COAI renews call for revenue share with LTGs

COAI renewed its demand for revenue share between telcos and large traffic generator apps like Netflix and Instagram, saying telecom operators would need additional fund to upgrade infrastructure to meet the increasing demand for bandwidth.

In a letter to telecom secretary Neeraj Mittal, Cellular Operators Association of India said it is imperative that the Indian government takes note of the issue facing the telcos and help create an apt precedent for the world.

The white paper highlights:

• Adopting a practical approach using statistics and mathematics, the COAI White Paper logically derived the increasing impact of the disproportionate traffic generated by Large Traffic Generating (LTG) platforms/applications and the need for responsible sharing of infrastructure development, maintenance and upgradation costs by them.
• The analysis in the White Paper led to five models of resolution to the issue, with the final model 5 emerging as the one protecting the Startups and MSMEs while bridging the deficit to the best possible extent, and is hence recommended. It also puts to rest all alleged concerns related to net neutrality, double charging, dubious proposal to increase consumer tariffs, etc.
• Further, the additional financial analysis based on the White Paper brought out the potential loss of approx. INR 800 crores to the Government exchequer in the absence of cost sharing by LTGs, which is expected to increase further in the coming years if not addressed in time.
• It also concluded that trying to offset the increased cost of INR 10,000 crore due to LTGs (in 2023) via tariff hikes is unrealistic as it would require an impractical additional subscriber base of 50 crores to do so.

However, the future situation is even more alarming as the White Paper is based on the data-carrying requirements of today. The following aspects indicate that the future requirements will increase further and at significant magnitude in this regard:

• The increasing convergence of diverse verticals and technologies is expected to lead to more bandwidth-heavy applications emerging, applying further pressure on the networks and necessitating heavier investments in the same. For example, the advent of AI brings forth the need to incorporate Graphic Processing Units (GPUs) into the systems for computing and processing data. These made-to-order equipment will have to be acquired by TSPs through advance payments, with 12-18 moths lag in delivery. Such heavy investments need to be planned appropriately by the TSPs, and the fair share contributions would help bring forth some balance in the cash outflows.
• The deployment of 5G and the future 6G also necessitates increasing deployments on the edge with enhanced network capabilities. Besides the high cost for the same, the increased power consumption, optimization, as well as infrastructure maintenance costs also need to be kept in mind.
• Newer technologies will also bring about newer demands, such as video optimization on OTT streaming platforms, whereby many different versions of a video with different resolutions and other technical characteristics are saved/loaded in the network, to cater to the different preferences or conditions of the viewers/consumers. Although the viewer consumes a specific variant of the video only, the pressure on the network increases.
• With all these factors adding to the network costs, this burden will become uneconomical and unviable for the Indian TSPs and can lead to drastic consequences, while the foreign LTGs responsible for the same continue to enjoy riding free over the networks without any responsible dues/actions.

It is pertinent to mention that major economies/territories across the world are also grappling with the same challenge and are in the process of devising a solution for the same. These include:

• United States of America (USA) – The Lowering Broadband Costs for Consumers Act of 2023 has been introduced in the U.S. Senate, which clearly establishes the need for various ‘Edge Service providers’ which generate disproportionately large traffic to contribute towards infrastructure costs, to make digital connectivity affordable for the end-users. The Act proposes that large-edge providers that account for more than 3% of the total annual internet traffic in the USA and earn more than $5 billion in annual revenues, be assessed to share the financial load of delivering affordable digital connectivity to the masses.
• European Union (EU) – EU is working on a legislation requiring the major generators of digital data and video traffic to contribute towards the cost of building and maintaining broadband networks. While the consultation
  has already started, the appointment of the new EU Commissioner is awaited for further progress and action, now expected to take place in 2025. The European Commission is also learnt to be considering easing the rules against telecom mergers and broadening the telecoms rules to make Big Tech companies help fund the rollout of 5G in the region.
• South Korea – The Service Stabilization Act enshrined in Article 22-7 of South Korea’s Telecommunications Business Act and administered by the Ministry of ICT requires that the largest content providers engage with broadband providers for cost recovery. In a remarkable development last year, South Korean internet service provider SK Broadband and Netflix (the global LTG) entered into a strategic partnership to provide better entertainment experiences to their customers and ended all disputes between them.
• Brazil – Last year, Brazil’s National Telecom Agency (ANATEL) also initiated a consultative process seeking comments to address a future regulation of digital platforms and the need for fair share.

In view of the above, it is imperative that the Government takes critical note and addresses this crucial issue at this juncture. This is a global conversation and a step in the right direction by India may help create an apt precedent for the world.

Additionally, while certain LTGs and their advocates have been suggesting that a fair share contribution would adversely impact the startups ecosystem in the country, ironically, recent developments indicate to the contrary as the financially-motivated approach of the LTGs surfaced when an Appstore provider (a global LTG) was found removing startups and smaller India-made applications/players from its online property, quoting reasons of non-payment of their quoted charges to these applications, for hosting them.

• This disregard for this vital ecosystem of players who bring innovation and entrepreneurship to the fore goes against spirit of the Government’s flagship ‘Make in India’ program and the progressive approach to foster innovation and encourage smaller organisations, as articulated by our Hon’ble Union Minister for Communications & IT.
• The same foreign LTGs vehemently oppose the fair-share proposal for the additional costs borne by the TSPs for carrying their disproportionately large traffic and provisioning the increasingly demanding infrastructure required to deliver so. They prefer to enjoy a free- ride over the Indian TSPs’ networks, while profiting heavily from them.
• Indian TSPs have maintained from the beginning that smaller players, startups and MSMEs which generate low traffic would not be required to pay the fair-share charge. Only the top LTGs which generate mammoth volumes of traffic would have to contribute the same to share in the rising network costs.

This depicts the Indian telecom industry’s position and pursuit of a fair and equitable ecosystem for further developing India’s digital communications prowess to the global leadership levels, as coveted by the Government as well as the nation. Responsible contributions from those benefiting immensely from the Indian telecom infrastructure and networks would be paramount to secure a healthy and progressive future for the ‘Digital India’ we aspire to create.

COAI appeals to the government to consider these aspects and take action.

CT Bureau