Vivan Sharan and Mohit Kalawatia
6. December 2018 14:56 PM IS
Online service providers operate in a largely unexplored regulatory environment unlike their relatives and predecessors in the offline world. Telecommunications Service Providers (TSPs) and Broadcasting Distributed Platform Operator Operators (DPOs), for example, are licensed by the Telecom Regulatory Authority of India (TRAI), whereas applications that transmit or distribute voice, text or video content over the Internet used, no license received. This lack of licensing or regulatory parity has led traditional incumbents to make repeated demands for regulatory convergence, especially since their own profits have shrunk as online competition for online services has widened.
The influence of the Internet on society has also grown inexorably ̵
OTT services would technically fall under the jurisdiction of a regulator in the IT ministry. To his great annoyance, however, the IT Ministry does not have its own regulatory authorities. Of course, the importance of regulators in governments around the world is in direct proportion to the size of their jurisdictions. Therefore, the requirement for parity of regulated entities has provided an enthusiastic TRAI with a ready justification for extending its jurisdiction to OTT services.
Recently, TRAI has begun a public consultation process allegedly providing a regulatory framework for a subset of OTT services that provide TSPs with similar functionality. These include OTT communication services such as voice and text messaging. The origins of this process and its scope are traceable for several years.
In 2015, TRAI had initially tried to paint the entire OTT ecosystem with a broad brush, while the Department of Telecommunications (DoT) had always mixed feelings about an independent TRAI, quickly drawing the circle for future consultations. In essence, the regulation of OTT communications services took precedence over other services such as electronic retail, content and media.
The focus of the recent TRAI consultation is on whether the construct of "substitutability" between TSPs and OTT communications services should be applied for. Comparison of the regulatory burdens applicable in both markets. That is, if services like WhatsApp provide functionality similar to text messaging, should not they be regulated the same? Such logic can be extended indefinitely and provide timely approaches to regulations that may not be appropriate for digital markets.
For example, online taxi aggregators may be referred to as substitutes for black and yellow taxis, online video providers for broadcasters, or online retailers, offline counterparts, etc.
Therefore, it makes sense to use metrics other than just substitutability to ensure clarity of regulatory scope and compliance.
The fact is that the impact of large OTT services on the market should be a concern for antitrust authorities worldwide – and this is directly related to whether OTT services and TSPs operate in the same markets. The next question is whether they replace each other in these markets.
To be clear, industry regulators such as TRAI have a legitimate interest in such antitrust matters that affect their regulated jurisdictions. The use of substitutability as the sole determinant of future regulation, however, deviates from the approach adopted by the Competition Authority of Nodal, the Competition Commission of India (CCI).
Even though the CCI is still new in the digital economy and has limited technical expertise The evolving regulations of relevant markets should inform the TRAI process. For example, a lawsuit against Snapdeal in 2014 alleged that the e-retail platform had abused its dominant position by concluding an exclusive agreement with sellers using its platform. As a result, the CCI noted that online and offline markets are just two different distribution channels and are not separate markets. This was similar to the functional approach that TRAI is now exploring.
However, the order issued by CCI in a lawsuit against WhatsApp shows a sharp learning curve. In 2016, one complainant alleged that WhatsApp held a dominant position in the relevant market for "free messaging apps available to various smartphones worldwide". The CCI considered that such communication services would not interfere with "traditional electronic communications services such as text messaging, voice calls, etc." that are provided by TSPs. This is because they differ in features such as accessibility (the former can only be used via a smartphone), price models, and additional features for users. Even in cases against Ola (2016) and Google (2018) the CCI noted that, due to certain characteristics, online markets differ from their offline markets.  The identification of market characteristics is obviously a differentiated exercise with constant technical improvement potential – something that the TRAI must acknowledge in its assessments, but provisionally.
More recently, the CCI also used available policy definitions to determine the relevant markets in a case against Flipkart. As IT law gives legal recognition to all electronic communications and commerce, which include OTT services, the IT ministry should take on the task of defining various OTT services using a modern IT policy. Ideally, this should precede TRAI's regulatory pronouncements, as it is a firm rule of law that the delegated power available to regulators is limited to what is envisaged by their parent laws. Importantly, a legislator can not delegate "essential legislative functions" to a body such as TRAI.
In addition, global best practices can provide templates for greater institutional coherence between regulators such as TRAI and CCI. For example, the 1945-1945 British Enterprise and Reform Act has strengthened the role of the Competition and Market Authority (CMA) and has requested consultations with the relevant sectoral regulators to resolve jurisdictional issues. In addition, it requires the exchange of information on possible antitrust issues in all markets.
Likewise, the South African Competition Commission has completed several MoUs with the regulators of the sector. These agreements are based on the provisions of South African Competition Law, under which the Competition Regulatory Authority is responsible for negotiating agreements with its sector-specific regulatory authorities.
In 2011, a senior committee of the Ministry of Enterprise (MCA) had also recommended to amend the Indian Competition Act to provide for binding consultations between the Chamber of Industry and Commerce and the sector regulators such as the TRAI. Despite this fact and the growing importance of antitrust law in digital markets, the Chamber of Commerce and Industry today is a haggard instance – without a special court of appeal and without the full strength of its board members. As another MCA committee has been formed this year to review competition law, it may be able to re-examine the upcoming recommendations and thus try to balance the competitive conditions between the regulators.
The authors are experts in technology policy at the Koan Advisory Group. New Delhi.