IAMAI POSITION ON NET NEUTRALITY

Submitted to the Department of Telecommunications Ministry of Communications and IT

May 2015

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Executive Summary

The Net Neutrality debate is active now and we thank the Department of Telecom for allowing us to

participate in this discussion process and duly submit our position. In this paper we have given our

detailed views on the topic with the objective that the consumers should be given unfettered access

to content and services once they have subscribed to data services.

Globally, the Net Neutrality laws are prevalent in very few countries. In fact, only 6 countries have

these laws and some 4-5 countries have it in form of soft laws i.e., Government have enacted non-

binding agreements or guidelines. We have analyzed these laws and our broad findings are:

a) These laws are not based on any empirical analysis or market failure data.

b) Most of these laws are directed towards the TSPs and ISPs and are onerous.

c) The laws do not classify the OTTs [communication or non communication] as has been done in the TRAI consultation paper.

d) The countries with stringent Net Neutrality laws have already achieved more than 50% of internet penetration

e) Not all the countries with Net Neutrality laws have termed zero rating services as illegal.

We have in this paper also highlighted some erroneous assumptions that the current debate in India

is based on such as:

a) Myth 1: OTT services are unregulated and operate in the absence of any legal and regulatory

oversight.

b) Myth 2: OTT communication is different from other OTTs.

c) Myth 3: The Internet based communication is in the same class as traditional calls and SMS.

d) Myth 4: Security and privacy concerns are not addressed with regard to communication

OTTs.

e) Myth 5: OTTs have caused revenue loss to the TSPs and ISPs.

f) Myth 6: OTT communication is cheaper than traditional calls.

g) Myth 7: All zero ratings are violation of Net Neutrality.

In our paper we have also countered these myths and fallacies around the Net Neutrality argument.

Our broad suggestion for the due consideration of the government and lawmakers are:

a) Net Neutrality should be adopted as a matter of principle by the government, TSPs and

OTTs.

b) There is at present no need for a law to ensure Net Neutrality.

c) If a law is thought to be necessary, then it should be a light touch regulation and the

following cardinal principles should be followed:

OTTs should not be licensed or subjected to any further regulation.

Net Neutrality laws should not be used to force OTTs to revenue share.

Net Neutrality laws should not be used to differentiate between OTTs.

Net Neutrality laws should allow zero rating services.

Net Neutrality laws should not bear upon the OTTs in terms of security and privacy

concerns.

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I. Introduction

Definition and General Principles

The Definition of Net Neutrality is based on the principle that Internet service providers and should

treat all data on the Internet equally, not discriminating or charging differentially by user, content,

site, platform, application, type attached to the equipment, or mode of communication. The idea is

that any network traffic—movies, voice, video, web pages, MP3s, pictures—can move from one

place to any other place without "discrimination." The principles of NN was coined by Timothy Wu,

Media Law professor and a legal scholar, University of Columbia, more than a decade ago, who could

clearly foresee this extensive debate over the open access and network neutrality in the coming

years. Hence, the basic principle behind a network neutrality of anti-discrimination regime should be

to give the users the right to use non-harmful network attachments or applications, and give

innovators the corresponding freedom to supply them.

The three important general principles on which net neutrality is based are:

1. No anticompetitive behavior by access providers

2. No Blocking or degradation of Lawful content

3. Transparency of information relevant to users and other stakeholders

The concept of net neutrality is not utopian in as much as it takes into consideration the fact the

network operators do need to optimize the flow of data traffic and may resort to technical and

engineering mechanisms to do so as and when necessary.

II. Net Neutrality Laws and Regulations – A Global snapshot

Some countries have adopted hard laws1 on NN and some have adopted soft laws2 [quasi legal] to

ensure net neutrality. In some other regions like India, EU [member states], Colombia and Uruguay

NN plans and proposals are under consideration by the regulators and the governments. There may

be heated discussions going on around the world on this particular subject but important thing to

note is that only a few countries have adopted NN laws in their countries. Most of the countries

have given it a priority in the form of soft laws without any legal binding.

Below are some of the examples of NN policies adopted by various countries and some of the

inferences that the regulators in India can draw from them. [The detailed Laws are in the [Annexure

I].

1 Hard Laws: Laws and Regulations have been passed 2 Soft Laws: Telcos/Government have enacted non-binding agreements or guidelines

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II.a Net Neutrality Laws across the world

Source: AccessNow.Org

i. Chile: Chile was the first country in the world to implement Net Neutrality Law in July 20103. The

Chilean Congress passed a set of amendments to the General Telecommunications Law which states

that ‘No [ISP] can block, interfere with, discriminate, hinder, nor restrict the right of any Internet

user of using, send, receive, or offer any content, application, or legitimate service through the

Internet, as well as any activity or legitimate use conducted through the Internet’. The law also has

articles that force ISPs to provide parental control tools, clarify contracts, guarantee users’ privacy

and safety when surfing, and forbids them to restrict any liberty whatsoever”.

The country has a highly competitive telecommunications market supported through a combination

of government and private investment. The investment is highest in the world at 0.75% of the GDP

[2008]4 more than in UK, USA, South Korea, Australia, and France. Chile’s Fondo de Desarrollo de

Telecomunicaciones (FDT), a telecommunications development fund is financed by the national

budget rather than through levies on telecommunications operators. It offers subsidies to private

companies willing to invest in special projects. Needless to say, government support is a

fundamental component to Chile’s broadband deployment.

In Chile the Subsecretaria de Telecommunications ruled that zero rating practice violated net

neutrality laws (Law No. 18168 of 2010 Section 24 H) and had to end by June 1, 20145

ii. Netherlands: The Netherlands has become the first country in Europe and second in the world after

Chile to enshrine the concept of network neutrality into national law in 2011 by banning its mobile

telephone operators from blocking or charging consumers extra for using internet-based

communications services.

