Telecom companies in India want tech firms to pay for network usage

Telecom operators in India, the second largest wireless market, would like internet companies to compensate for using their networks, a recommendation they've made to the local regulatory body, echoing a viewpoint that is gaining some momentum in other parts of the world but also stoking fears about violation of net neutrality.

Jio, India's largest telecom operator with more than 450 million subscribers, recommended to the local regulator that internet companies should be made to "contribute" toward telecom network costs based on the traffic they consume, their turnover and number of users.

"We suggest that TRAI [India's telecom regulator] should recommend for OTT providers contributing in the network development and building a backbone for the country. In this effort, the Other OTT service providers should also be required to pay their fair share," said the unit of Reliance, which is run by Asia's richest man Mukesh Ambani.

Reliance, which carries 55% share of India's total data traffic, contends that requiring internet companies to compensate for network usage will ensure a level playing field. Jio said there is a "near consensus" among telecom operators across the globe on this subject.

Airtel and Vodafone-Idea, two other major telecom players in the country, concur with their leading competitor. Airtel additionally proposed that only the largest users of the internet infrastructure should bear the costs of network usage, allowing smaller startups to thrive unhindered.

India is one of the world's largest wireless markets but average revenue per user is fairly low in the South Asian market. At an ARPU of a mere ~$2 per month, India ranks in the bottom -5% of all low middle- and low-income countries. The top three telecom operators in India agreed last year to pay $19 billion to use 5G airwaves and are hoping that the regulator intervenes to boost their margins.

Their comment, made public this week, is in response to a consultation paper by Telecom Regulatory Authority of India.

Mobile tariff for low middle- and low-income countries (Macquarie Research, ITU, S&P Global Market Intelligence)

What's intriguing about their remark is the multifaceted relationship telcos share with tech giants. Telecom networks in India are some of the largest distributing partners for tech firms. Netflix, for instance, partnered with Jio just last month to bundle the streaming service with the carrier’s two pay-as-you-go plans. Jio also has a 10-year partnership with Microsoft to launch new cloud data centers in India and resell many business offerings.

Google and Meta are also significant minority investors in Jio, having together invested more than $10 billion in the Indian firm. Google has also invested up to $1 billion in Airtel.

Critics, such as Nikhil Pahwa from Medianama, caution that adopting the suggestions of telecom networks would breach principles of net neutrality. Nearly 10 years ago, Pahwa was instrumental in raising awareness about potential violations of net neutrality when Meta tried to introduce Free Basics in the country. TRAI eventually banned Free Basics.

Many tech companies, via industry associations, have also criticized the suggestions of network operators, emphasizing that their services have bolstered telco revenues. They also caution that if they are forced to cover network costs, it could potentially lead to reduced investments in innovation and might shift the burden of these costs onto the consumers.

"A mandatory / mandated collaborative framework between OTT service providers and licensed TSPs may lead to the creation of a system where TSPs can demand compensation from OTT service providers in the form of revenue sharing or network usage fees," said Asia Internet Coalition, an industry association group that represents some of the biggest tech companies including Apple, Amazon, Microsoft, Google, Meta, Netflix and Spotify.

"This will impact net neutrality and consumer well-being in the long run. More importantly, a revenue sharing or network usage fees model will likely violate the principle of net neutrality."

Telecom companies in India claimed that their recommendations do not violate net neutrality.

Jio said:

We submit that a flexible approach that allows TSPs to increase their investments in infrastructure and help OTT players benefit from the rollout of additional infrastructure depending on the optimization of their traffic volumes will ensure the public internet remains affordable and equally available for everyone.

We submit that such an approach will be within the principles of Net Neutrality and there will be no impact on prevention of unreasonable discrimination of internet traffic based on content, nature of service etc. Further it will help deliver on the promise of Universal access, will help India meet its Broadband proliferation objectives and will help bridge the digital divide.

Telecom operators in India are not alone in making such recommendations. Network operators and many other bodies are attempting to make a similar push in South Korea and Europe.

"An intervention at this time is relevant because the traffic on telecom networks will continue to grow at an exponential rate as 5G matures and we move to 6G. The users alone will not be able to contribute towards the huge investment required in building such networks," Jio wrote in its response.

"Non-participation in funding the network costs by businesses and content providers can scuttle the entire process, consequently, there is a need for a big push to big technology to contribute, as 5G and 6G are ideal for their bandwidth-heavy applications like video streaming and online games."