The Ministry of Communications (“MoC”) had published the draft Indian Telecommunication Bill, 2022 (“Draft Bill”) on 21st September 2022 along with an explanatory note on the Draft Bill. The Draft Bill seeks to replace the Indian Telegraph Act, 1885, the Wireless Telegraphy Act, 1933 and the Telegraph Wires (Unlawful Possession) Act, 1950 and is open for public comments till 20th of October 2022.

The following Salient Features are proposed in the Draft Bill:

• Regulation and licensing of Over-the-top communication services: The Draft Bill seeks to regulate over-the-top (“OTT”) communication services, interpersonal communications services, email, internet based communication services, among others, by exapnding the definition of “telecommunication services”. The Draft Bill proposes to require entities to seek a licence from the Department of Telecom (“DoT”) for providing telecommunication services.
• Identification of Users: The Draft Bill proposes that Licensees must identify the person to whom it provides services, through a verifiable mode of identification as may be prescribed. Further, the identity of a person sending a message using telecommunication services shall be available to the user receiving such message. Any entity which is granted a licence by the Central Government, shall unequivocally identify the person to whom it provides services, through a verifiable mode of identification as may be prescribed.
• Interception and blocking provisions: The Draft Bill proposes to allow government authorities to block, intercept, detain, and disclose messages sent through OTT communication services (such as Telegram, Signal, WhatsApp, etc.) on grounds of public emergency/public safety. Furthermore, on grounds of safety, government authorities can take “possession” of OTT communication services and direct licensees to provide for a call routing scheme during disaster management on the grounds of public emergency/public safety. Additionally, in times of war, governmental authorities may take over the control and management of OTT apps providing telecommunication services, among others.
• Do-not-disturb regulations: The Draft Bill proposes to introduce an enabling provision to implement Do-not-disturb (“DND”) regulations on OTT communication services. This would allow users to give prior consent for receiving certain messages and the preparation and maintenance a DND register, to ensure that users do not receive specified messages without prior consent.
• Power to prescribe standards for telecommunication services: The Draft Bill proposes that the Central Government can issue standards in respect of telecommunication equipment, telecommunication services, etc. and reliability of the provision of any telecommunication services to the public.
• Regulatory Sandbox: The Draft Bill proposes to allow for creation of a regulatory sandbox in order to encourage innovation and technological development in the telecommunication sector.
• Penalties: As per the Draft Bill it is proposed that Government authorities can impose a penalty after determining the category of severity of any breach of terms and conditions of any license, registration, authorization or assignment granted under the Draft Bill.
• Grandfathering provision: With a view of ensuring smooth transition and avoiding any possible disruption, the Draft Bill provides for continuity of rules, regulations, orders etc. issued under Indian Telegraph Act, 1885 or under the Indian Wireless Telegraphy Act, 1933, or under the Telegraph Wires (Unlawful Possession) Act, 1950.
• Dilution of powers of Telecom Regulatory Authority of India (“TRAI”): The Draft Bill proposes to remove specific provisions of the TRAI Act, 1997 which mandated the Government of India to seek TRAI’s recommendations regarding the terms and conditions of licence before issuing the same to a service provider.
• Spectrum Assignment: The Draft Bill proposes to allow for assignment of spectrum through:
  • Auction;
  • Administrative process for governmental functions or purposes in view of public interest or necessity; or
  • In any other manner as may be prescribed.

Our Take

The inclusion of OTT communication services within the scope of the definition of “telecommunication services” in order impose regulations under the telecom licensing regime to such services in our view is not a step in the right direction by the Government of India since it would lead to overregulation and would hinder innovation. The rationale behind the requirement of OTT communication services having to seek a license has apparently been done to ensure a level playing field between OTT communication service providers and Telecom Service Providers (TSPs). The rationale behind such demands by TSPs was “functional substitutability” of OTT communication services such as Voice telephony (VoIP), messages (SMS), Video calls, and Instant messaging service. This inaccurate equivalence between OTT communications services and services provided by TSPs ignores the fact that OTTs and TSPs operate in different layers, and OTTs are not substitutable but dependent on TSPs for network access. Additionally, the requirement of seeking a license and the possibility of a license fees being imposed on OTT communication services would increase compliance costs and hinder the roll out of innovative products. Any imposition of a license fee on OTT communication services would force such service providers to impose a fee upon their customers thereby ultimately harming consumer interests who in any case already pay for internet services.

The broad definition of telecommunication services would also likely bring e-commerce applications within the ambit of the proposed licensing regime as these applications provide messaging services via OTT to their customers for grievance redressal and other services.

The need to regulate the telecom network is based on the need to regulate spectrum which is deemed to be a public good. Furthermore, the TSPs operate the broadband infrastructure through which OTT service providers provide various innovative services to their customers. TSPs recover their costs as customers have to pay for using such bandwidth while availing OTT services.

The wide definition of telecommunication services is also likely to result in a regulatory tussle between the Ministry of Electronic and Information Technology (“MeitY”) and the MoC since they would be seeking to regulate the same set of services. Currently, services like internet communication services and OTT communication services are regulated under the Information Technology Act, 2000 and rules made thereunder. These are currently administered by the MeitY. The inclusion of the OTT communication services within the telecom regulatory regime will only upend the wide range of existing regulations governing the OTT services and lead to a confused regulatory architecture hampering the growth of the OTT sector.

Dilution of the powers of TRAI in recommending the terms and conditions of licence to be issued to a service provider would severely weaken the extant regulatory environment. Experience and learnings of the telecom sector over the past 25 years has successfully demonstrated that a powerful regulator like TRAI has been able to foster rapid growth in the telecom sector in the country. The development in the telecom sector is borne out by the fact that there are approximately 1173.66 million mobile subscribers as on 31st July 2021. A strong regulator is a sine qua non for the development of any sector and any weakening of the regulatory powers of TRAI would lead to decline in investor confidence, policy stability and inhibit the growth of the telecom sector in the long term.

It is worth mentioning that the consultative process employed by the MoC in finalising the draft telecom bill through the publication of the consultation paper, draft bill and the explanatory note accompanying the draft bill is laudatory. However, the inclusion of vague provisions in the draft bill militates against the stated objective of ease of doing business and furthering access to digital resources through Digital India initiative. The market forces should be allowed to prosper in the OTT sector and archaic telecom regulations ought not to be imposed on it.

This article was first published on Saikrishna & Associates