3 http://www.palermo.edu/cele/pdf/english/Internet-Free-of-Censorship/Content-Filtering-Latin-America.pdf 4 https://openmedia.ca/plan/international-comparisons/chile 5 https://gigaom.com/2014/05/28/in-chile-mobile-carriers-can-no-longer-offer-free-twitter-facebook-and-whatsapp/

Hard LAWS

•Netherland

•Chile

•Brazil

•Slovenia

•Israel

•US

Soft LAWS

•Norway

•Uk

•Japan

•South Korea

Plan/Proposal Stage

•Colombia

•Argentina

•Uruguay

•EU

•Mexico

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The Telecommunications Act prohibits the hindrance or slowing down of services or applications on

the Internet by ISPs and network owners. The main net neutrality provision of this law requires that

"Providers of public electronic communication networks used to provide Internet access services as

well as providers of Internet access services will not hinder or slow down services or applications on

the Internet".6 Also, it is prohibited for ISPs to charge end-users differently for the use of different

types of Internet services or applications.

iii. Brazil: Brazil passed NN Law on April 22, 2014. The law, known as the Marco Civil da Internet or

“Marco Civil” (in English, the Civil Internet Regulatory Framework) was first proposed in the Brazilian

Congress in 2011 and was passed in 2014. The Law is intended to secure equality of access to the

Internet in Brazil—i.e., Net Neutrality—and provide privacy protections for Brazilian users of the

Internet. The Law bars telecom companies from charging higher rates for access to content requiring

more bandwidth [videos and VOIP Apps]. The law dropped a measure on ‘Mandatory Data

Localization’7.

iv. Slovenia: A small country like Slovenia too adopted new law to protect net neutrality in 20138. The

new law governing electronic communications [Article 203] states the following:

The Electronic Communications agency encourages the preservation of the open and neutral

character of the internet and the access to and dissemination of information or the use of

applications and services of their choice of end users. Network operators and Internet access

providers shall make every effort to preserve the open and neutral character of the internet, thus it

may not restrict, delay or slowing Internet traffic at the level of individual services or applications, or

implement measures for their evaluation.

Regulators in Slovenia have fined the country’s two largest mobile operators for zero-rating music

and cloud storage services9.

v. USA: USA passed Net Neutrality as a law in February 2015. After a prolonged debate on the issue

where in 2014 when a federal appeals court struck down the Federal Communications Commission’s

(FCC) original strong Net Neutrality rules led to heavy public outrage. On May 16, 2014, the FCC

issued a proposed internet regulatory structure [new policies]10 on which it invited suggestions from

the public which received millions comments, making a record of sorts for any previous FCC

regulation. Finally in February 2015, the FCC passed the Open Internet order [Title II Regulation].

According to the FCC, the broadband internet service providers will be treated as common carriers.

This means that internet providers will operate under the same policy as landline phone services,

where there is no discrimination or differential pricing based on the phone calls made. The internet

providers cannot block broadband access to legal content, cannot throttle speeds of internet data

based on content, applications or services and there will be no paid prioritization whereby services

can strike deals with telecom operators / ISPs to use faster lanes.

6 http://wetten.overheid.nl/BWBR0009950/Hoofdstuk7/Artikel74a/geldigheidsdatum_10-02-2014 7 http://www.engadget.com/2014/04/23/brazil-passes-internet-bill-of-rights/ 8 http://www.uradni-list.si/1/content?id=111442 [In Slovenian] and http://www.akos-rs.si/files/APEK_eng/Legislation/ZEKom-ANG.pdf [In English] 9 http://www.mobileworldlive.com/mobile-operators-slovenia-fall-foul-net-neutrality-rules 10 http://www.theverge.com/2015/2/4/7977569/its-official-the-fcc-will-seek-to-reclassify-the-internet-as-a-utility

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vi. Israel: Israel passed the law in November 201311. The law prohibits all licensed ISPs to limit or block

any service or application provided over the internet network and limit or block the customer's

ability to use end device capabilities. In February 2014, the government passed the extension of net

neutrality to wireline providers. Israel now has a generally applicable statutory net neutrality

framework.

III. Analysis of Current International Laws

Wherever Laws exist to ensure net neutrality, they are based on some fundamental principles. Some

of the important principles on which the Net Neutrality laws in the various countries are based are

outlined this section. The current Laws are summarized under two main aspects a) Founding

Principles and b) Critique:

Founding Principles:

Critique/Evaluation of the Principles:

1. The laws effectuate free, open and non

discriminatory internet as a basic right

2. The laws and regulations are directed towards the

Telcos since they focus on neutrality of networks

and not neutrality of content or platforms.

3. The laws do not distinguish between different

types of OTTs

4. All the countries that have adopted NN laws have

a moderate to high internet penetration levels.

Brazil [54%], Netherland [93%], Slovenia [70%],

Chile [61%], Israel [73%] and USA [86%]12

.

5. Zero ratings are termed as violation of Net

Neutrality [ except in USA which still allows ZR on

a case to case basis]

1. The Laws are not based on Empirical Analysis or

Market Failure data

2. The laws are onerous and have been criticized

3. All zero ratings are assumed to be illegal

III.a Founding Principles of Existing Laws

1. Free, Open and Non Discriminatory Internet

All NN Laws state that the consumers should be given free and open access to internet. No blocking

or throttling lawful content and services and no discrimination against or restrictions to the right of

any user to use an application or protocol, regardless of origin, destination, nature or property.

Consumer interest in access to internet and information is of primary concern and the overriding

factor13

11 http://www.moc.gov.il/sip_storage/FILES/9/3359.pdf 12 ITU and http://www.internetlivestats.com/internet-users-by-country/ [2014] 13 Except in USA where some flexibility is given to the TSPs, where zero rating is allowed on a case to case basis.

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2. The Laws are directed towards the Telcos

All current laws on Net Neutrality principally govern the relationship between TSPs, ISPs and their

consumers. These laws are directed towards the Telcos. The TSPs and ISPs need to make every effort

to preserve the open and neutral character of the internet and should not in any case restrict, delay

or slow Internet traffic except in case of to preserve the integrity and security of the network.14

None of the laws impose any regulation or restriction on the OTTs anywhere.

3. The Laws do not distinguish between the types of OTTs

None of the NN laws classify the OTTs [communication or non communication] as has been done in

the recent consultation paper by TRAI. In all current laws OTTs are treated as the same class of

service. The consultation paper by TRAI has differentiated OTT players offering the communication

services [voice, messaging and video call services] from the rest. There is no basis for such

differentiation between OTTs offering communication services and other OTTs. Such classifications

lead to fragmenting the Internet and violated principles of of NN.

