Revenue share demands by internet-telcos like rent-seeking: IAMAI

The Internet and Mobile Association of India (IAMAI) has said demands made by telcos for revenue sharing mechanisms between internet companies and telecom service providers (TSPs) “smack of rent-seeking”, and would disincentivise growth for OTT-based businesses.

According to IAMAI, by requiring largest OTT service providers to pay TSPs for data used by consumers, the telecom players would effectively be charging twice for the same service, since they already charge consumers for data.

“In any case, ‘surging data traffic’ is merely data consumed by consumers that they have already purchased from telecom companies. Therefore, the ‘strain’ on infrastructure of TSPs occurs when they sell data to consumers beyond their infrastructural capacity a fact that has been conveniently ignored,” IAMAI said in a statement.

The association said that demands for imposing revenue-sharing mechanisms between internet companies and TSPs “smack of rent-seeking”.

IAMAI called out demands made by the Cellular Operators Association of India (COAI) and the Indian Council for Research on International Economic Relations (ICRIER) in this regard.

IAMAI noted that COAI has called for regulatory intervention to ensure ‘largest traffic originators’ pay a ‘fair share charge’ to telecom companies to account for capital investments that have been made to accommodate surging data traffic.

“Similarly, ICRIER has called for the imposition of a ‘Broadband Infrastructure Levy’ to be applied at three per cent of India operations of ‘significant’ OTT service providers based on ‘specialised contracts’ between service providers and network operators,” it flagged.

Strongly opposing demands to bring OTT service providers under regulations typically reserved for telecom companies, IAMAI argued that such demands fail to recognise that telecom service providers are subject to a special regulatory and licensing regime by virtue of the control that they exercise over valuable national resources such as spectrum.

“Therefore, the introduction of a telecom regulatory regime for OTT service providers would be an act of over-regulation,” it said.

Over-the-top service or OTT providers have offered high-quality content for little-to-no cost to users. This, in turn, has spurred the rapid growth of data consumption and economic activity in India.

“Mandating revenue-sharing mechanisms between OTTs and TSPs would effectively reverse this phenomenon by disincentivising growth for OTT based businesses, for whom a volume-based revenue sharing mechanism would be a glass ceiling for continuing growth and may prove to be an entry barrier for startups,” it said.