‘Revenue Sharing’ an underhanded attempt to violate net neutrality: IAMAI

COAI’s demand for ‘revenue sharing’ are a covert attempt to dilute net neutrality in India. Bodies such as the Cellular Operators Association of India have been advocating for a model where the sending party network pays (SPNP) which would allow Telecom Service Providers to exploit internet businesses by formalising rent seeking. The SPNP model would also be a death knell for the digital economy and the creative ecosystem which it sustains.

Calls for a SPNP mechanism have re-emerged even though the demand for telecom services is entirely dependent on the ability of OTT services to attract users. Levying additional cost on OTTs, without providing any additional services, would be akin to exacting tribute. This would also have a chilling effect on investment and entrepreneurship on an emerging sector, where businesses typically take a few years to monetize.  

Over-the-top service providers have flourished in India’s current regulatory regime as they were empowered to distribute high quality content for little to no cost to users. This in turn has promoted internet adoption, economic activity, and added value to the data package products sold by Telecom service providers.

An SPNP mechanism would effectively reverse this phenomenon by 1) Disincentivising growth for OTT based businesses; for whom a volume-based revenue sharing mechanism would be a glass ceiling for continuing growth and may even act as a barrier to entry for new startups. 2) Adding a cost to accessing free or cheap content, which would inevitably be transferred to the consumer, effectively raising the cost of internet usage. 3) Allowing carriage regulation to become content regulation; as different formats of content have different implications on volume, traffic and value, this mechanism would in-effect become a determining factor for individuals and businesses developing and consuming content. 

Given that India’s internet success has been hugely dependent on affordable access to data, instilling a SPNP mechanism would effectively raise costs for users, albeit indirectly, and have the same impact as raising the cost of data itself. A higher cost associated with internet usage would lower overall revenues of internet businesses and may even reduce the amount of data consumer would use. This would result in a scenario where there may be no meaningful growth in the revenue of TSP, despite the massive price paid by the digital economy.

Netizens in India and abroad have repeatedly chosen to maintain net neutrality, the rewards of which may be reaped for decades to come. However, the reignition of this debate threatens the stable and flourishing tech ecosystem which India has developed over the last decade and will weaken India’s position as a leader of the Global Digital Economy.