4. The countries that have adopted NN laws have a moderate to high internet penetration

levels

It is important to note that all the countries that have adopted NN laws have a moderate to high

internet penetration levels averaging at 73%. Brazil has a 54%, Netherland 93%, Slovenia 70%, Chile

61%, Israel 73% and USA 86%15. These countries have the most connected wireless and wire line

broadband network and a highly competitive telecommunications market supported by their

respective governments. It may be noted that Internet penetration is less than 20% in India and

most of this is narrow band.

5. Zero ratings are termed as violation of Net Neutrality

Most of the existing laws consider zero rating of Internet services as against the principles of free

and open Internet and specifically forbid it. Chile, Slovenia and Netherland are some of the countries

that have found zero rating a discriminatory practice which threatens access to an open and neutral

internet. These services are now banned in these countries except for in Brazil, US and Israel where

such services are allowed on a case to case basis. It is to be noted that the countries that have

14 Deviation from this rule is only allowed: [Netherland]

to reduce congestion, while treating similar traffic equally;

to preserve the integrity and security of the network and service of the provider or the equipment of the end-user; If the breach of integrity or security is caused by the equipment of the end-user, the provider has to notify the end-user first and give them sufficient time to rectify the situation.

to block the transmission of unwanted communications (e.g. spam) to an end-user, only if the end-user has given consent beforehand; or

to comply with the law or a warrant. 15 ITU and http://www.internetlivestats.com/internet-users-by-country/ [2014]

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accepted NN laws did not ban zero rating services as soon as the Law came, such services were

banned much later after having contentious debate over it.

III.b Critical Evaluation of Current Net Neutrality Laws:

1. The Laws are not based on any Empirical Analysis or Market Failure data

The Net Neutrality principles internationally [as stated above and detailed in [Annexure I] are not

uniform and are adapted as per the local requirements by government and regulators under

pressure from so-called user groups. As a result there has been uncoordinated Laws in several

countries making Internet a fragmented market as a whole globally. The countries that have adopted

the rules of NN as law or through regulations have not done so on the basis of any empirical analysis

or on objective evidence of market failure data. Most laws have been passed on the basis of populist

demands.

2. The Laws are Onerous

It has been observed that the Net Neutrality regulations are directed towards the TSPs and the ISPs.

The onerous rules under the law impede the freedom of pricing and freedom of contract for the

Telcos. Any rule of law should also recognize the right of freedom of contract, allowing all players to

transact in a competitive manner, i.e., on non-exclusive and non-discriminatory terms. While

consumer interests should not be compromised, the regulators should also provide the telcos

sufficient flexibility to enter into innovative business arrangements and pricing as long as such

arrangements are consistent with the net neutrality principles and are not anti-competitive.

There have been several cases where the regulators fined/banned/blocked the Telcos on the

grounds of NN violation. Dutch regulators fined carriers KPN 250,000 euros and Vodafone 200,000

euros for breaking the rules.16 For the first time ever, Dutch companies have been fined for violating

net neutrality laws. In the US, the FCC’s Open Internet Order has led to several criticisms across the

states. Several lawsuits have been filed by four consortiums representing cable, wireless, and

telecommunications companies.

Such moves have been criticized severely across the globe on various grounds such as:

Freedom of internet replaced with government control

Onerous regulations imposed on Telcos and ISPs, takes away their right to free enterprise 17

This can potentially destroy market competition and stall investment in Internet

infrastructure.

3. All zero ratings are termed as illegal

16 http://timesofindia.indiatimes.com/tech/tech-news/New-internet-rules-set-up-industrys-next-battle/articleshow/46422175.cms 17 An economic system where few restrictions are placed on business activities and ownership or the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority

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Most of the current laws across countries have banned the zero rating services on the grounds of

violation of net neutrality principles. These laws are not consistent in all the countries. Countries like

the USA and Israel have not banned such services as the regulators believe that not all such practices

are violating the rules. As per FCC ‘Open Internet Order’ rules include a general "standard for future

conduct," which will be a standard for ensuring that broadband providers are not "unreasonably

interfering with or unreasonably disadvantaging" the ability of consumers and content providers to

access and use the Internet. Hence the wireless carriers will be able to maintain current plans like

zero-rating and sponsored data. However, future plans that carriers implement along those lines will

likely be put under the microscope on a case-by-case basis.

IV. Some Erroneous Assumptions in India

At present the debate on net neutrality in India is underway. IAMAI believes that the debate is based

on some erroneous assumptions. In this section we make an attempt to counter some of the

fallacies around the net neutrality argument in India. The biggest inaccuracy in the debate is the

term OTT. We would like to clarify that the term “OTT” is inaccurate in as much internet application

and services, encompass a wide range of services, including VoIP, Instant Messaging, Cloud Services,

Internet Television, e-Commerce and Social Networking. Computer technologists, on the contrary

make well accepted distinction between the networks layer (TSP’s), and the applications layer both

of which are independent consumer businesses. Hence, to reduce internet platforms and services to

a phrase such as OTT is incorrect. In this document however we have used the term OTT to avoid any

confusion.

IV.a OTTs are Unregulated There is a general misconception that OTTs are completely unregulated and operate in the absence of legal and regulatory oversight. Internet platform and services companies are already strongly regulated through the powerful and effective IT Act 2000 [as amended in 2008]. It is the most comprehensive Act covering all aspect of Internet platforms and services. This Act states in its preamble it regulates all aspects of online commerce and services. Hence, it is a clear statement of parliamentary intent that no licensing or registration of online services is necessary. In addition, all OTT companies comply with existing laws of the land. In fact, most of the companies,

when called upon to do so, regularly share data with LEAs and other agencies.

IAMAI is of the view that OTT services are strongly and sufficiently regulated and there is no need for

any further regulations. In fact, more regulations would irreparably damage the emerging start up

eco system in India.

IV.b OTT Communications [VOIP and Text] is different from other OTTs

It is inaccurate to state that OTT communication is different from other OTTs. OTTs are application

based and are priced as per the data [Kb/Mb] consumed. A voice based OTTs will consume bytes

similar to the other OTT services. Communication services which operate on the Internet layer are

served through telecom licensees. These licenses don’t make any difference in the allocation policy

of spectrum. Thus, spectrum is allocated for all data (2G/3G/4G) and does not allow distinguishing its

usage by the license holders.

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There are many OTT players that offer a bundled service where even a shopping or a review website

may offer some features of a communication service [E-Commerce and Social Media]. Hence, this

will pave way to the following issues:

Bringing communications OTTs in the same class of services as normal voice and

messaging is likely to prevent new and innovative services from being offered to Indian

users.

