thus, auctioning off satellite spectrum as it is done with its terrestrial counterpart will have the negative effect of creating exclusive rights over a traditionally shared resource, and will limit the overall satellite spectrum that is available for India. Thus, administrative assignment of spectrum ought to be the preferred mode of allocation of satellite spectrum. .
Beyond the ambiguous wordings of the Telecom Act, 2023 on the question of whether OTTs fall under its ambit or not, it is yet more disappointing to see a similar errant approach being employed in the Draft Broadcasting Services (Regulation) Bill, 2023 (hereinafter, Draft Broadcasting Bill). Broadcasting refers to the distribution of audio or visual content to an audience via electronic communications. The Draft Broadcasting Bill aims to amend and consolidate the law regarding broadcasting in India, which is currently mostly regulated by the Cable Television Networks (Regulation) Act, 1995. Interestingly, it attempts to bring OTTs within the ambit of ‘broadcasters’ under Section 2(y). Such a categorization of OTTs as broadcasters has been criticized as being fundamentally misconceived. Just like the case with TSPs, there are numerous differences between OTTs and ‘broadcasters’ as the term is traditionally understood. First, as explained above, OTTs rely on the infrastructure provided by TSPs and ISPs to deliver their content, while broadcasters rely on broadcasting network operators. Most importantly, broadcasters operate via a ‘push model’ wherein content is delivered to mass audiences as per a pre-determined schedule, whereas OTTs operate by a ‘pull model’ wherein the users have autonomy to choose what they want to watch, at what time.
Therefore, it appears that the Indian legislatures’ ‘Achilles heel’ when it comes to regulating OTT platforms has been clubbing them under the same umbrella as other technically and functionally distinct entities. This is exemplified by the both the subtler approach of the Telecom Act, 2023, and the express inclusion of OTTs in the Draft Broadcasting Bill, which seems to be making the same error as the Telecom Act, 2023’s draft version. In this light, the next section will explore how the ideal regulatory framework for Indian OTTs should be distinct from those being devised for other entities, and tailor made for specific needs of the industry.
Moving Towards an Ideal Regulatory Framework
As far as bridging the regulatory gap between OTT communication services and TSPs is concerned, it is evident that the approach taken by the Telecommunications Bill, 2022, i.e., subjecting entities of a distinct nature to the same requirements would not be appropriate. Further, the lack of express inclusion of OTTs the Telecommunications Act, 2024 does not bring relief either due to the ambiguous wordings employed in the Act. Thus, the demands of OTT platforms for an express exclusion of the OTT from the Act are reasonable.
A potential solution, mostly advanced by the TSPs, to restore equilibrium between them and the OTTs would be a mandatory cost sharing framework. Their argument is simple- since the OTTs rely on the telecom infrastructure provided by the TSPs, they should financially contribute towards the development and upkeep of the same. While the solution appears prima facie reasonable, it is important to acknowledge that such a mandatory cost sharing framework may have concerns for net neutrality. Net neutrality is essentially the principle that those who provide access to the internet must treat all the content therein in an equal and non-discriminatory manner. If a mandatory cost-sharing framework is imposed, TSPs, as controllers of the internet infrastructure, may block or slow the content of the OTT platforms that do not share their costs, or may prioritise those that do. This would naturally be a violation of the net neutrality principle. Thus, instead of a mandatory cost sharing framework, a better solution may be encouraging TSPs and OTTs to enter into voluntary cost sharing frameworks, on mutually agreeable terms. This is in line with the ITU’s recommendations towards enabling an environment for voluntary commercial arrangements between TSPs and OTTs.
Beyond just cost sharing frameworks aimed at creating a level playing field, it is also important to acknowledge that OTTs should not be allowed to function in a complete regulatory void in other aspects. Given the stark structural, functional, and technical differences between OTTs and TSPs as depicted above, the debate for and against filling this regulatory void should be centred not on the perceived disparity between them, but should be re-directed towards focusing on regulatory gap means for consumers and the industry’s growth. In this light, the unique regulatory structures Singapore and the European Union (EU) have created for OTTs can lend us inspiration to conceptualise the appropriate regulatory framework for the OTT industry in India.
Where Singapore is concerned, it has created indeed created a licensing regime for OTT communication services, termed as a Service Based Operating (SBO) license. However, this license regime is different from the one TSPs are subject to, which is termed as a Facilities Based Operations (FBO) license. Respecting the difference between the two services, both the licenses carry different obligations. FBO license holders carry out obligations similar to those imposed on Indian TSPs, ranging from payment for use of spectrum, provision of interconnectivity, rolling out and maintaining networks, etc. SBO licensees on the other hand are subject to minimum quality of service standards and consumer protection measures. These include obligations relating to disclosure of prices, terms and conditions, restrictions on service termination, and prohibition against charging for unsolicited telecommunications services.
The EU, in a similar fashion, has a regulatory framework that differentiates between TSPs and OTTs. OTT services are classified under the ‘Number Independent Interpersonal Communications Services’ (‘NI-ICS’) category within the European Electronics Communications Code (‘EECC’). This terminology is based on the fact that OTTs do not depend on publicly assigned numbering services. On the other hand, TSPs in the EU are classified as ‘Number Based Interpersonal Communications Services’ (‘NB-ICS). The regulatory regime for both these categories is different- NI-ICS are not subject to the EECC’s general authorisation regime, do not have to provide emergency services, etc. However, measures relating to data privacy and consumer protection apply to them, such as provision of pre-contract information to the customer, offering them facilities to monitor and control the usage of their service, etc.
Conclusion
All in all, it apparent that a ‘one size fits all’ approach will not be suitable for regulating two services with a completely different modus opperandi. Not only will such an approach be insensitive towards the major differences between OTTs and TSPs, it would also not make sense from an economic perspective. The OTT industry maybe fast growing at a whopping 20% and is expected to double in terms of total revenue generated by 2027– but it is still an emerging sector. In this light, policies aimed at their regulation should foster innovation and growth in this sector. Subjecting OTTs to the same requirements, costs, and licensing obligations as TSPs, which constitute an already well-established sector, would be unwise and inevitably stifle the former. Instead, the focus of the policy makers should be re-directed from trying to bridge the perceived regulatory imbalance. The need of the hour for lawmakers is to devise a separate regime for OTTs in line with the approach adopted by Singapore and the EU, tailor made and adjusted to the unique requirements of the sector, focused on enhancing the consumer experience and quality of their services. Indeed, even industry experts who have generally opposed regulation of OTT services argue for creation for quality-of-service standards for the same. Such a regulatory structure, focused on enhancing the consumer experience, would in turn give a positive boost towards the growth of this sector itself.
Author:
Piyush Senapati, 4th Year Student at National Law University, Jodhpur
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