Should Over-The-Top (OTT) Providers Pay the Telecom Industry?

Abstract

The objective of this study is to investigate the prevailing conflict between the telecommunications and Over-The-Top (OTT) sectors in India. Telecom Service Providers (TSPs) have been urging OTTs to compensate them for network usage and revenue deficits. This study leverages an exhaustive literature review to scrutinize the various assertions and recommendations forwarded by diverse telecommunications bodies across the globe. The findings reveal that while the OTTs have favourably influenced the Internet Service Provider (ISP) segment of the telecom industry by functioning as a complementary good, it has negatively impacted the growth and revenues of traditional communication platforms like SMS and calling. The paper also identifies the competition issues attributed to the OTT market, as claimed by the TRAI and ITU. Through a dedicated model, an argument is substantiated that the disadvantages inflicted by OTTs on the TSPs surpass the benefits. We then propose our policy recommendation which necessitates that OTTs bear or share some of the costs of the TSPs. Two distinct models are introduced to calculate these compensations. The models factor in the different sizes of OTT and telecom firms to yield a balanced costing model. Subsequently, an in-depth analysis of the recommended policy implications is conducted. It is deduced that although our policy may instigate a debate about potential negative impacts on net neutrality, a similar approach adopted by the US government did not result in any adverse effects on the growth of their internet sector. On the contrary, it demonstrated notable expansion. The exploration undertaken in this paper illuminates various fallacies and misconceptions prevalent within the relationship between the telecommunication and OTT industries.