In case of those OTTs such as e-commerce and social media sites where only a part of

their services is communication or text based, the same platform would have to follow

different norms [e.g., the Indian company PayTM offers communications with

ecommerce, Facebook offers social media with communications].

This will lead to fragmentation of internet and soon there would be demands for

classifying ecommerce, social media, games etc. as different classes of services and

regulating and charging them separately. It is a slippery slope and we would not suggest a

movement in that direction.

There is no rationale for differentiating between OTTs offering communication services and other

OTT services, and therefore a discriminatory regulatory regime / framework created for an artificial

bucket may not be appropriate.

IAMAI is of the view that OTT services should not be differentiated, this would divide the internet.

IV.c Internet based Communication is in same category as Traditional calls and SMS

It is a myth that the Internet based communication and messaging services [Internet telephony and

Chat apps] are in same category of service as traditional calls and therefore regulated and priced in

the same manner. The application-based services are not same class of service as the normal calls.

The internet based communications [VOIP and Chat] cannot be offered without Internet unlike

traditional wireless or wireline calls. Therefore, no same regulation and no similar pricing mechanism

as applied to traditional calls and SMS should apply to internet based communication services.

The idea [as stated in TRAI CP on Regulating the OTT Services] that telcos should additionally charge

communication OTTs for the use of the TSPs network over and above data charges suggests, in

simple terms, that telcos should be permitted to “double dip”. That is, they may charge twice for

providing a single service, thereby recovering twice the revenue while the cost remains the same.

This would simply be an unauthorized tax on OTTs imposed by telcos, and should not be permitted.

IAMAI strongly recommends that communication OTTs should not be put in the same category as the

traditional calls and SMS and should not be regulated and priced as the same manner as them.

IV.d Security and Privacy concerns are not addressed with regard to Internet based

Communication

It is incorrect to assume that security and privacy concerns are not adequately addressed by OTT

communications services.

Security and Privacy concerns with regard to the Internet based communications services are

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adequately addressed by existing laws and regulations. These concerns are taken care of by the

comprehensive statutory regime which addresses them. Provisions for monitoring, take down and

blocking are elaborately laid down and followed as per section 69A and other provisions of the IT

Act. In addition there are international treaties in place to share information through the due

process of law.

The retention of sensitive personal information as defined under Section 43A of the Information

Technology Act, is provided as per Rule 5(4) of the Information Technology (Reasonable Security

Practices and Procedures and Sensitive Personal Data or Information), 2011 which states that any,

body corporate shall not retain data for longer than necessary unless mandated by a provision of

law. The IT Act separately provides for retention of data in Section 67C. This retention period is then

defined for a period of 90 days for the preservation of information and associated records for the

purposes of any investigation as per Rule 3(4) of the Information Technology (Intermediary

Guidelines) Rules, 2011.

In addition, independent provisions exist under other laws that are used by law enforcement,

security agencies and courts to compel the production of such information including Section 91 of

the Code of Criminal Procedure, 1973.

The existing regulatory regime provide for an appropriate framework for lawful access to

information as may be required for investigative purposes. Statutes such as the Code of Criminal

Procedure, financial Laws such as the Customs Act and the Income Tax Act, and other specialized

Laws lay down legal processes for access to relevant information by investigative agencies.

IAMAI is strongly of the view that there is no need to mandate further provisions on this aspect -

overlapping laws will only result in delayed enforcement and inconsistency of approach. Instead the

existing legal provisions should be strictly and lawfully implemented or strengthened.

IV.e OTTs have caused Revenue loss to the TSPs and ISPs

This is the worst myth perpetrated by TSPs and supported by the TRAI. It is simply not true that

innovations of VoIP and text apps have affected the TSPs financial stability and available data, points

to the contrary. Indicators of revenues from regulatory filings, earning calls of telecom companies

and public statements clearly indicate that data is driving telecom growth. The Top 3 telecom

companies who have an aggregate of 62% of the total mobile users in India have had increasing

revenues and profits, quarter on quarter which they attribute principally to higher revenues on data

usage.

The CEOs of the top three telecom companies too have stated that there is no evidence of any

cannibalization.

Gopal Vittal, Joint MD and CEO (India & South Asia), for Bharti Airtel has said on a recent earnings

call that, “There is still no evidence that suggests that there is cannibalization,” when inquired as to

whether any data is cannibalizing their voice business. This has been confirmed by a two-fold jump in

consolidated net profit at Rs 1,436.5 crore in the third quarter of 2014-15 on the back of continued

growth in mobile data revenue. [MediaNama Feb 24 2015]

Vittorio Colao, Vodafone’s group chief executive has stated that, “Growth in India has accelerated

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again (October-December), driven by data”. For the October-December 2014 quarter statement

reveals that, “Vodafone's Indian unit outpaced its group counterparts to report 15% organic growth

in revenue in the quarter through December, as subscribers used more of its premium data services,

even as the basic voice telecom service remained under pressure, like its top rivals”. [Economics

Times 6th Feb 2015]

Himanshu Kapania, Group Ceo, Idea Cellular has stated in December 21, 2014 that, “ "The

management indicated that revenue growth could be maintained in high-teens with data adoption

as a key catalyst. We believe recent equity issuance and healthy cash generation create sufficient

room for participation in spectrum auctions”. The October-December 2014 quarter statement for the

company reveals that, “Idea Cellular's consolidated net profit for the fiscal third quarter jumped

nearly 64%, meeting estimates, as the nation's No. 3 telecom operator posted strong growth in

subscriber additions and as higher demand for data offset pressure on its voice services”. [Business

Today Dec 21, 2014]

Similarly, respected financial analyst Deepak Shenoy, on the Capital Mind Blog writes: “Indeed,

people are using more data than voice, or SMS. But the increased use of data means that by and

large, people are paying for that data. Let us not get caught in per message or per call metrics, and

look at the overall wallet-share of all users on average. We collated data from TRAI for India as a

whole, and we separately got data for SMS revenue per user per month, and similar metrics for data

and voice calls”.

