Net neutrality directions to benefit Reliance Jio, Bharti Airtel

Recommendations of the Telecom Regulatory Authority of India (Trai) on Net neutrality are broadly in line with its February 2016 regulation prohibiting discriminatory tariffs for data services.

They also bar differential speeds for various offerings by internet service providers. However, the telecom regulator has kept content delivery networks out of the regulation. This means that cellular service providers who have their own content platform and are offering these services on their own network (content delivery networks) can charge differential pricing.

Mayuresh Joshi of Angel Broking says the reason content delivery networks have been kept out of the regulation is that they will not impact competition and are not considered discriminatory.

According to analysts at Edelweiss Securities, the proposed rules are likely to give integrated operators an upper hand versus pure-play connectivity providers. They expect telcos such as Reliance Jio and Bharti Airtel to be key beneficiaries as they have a presence in content platforms. Reliance Jio (JioTV and JioCinema, among others) and Airtel (Wynk Movies, Music & Games) have been creating their own content ecosystem to retain and increase subscribers.

Analysts say they will use the content delivery network exemption and offer platform content at lower prices to drive their subscriber base.

Most analysts believe that rules are in place but Trai has now recommended that licence conditions related to the issue needs to be amended to cover all other types of discrimination.

 Regulations related to discriminatory tariff for data services based on content had been addressed by Trai through rules issued in February 2016.

The regulator had ruled in favour of Net neutrality last year and prohibited Facebook’s Free Basics platform and other offerings by Indian telcos that violated this principle.

The prohibition, according to Angel Broking, only applies to discriminatory tariffs based on content. Service providers can offer lower tariffs for all users for a limited period, then that would not constitute violation of Trai’s order, says the brokerage.

Service providers are disappointed, given that the regulator has not made any recommendation for voice-related over-the-top applications, except that separate regulations to deal with these applications be created. Telcos have asked for a level-playing field.

The regulator has also recommended a watchdog for enforcing Net neutrality and has proposed reasonable measures of traffic management. It has also recommended stiff penalties for violations, starting at Rs 50,000 per violation per day. The overall penalty could go as high as Rs 50 lakh, depending on the gravity of the violation.