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TRAI net neutrality recommendations may hit Airtel, Reliance Jio's earnings: Here's how

Manu Kaushik     November 29, 2017

At a time when countries across the globe are struggling to arrive at a common definition of net neutrality, the Telecom Regulatory Authority of India (TRAI) has come out with recommendations on net neutrality, one of the most controversial issues in the telecom sector.
Broadly, the regulator has disallowed "discriminatory treatment" of content by telecom operators. In the past, telecom operators were found to be involved in throttling, blocking and degrading of Internet speeds to give preferential treatment to a particular type of content belonging either to the telecom operator or any third-party that had tied up with the telecom operator. For instance, the largest telco in the country, Airtel, launched Airtel Zero in April 2015 tying up with companies like Flipkart and others to give preferential treatment to their content. Although Airtel's zero-rated service was free for consumers, the data charges were paid by companies who had deals with Airtel.
The recommendations seem to have irked telecom operators in a big way. Firstly, the operators will not be able to get into agreements with OTT (over-the-top) players (like YouTube and WhatsApp), thereby, shutting down an additional revenue stream for telcos. Also, telcos argue that since the current recommendations have kept OTT services out of the ambit of any regulations, it will allow them to continue to eat into the revenues of telcos.
In March 2015, TRAI first attempted to define net neutrality through a consultation paper on regulatory framework for OTT services. TRAI had apparently clubbed the OTT and net neutrality issues because telcos were offering data packs - WhatsApp packs and Facebook packs. In subsequent consultation papers, and recommendations to the department of telecom, Rajan Mathews, Director General of GSM body COAI, says, "TRAI did not consider the issue of OTT services and the relationship between telecom operators and OTTs, and the regulator continued with piecemeal approach, rather than taking a holistic view."

The recommendation suggests setting up of a multi-stakeholder body (comprising telcos, Internet service providers, content providers, civil society and academia) to monitor the traffic management practices (TMPs) of telcos. Telcos will have to declare their TMPs - and their impact on consumers - if they choose to deploy such practices. Such recommendations, if implemented, will increase the compliance burden for telcos.
The only reprieve for telcos is that TRAI has allowed exemptions for content delivery networks (CDNs). These are services where telcos deliver content within its network without going through the public Internet. Examples include Reliance Jio's JioTV, JioCinema, JioMusic, JioMags, and Bharti Airtel's Wynk Movies and Wynk Music. In a report, Mumbai-based brokerage Edelweiss Securities has said that "CDN exemption is likely to benefit integrated operators who are trying to create a content ecosystem to drive user traction. We expect Reliance Jio and Bharti Airtel to sustain leading positions in this space. They could  leverage CDN  exemption  and  offer  platform  content  at  lower  prices  to  drive  traction..."
Over the past one year, TRAI's has taken a tough stance on key policy matters. Whether reducing interconnection charges (to 6 paise from 14 paise) or penalising three incumbents for denying interconnectivity points to Jio, and now the net neutrality recommendations, the regulator is keeping operators on the edge.

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