“From Jun 2013 to Sep 2014 – a 15 month period prior to which data revenues were not separately

disclosed – we can see that:

i. Average revenues per user have gone up from 111 to 116, a Rs. 5 increase. (per

month)

ii. Of that, Call Revenue per user is down by Rs. 3.18 per user per month, and SMS

revenues have fallen by 24 paise per month.

iii. But Data revenues are up by Rs. 10.46 per month per user!

iv. This is not cannibalization; this is a new business model!” 18

Data is the next growth leg and it is expected that data contribution to be more than double to 23%

of overall revenues (vs. 10% currently) by 2016. Data revenue has grown by 85% in the period June

2013-14 and volume growth has been over 100%. Data revenues would grow at a 40% CAGR over

2014-18, leading 12.3% increase in industry revenues over the same period. Any form of restriction

or discrimination could jeopardize the growth rate significantly. [Supporting illustrations have been

provided in the Annexure II]

The other argument that infrastructure costs are only borne by Telecom Operators and not internet

platforms is not true19. As mentioned in earlier, OTTs form substantial data traffic on networks and

18 http://capitalmind.in/2015/04/telecom-companies-are-not-losing-money-to-data-services-the-net-neutrality-debate/ 19 It should be noted that about 99.5% of all Internet interconnection globally is done with neither (a) payment nor (b) contract, on a "Bill and Keep" basis. Also it bears to be considered that, the request for the data flow usually stems not from the [content provider] but from the Telco or ISPs own customer and therefore the Internet platform and services providers have helped TSPs create a new revenue stream rather than take revenues away from them. It is also noted that, there is no evidence that operators’ network costs are already not fully covered and paid for in the Internet value chain from [content providers] at one end, to the end users, at the other.

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as a result generate huge revenue for the telcos. This revenue earned is over and above the cost

involved to build infrastructure. Hence, the argument for heavy infra cost and network congestion is

imaginary. Thus, arguments based on loss of revenue and free ride of OTTs are misleading and

partisan.20

IAMAI is of the view that the OTTs should not be pay any revenue share to TSPs. Data growth due to

OTT platforms have not only contributed immensely to the revenues of the TSPs but have also opened

new source of revenue generation to them.

IV.f OTT Communications[VOIP and Text] is Cheaper than Traditional Calls and SMS

It is a myth that OTT communications are cheaper than the traditional calls. In India, the general

perception is that VoIP is cheaper than traditional voice calls. A 60 minute call over IP can consume

around 25-35 MB for voice alone and 240MB for Video plus voice21. A 1-min voice call on Skype to

Skype will cost on an average Rs 3 depending on bandwidth (HD Video) and connection speed

[2G/3G]. This translates to Rs. 180/ Hour or more which is almost 3 times the cost of an average call

per hour on a normal subscriber.22 Moreover, Internet telephony currently accounts for less than

0.035% of total voice minutes of the industry in India which is very negligible and does not have any

significant impact on the traditional calls and SMS.

Similarly, the chat apps too are contributing at a faster rate to data usage. A chat application is

completely different from p2p SMS. There is much more value addition in chat applications through

transfer of not just texts but also pictures, videos etc. In fact, it is because of these value added

services that people take broadband connection. In the absence of such innovative methods of

communications, data consumption we believe, users would not have been attracted towards data

packages and internet penetration and adoption would have suffered.

Following are the points that sum up the argument that growth of communication OTTs is not

impacting the traditional revenue stream of TSPs:

a) Absolute Cost is Higher: VOIP is not cheaper that traditional voice calls, and the absolute cost

to culminate a call is actually 3 times more expensive.

b) Insignificant Internet Telephony Market: Internet telephony currently accounts for less than

0.035% of total voice minutes of the industry in India which is very negligible and does not

have any significant impact on the traditional calls and SMS. Internet telephony has quality

issue in India and requires 3G and 4G connectivity which is again way below average level of

adoption.

c) Loss of Revenue Argument is Incorrect: Many users perceive Internet telephony as value

application to take broadband connection23. A call made on skype is possible only due to the

advent of such technology. In the absence of such innovative technology such an economic 20 In India the Telcos pay heavily in attaining spectrum license. Every single analyst report today suggests that spectrum cost in India is one of the highest in the world. Spectrum pricing in India on an average is 25 times costlier than the Countries viz., US, France, Singapore, Germany, Spain and Sweden. This has stretched their financial profiles as a result of heavy investments in license fee. Some of the leading telecom operators pay almost 28-29% of their revenues as license fees. Due to the mismanaged spectrum licensing policies of the government 21 http://www.business-standard.com/article/companies/airtel-rolls-out-special-data-packs-for-voip-114122600703_1.html 22 As per DoT internet telephony regulations 23 TRAI Paper 2008 on Internet Telephony Issues: http://www.trai.gov.in/WriteReadData/Recommendation/Documents/recom18aug08.pdf

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activity wouldn’t have taken place at all. Hence, it is just a notional argument which is without

and foundation on facts.

There are already enough regulations on the Internet Telephony in India [Calls from Skype to mobile

numbers and land line consume reasonably less, but this is not yet permitted in India24] and there is

no need to further bring a licensing or revenue share arrangement between the OTTs and TSPs.

IAMAI is strongly of the view there is no need for any revenue sharing norms between the OTTs and

TSPs. This will disrupt VOIP and will also skew any further innovation in the same field which is need

of the hour.

IV.g All Zero Ratings are Violation of Net Neutrality It is not true that all Zero Ratings are violating the Net Neutrality principles. Many countries such as Brazil, US, Canada, Mexico, Ecuador, Peru, Israel, EU, UK, Belgium, France, South Korea, Colombia, Uruguay, Argentina have all kept it open in spite of having laws favoring Net Neutrality. Interestingly most of these countries have more than 50% of internet penetration. Whereas in India where the Internet penetration is only 19%, such services can actually help in faster proliferation of broadband. Such services are essential for the social-economic development in line with technological advancement. For instance, UNICEF and Bharti Airtel have partnered to collaborate in 17 African countries by rolling out UNICEF health and education apps for free25. Government’s e/m-governance services such as the SMS alerts -Reporting accident, fire, crime, and other major disasters, CCTV Highway and Traffic Monitoring, Info for Women on Jobs and Children will all be supported through such zero rated services. We are of the view that some zero rated services may have immense value in reaching internet to

the unreached. Hence such services should be judged in a case to case basis. It may also be noted

that India has a strong Competition Law, any anti-competitive plans by TSPs or OTTs can be quickly

rectified through the Competition Law.

IAMAI is of the view that we should be open minded about zero rated services, judge them on a case

to case basis and prevent them from being anti-competitive.

V. IAMAI Suggestions:

In this section, based on our review of the existing law and the contours of the current debates on

net neutrality in India, we put forward our suggestion for the consideration of the government and

lawmakers. Our first suggestion is that at present net neutrality should be adopted as a matter of

principle by the government, TSPs and OTTs. Secondly, we suggest that there is at present no need

for a Law to ensure net neutrality and finally, if a Law is thought to be necessary, it should avoid

some crucial pitfalls. The rationale behind our suggestions is explained in detail below.

1. Adoption of General Principles:

Net Neutrality should be adopted as a general principle by the government, TSPs, OTTs and user

groups. These general principles should be articulated to ensure the following:

No blocking

24 As per DoT internet telephony regulations 25 http://www.itwebafrica.com/mobile/339-africa/234189-unicef-partners-airtel-to-roll-out-free-apps-in-africa#sthash.zLQarjMB.dpuf

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No discrimination

No Throttling

No fast and slow lanes from the consumer’s perspective,

2. There is No Need for a Law to Ensure Net Neutrality:

IAMAI would suggest that there is no need for Net Neutrality Law at present. Primarily, as there is no

evidence of market failure in India. As also in all the countries that have NN laws are not based on

the strength of any empirical analysis or on objective evidence of market failure data. Most laws

have been passed on the basis of populist demands. We also believe that NN laws at this point will

impose onerous regulatory responsibilities on the Telcos. Such conditions will impede the freedom

of pricing and freedom of contract for the Telcos. [As mentioned in section III B’2] Such onerous

regulatory burden on the Telcos is unnecessary.

Moreover India’s digital ecosystem is still at a nascent stage and there are close to a billion people

who are not yet connected to Internet and bringing any regulatory measure to ensure net neutrality

will in a way tie the hands of TSPs in providing connectivity. Moreover, through net neutrality laws if

further regulatory impositions are made on OTTs the emerging start up ecosystem in India would

definitely be harmed beyond repair.

3. In case of a Law: Light Touch Regulation should be adopted: However if the government

still decides to bring in a hard law to ensure network neutrality, there should be a light touch

regulation and the following cardinal principles should be followed:

a) OTTs should not be licensed or subjected to any further regulation:

As mentioned in section IV-A, OTTs are already strongly regulated under the powerful IT Act. The

security and privacy concerns with regard to the OTT players providing communication services are

also adequately addressed by existing laws and regulations. Any additional regulation in terms of

revenue share could cripple tech entrepreneurship and application development. It will also lead to

differential pricing and double dipping as a consequence, having an adverse impact on the

consumers. Further, all current NN laws are directed towards Telcos [refer to section III-A-2] only

and nowhere there is any regulatory binding on the OTTs.

b) NN laws should not be used to force OTTs to revenue share:

The argument that there needs to be revenue share as VOIP and Text has hurt the TSPs is a myth

and is exaggerated. Innovations of VoIP and text apps have not affected the TSPs financial stability

and available data, points to the contrary [Section IV e and IV f]. Data revenue has grown by 85% in

the period June 2013-14 and volume growth has been over 100%. [Annexure II]. Hence, there is

enough empirical evidence that shows that OTTs contribute immensely to the revenue of the Telcos.

Moreover, revenue share arrangements would tantamount to double dipping by the TSPs.

c) NN laws should not be used to differentiate between OTTs:

The NN laws should not differentiate between the OTTs. This will lead to fragmentation of internet

and soon there would be demands for classifying ecommerce, social media, games etc. as different

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class of services and regulating and charging them separately. It is a slippery slope and we would not

suggest a movement in that direction. [Refer to Section IV B]

d) NN laws should allow Zero Ratings services:

Not all Zero Ratings are violating the Net Neutrality principles. Especially in countries like India

where the Internet penetration is very low such services can actually help in faster proliferation of

broadband. So the NN laws should keep the plan of zero-rated services open and implement along

the lines that is not anti-competitive.

e) NN Laws should not bear upon the content and platform layer:

Finally we are of the view that net neutrality laws should not bear upon the content and platform

layers in terms of security and privacy concerns. As mentioned earlier, security concerns with

reference to OTTs are adequately taken care of by various provision of the law including the IT Act

and the IT Act also takes care of privacy issues to a large extent.

To conclude, we would like to reiterate that at present net neutrality should be clearly defined and

adopted as a general principle by government, TSPs, OTTs and user groups; internet penetration is

too shallow and net neutrality debate is too premature at present to bring in any hard laws and net

neutrality laws if brought in should not bear upon the Internet layers, but should be directed at the

TSPs only.

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ANNEXURE I

VARIOUS GLOBAL NET NEUTRALITY LAWS

Country Law Year of

Establishment

Netherland The Netherlands has become the first country in Europe to enshrine the

concept of network neutrality into national law by banning its mobile

telephone operators from blocking or charging consumers extra for using

internet-based communications services

OVERVIEW

Article 7.4a of the Telecommunications Act prohibits the hindrance or

slowing down of services or applications on the Internet by ISPs and

network owners. Deviation from this rule is only allowed:

to reduce congestion, while treating similar traffic equally;

to preserve the integrity and security of the network and service of

the provider or the equipment of the end-user; If the breach of

integrity or security is caused by the equipment of the end-user, the

provider has to notify the end-user first and give them sufficient

time to rectify the situation.

to block the transmission of unwanted communications (e.g.

spam) to an end-user, only if the end-user has given consent

beforehand; or

to comply with the law or a warrant.

IMPACT

The Dutch approach to net neutrality received large attention in Brazil and

served as an important reference during the negotiations of the Marco

Civil da Internet, the country's Internet Civil Rights Law, approved by the

Chamber of Deputies' in March, 2014

On April 3, 2014, upon strong support of Commissioner Kroes, the

European Parliament voted in favour of maintaining net neutrality

throughout European networks. The position might become law, if

approved by the European Commission in the upcoming months

2011

USA The Federal Communications Commission of the United States has

adopted a declaration where Internet and Broadband utilities have been

classified as services under Title II of the Telecommunications Act services

March 201526

26

http://www.fcc.gov/openinternet

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Country Law Year of

Establishment

and are now regulated by an Order dated March 12, 2015 mandating

network neutrality rules.

The reclassification order will include specific rules on the broad areas

indicated below:

1. No blocking: broadband providers will not be able to block access to

legal content, applications, services, or non-harmful devices.

2. No throttling: broadband providers will not be able “impair or degrade”

lawful Internet traffic on the basis of content, applications, services, or

non-harmful devices.

3. No paid prioritization: broadband providers may not favor some lawful

Internet traffic over other lawful traffic in exchange for payment, i.e. there

will be no “fast lanes.”

4. The rules include a general "standard for future conduct," which will be

a standard for ensuring that broadband providers are not "unreasonably

interfering with or unreasonably disadvantaging" the ability of consumers

and content providers to access and use the Internet. Such future practices

will be judged on a case-by-case basis.

Brazil Brazil Law bars telecom companies from charging higher rates for access to

content requiring more bandwidth

OVERVIEW

Internet Bill of Rights

The law, known as the Marco Civil da Internet or “Marco Civil” (in English,

the Civil Internet Regulatory Framework) was first proposed in the Brazilian

Congress in 2011 and was passed in 2014. The Law is intended to secure

equality of access to the Internet in Brazil—i.e., Net Neutrality—and

provide privacy protections for Brazilian users of the Internet.

2014

Slovenia OVERVIEW

Article 203rd, Electronic Communications Act

Summarizes as follows:

(1) The Agency encourages the preservation of the open and neutral

2012-2013

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Country Law Year of

Establishment

character of the internet and the access to and dissemination of

information or the use of applications and services of their choice of end

users.

(2) Network operators and Internet access providers shall make every

effort to preserve the open and neutral character of the internet, thus it

may not restrict, delay or slowing Internet traffic at the level of individual

services or applications, or implement measures for their evaluation,

except in case:

- Necessary technical measures to ensure the smooth operation of

networks and services (e.g., to avoid traffic congestion);

- Necessary steps to preserve the integrity and security of networks

and services (e.g., elimination of unfair seizure of over a

transmission medium - channel);

- Emergency measures for limiting unsolicited communications in

accordance with the 158th of this Act;

- 4. Decision of the court.

IMPACT

Dutch regulators last year fined carriers KPN 250,000 euros and

Vodafone 200,000 euros for breaking the rules.27

Chile OVERVIEW

Law No. 18168 of 2010 Section 24 H.

Concessionaires of the telecommunications public utility providing services

to Internet Access Providers together with these providers (in the

understanding that Internet Access Providers shall make reference to any

natural or artificial person providing commercial connectivity services

between users or their Internet networks):

a) May not arbitrarily block, interfere with, discriminate against, hinder or

restrict the right of any Internet user to use, send, receive or offer any

legal content, application or service on the Internet, or any kind of legal

Internet activity or use. In this sense, they shall offer to each user the

service of Internet access or connectivity to the Internet Access Provider,

as applicable, which may not make an arbitrary distinction between

content, applications or services on the basis of the origin or ownership

thereof, according to the relevant Internet connection configuration as per

2010

27 http://timesofindia.indiatimes.com/tech/tech-news/New-internet-rules-set-up-industrys-next-battle/articleshow/46422175.cms

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Country Law Year of

Establishment

the contract in force with the users. In any case, concessionaires of the

telecommunications public utility and Internet Access Providers may take

any measure or action that may be necessary for purposes of traffic

management and network administration, within the exclusive area of

activity that has been authorized to them, provided the above is not

intended to conduct actions that affect or may affect fair competition.

Concessionaires and IAPs shall endeavour to preserve the privacy of the

users, safeguard their users against viruses and ensure security on the

network. Additionally, they may block access to certain content,

applications or services, only upon express request of the users and at

their expense. Under no circumstance may this block arbitrarily affect

providers of Internet services and applications.

b) Such concessionaires and Internet Access Providers may not limit the

right of users to add or use any kind of instruments, devices or equipment

on the network, provided they are legal and do not harm or adversely

affect the network or the quality of the service.

c) Concessionaires and Internet Access Providers shall offer, at the expense

of the users requesting it, parental control services for content that is

against the law, ethics or moral conventions, provided the user receives

clear information, in advance, regarding the scope of such services.

d) Concessionaires and Internet Access Providers shall publish on their

website information about the Internet access offered, its speed and the

quality of the connection, making a distinction between national and

international connections, and shall include information about the nature

and guarantees of the service. The user may request that the

concessionaire or Internet Access Provider, as applicable, deliver such

information at its own expense, in writing and within a 30-day term as

from the relevant request.

Peru OVERVIEW

Law No. 29904

Article 6: Freedom to use broadband applications or protocols

Internet service providers will respect network neutrality and cannot

arbitrarily block, interfere with, discriminate against or restrict the right of

any user to use an application or protocol, regardless of origin, destination,

nature or property.

2012

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Country Law Year of

Establishment

The Supervisory Agency for Private Investment in Telecommunications –

OSIPTEL determines the behaviours that will not be considered arbitrary,

concerning network neutrality.

Israel The law prohibits all licensed ISPs to limit or block any service or

application provided over the internet network and limit or block the

customer's ability to use end device capabilities.

In February 2014, the government passed the extension of net neutrality

to wireline providers, so Israel now has a generally applicable statutory net

neutrality framework.

2013

Proposed Bills

EU

The European Union has through amendments in its Universal Service

Directive first shown a regulatory recognition towards ensuring network

neutrality.28 This has recently been augmented by the adoption of a specific

proposal29 in the European Parliament.30 The text of proposed Article 23(1)

clearly states that, “End-users shall have the right to access and distribute

information and content, run and provide applications and services and use

terminals of their choice, irrespective of the end-user’s or provider’s location

or the location, origin or destination of the service, information or content, via

their internet access service.”. It further contains a specific prohibition on ISPs

against discriminating against specific content, applications and services.

It’s in review

Stage

.

28 Directive 2002/22/EC (the ‘Universal Services Directive’), (available at http://eur-

lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32002L0022:en:NOT last visited August 20, 2014).

29 European Parliament, European single market for electronic communications COM(2013)0627 – C7-0267/2013 – 2013/0309(COD) (March 26, 2014)

(available at http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+AMD+A7-2014-0190+237-244+DOC+PDF+V0//EN last visited

August 20, 2014).

30 European Parliament, Press Release : Ensure open access for internet service suppliers and ban roaming fees, say MEPs (April 3, 2014) (available at

http://www.europarl.europa.eu/news/en/news-room/content/20140331IPR41232/html/Ensure-open-access-for-internet-service-suppliers-and-ban-roaming-fees-

say-MEPs last visited August 20, 2014).

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Country Law Year of

Establishment

Proposed Article 23(5) states that, “Providers of internet access services shall

not restrict the freedoms provided in paragraph 1 by blocking, slowing down,

altering, degrading or discriminating against specific content, applications or

services, or specific classes thereof..”

Even though this proposal has been adopted by a vote and awaits a final

endorsement most EU Member States have already implemented some form

of network neutrality regulations. A Country level factsheet in 2013, which

studied regulations across EU Member States noted that, “Most European

countries have at least adopted an official position on net neutrality…Some

countries have moved on to providing guidelines for the industry (France,

Austria, Denmark) or launched a voluntary code of conduct (United

Kingdom).”.31

Argentina

Argentine House of Representatives Bill 1159-D-2011

SECTION 1.

Internet Service Providers, which comprise any natural or artificial person

providing commercial connectivity services between users or their Internet

networks, and any companies providing connectivity to Internet Access

Providers:

a) May not arbitrarily block, interfere with, discriminate against, slow down or

restrict the use, sending, receipt or offer or any legal content, application or

service on the Internet by any user of this service, or any other kind of legal

Internet activity or use.

b) Internet Service Providers and companies providing connectivity to Internet

Access Providers may not limit the right of users to add or use any kind of

instruments, devices or equipment on the network, provided they are legal

and do not harm or adversely affect the network or the quality of the service.

c) Internet Service Providers and companies providing connectivity to Internet

Access Providers may take any measure or action that may be necessary for

purposes of traffic management and network administration.

SECTION 2.

Link

31 OpenForum Academy, Net Neutrality in the EU – Country Factsheets (September, 2013) (available at

http://www.openforumacademy.org/library/ofa-research/OFA%20Net%20Neutrality%20in%20the%20EU%20-%20Country%20Factsheets%2020130905.pdf

last visited August 20, 2014).

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Country Law Year of

Establishment

All ISPs shall publish on their website information about the Internet access

offered, its speed (both uploading and downloading speed), and quality of the

connection.

Bill S-1491/11

Section 1.

Telecommunications service providers and Internet Access Providers (Same

rules as above)

Mexico Bill to amend the Federal Telecommunications Law

Section 44 XVI.

Where public telecommunication network concessionaires provide Internet

access, whether land or mobile-based, they shall ensure unrestricted network

traffic and shall abstain from blocking, discriminating against, hindering or

restricting the right of users to access, read, send, receive, hire or offer any

lawful content, service or application. Internet Access Providers that are not

concessionaires but make use of a public telecommunication network shall

also abide by the provisions in this paragraph.

Colombia Section 56. Neutrality on the Internet. Internet Service Providers.

Internet Service Providers may not, notwithstanding the provisions of Law No.

1336 of 2009, block, interfere with, discriminate against or restrict the right of

any Internet user to use, send, receive or offer any lawful content, application

or service on the Internet. In this sense, they shall offer to each user Internet

access or connectivity, which may not make an arbitrary distinction between

content, applications or services on the basis of the origin or ownership

thereof. Internet Service Providers may make offers according to the needs of

the market segments or their users based on their use and consumption

profiles, and this shall not be understood as discrimination.

2011

Soft Laws

South

Korea

South Korea has also been discussing standards for net neutrality.

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Country Law Year of

Establishment

In 2011, the Korea Communications Committee, which regulates the country’s

telecommunications, organized a net neutrality forum consisting of

government, ISPs, civil activists and academia. And in 2012, they set up rules

that prevent a telecom operator, like Korea’s KT Corporation, from providing

service “without justifiable grounds,” such as ensuring network security and

stability.

Japan

Japan, Hong Kong and Singapore permit net neutrality traffic control

measures as long as they are fair and open. In Japan net neutrality emerged as

an issue on mobile, not the fixed line networks. Japan has chosen to use a “co-

regulatory” approach to focus on congestion management with minimum

standards for quality of service.

Canada In Canada, there is no distinction between information services and

telecommunications services in the Telecommunications Act; therefore,

Internet providers must conform to the regulations set out in the Act,

including common carriage rules. However, to date the CRTC has generally

refused to intervene in the area of Internet retail services ("Telecom Public

Notice"). According to the newly issued policy on Internet traffic management

practices ("Telecom Regulatory Policy CRTC 2009-657…"), the CRTC now

intends to fight discriminatory management on retail networks, but will

intervene only after receiving complaints from users. Subsections 27(2), 7(i)

and section 36 of the Act are relevant to net neutrality.32 Section 36 of the

Telecommunications Act33 states that, “Except where the Commission

approves otherwise, a Canadian carrier shall not control the content or

influence the meaning or purpose of telecommunications carried by it for the

public.”

32 Alex Guindon, Net Neutrality in Canada and what it means for libraries, the Canadian Journal of Library and Information Practice and

Research (available at https://journal.lib.uoguelph.ca/index.php/perj/article/view/1133/1709#.U_W8FcWSzTo last visited Aug. 20, 2014).

33 Telecommunications Act (S.C. 1993, c. 3) (available at http://laws-lois.justice.gc.ca/eng/acts/T-3.4/page-12.html#docCont last visited

Aug. 20, 2014).

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ANNEXURE II

Illustrations Stating No Revenue Loss to the TSPs

Illustration -1 ISPs Data Growth (Volume)

(Source: Morgan Stanley Report “Decoding India’s Data Story”)

Illustration -2 ISPs Data Growth (Revenue)

(Source: Morgan Stanley Report “Decoding India’s Data Story”)

Illustration 3 –Data Revenue % of Total Revenue

(Source: Morgan Stanley Report “Decoding India’s Data Story”)

0

50,000

1,00,000

1,50,000

2,00,000

2,50,000

3,00,000

3,50,000

F4Q13 F4Q14

To

tal

Da

ta V

olu

me

(mn

MB

)

Total

Idea

RCOM

Vodafone

Bharti

0

5000

10000

15000

20000

25000

F4Q13 F4Q14

Da

ta R

even

ue

(Rs

mn

)

Idea

Bharti

6.00%

8.00%

10.00%

12.00%

14.00%

F4Q13 F2Q14 F4Q14

Bharti

Vodafone

Idea