With one of the lowest calling rates in the world, people don’t have an incentive high enough to use internet to make phone calls. Moreover, the network quality isn’t conducive to use internet telephony.
Net Neutrality simply means access to all the content over the internet without blocking or favouring any particular website.
It means that the internet traffic should be treated equally, without any bias or prejudice.
Three demands of net neutrality
Debate
Openness is the base for the growth of internet & vital for the innovations over the internet.
Internet is supposed to be free and equal access to one and all. However, with messenger apps like WhatsApp, eating into revenues of SMS services of telecom companies like Airtel and Vodafone, companies are livid, naturally.
Net Neutrality
What the debate is all about?
Some key numbers:
- Mobile internet penetration in India is 20%, predominantly 2G
- Global annual SMS traffic in 2013 was 8.16 trillion
- User base of app-based messaging services has grown over 1 billion
- Data usage growth at over 65% from October 2013 to December 2014
- Data revenue will reach 32% by 2015 versus 14% in 2010
- One minute voice call is around 50 paise vs 4 paise on the internet
- Average voice call is 2 minutes while internet call is 12 minutes
- Average revenue for SMS is 16 paise versus 1 paise for app-based text
What the telecom companies want?
Telecom Regulatory Authority of India (TRAI) says, “There is a demand for “fast lane” internet in certain sectors; this enables content providers to ensure priority delivery of their content.”
What this means is websites who pay a service provider (like Airtel and Vodafone) will have their websites load faster on your computer or phones as compared to the others who don’t pay.
Imagine, is Flipkart pays Airtel to create a “fast lane” for its website or phone app, would you shop on any other e-commerce site as the site will load slowly on your phone or computer? This is seen as discrimination against companies, especially start-ups.
What are these OTT (over-the-top) services?
Over-the-top content or over-the-top services are the many “ apps” that you use on your smartphone.
These app use the 2G, 3G, etc provided by your mobile network. For e.g: whatsApp, Skype, etc.
So, over the top services are those services which need your phone network or WiFi to work.
Telecom companies have a grudge that these apps are now providing services like calling and texting, services which were their bread and butter revenues.
These over the top applications (apps) are basically of three types
1. Messaging and voice services ( communication applications eg whatsapp).
2. Application ecosystems (social networking eg amazon).
3. Video and Audio content ( entertainment eg. YouTube).
Do these apps really impact revenues of your network provider?
Yes and no.
Of course revenues earned by telecom companies from SMSes are going down because of services like WhatsApp, etc. But in a competition, that is supposed to happen. WhatsApp provides texting services that is far superior and richer than a traditional text message. Although Hike messenger, which is run by Kavin Bharti Mittal (Founder and CEO, Hike App), son of Bharti Enterprises' Sunil Mittal is in direct competition with WhatsApp, remember?
Moreoever, Hike got its first funding from Bharti Softbank in April 2013 of $7 million. Bharti Softbank, in April 2014, again invested $14 million in Hike App. Then, a funding of $65 million led by Tiger Global and Bharti Softbank in August 2014.
Bharti Softbank is a joint venture between Bharti Enterprises and SoftbankCorp.
TRAI says that in 2013, Skype’s traffic was 40% of the total voice call market of telecom companies globally.
But the situation in India is different. With one of the lowest calling rates in the world, people don’t have an incentive high enough to use internet to make phone calls. Moreover, the network quality isn’t conducive to use internet telephony.
Also, mobile internet penetration in India is a mere 20%, that too predominantly on 2G.
Text messages, in 2013, stood at 8.16 trillion as against a whopping 18.3 trillion through apps like WhatsApp, Line, Facebook Messenger, etc.
WhatsApp, (as on December 2014) had 70 million users in India and Hike Messenger (from Airtel) had 35 million.
But to use these services, consumers need internet access on their phone.
TRAI, itself says, “The trends in increased data usage show that mobile operators are also benefitting from the popularity of OTT (apps) services.
For Airtel alone, mobile data revenues rose from 6.5% in last three months of fiscal 2013 to 16.2% in third quarter of fiscal 2015. Mobile data revenue for the company grew by nearly 75% in the third quarter of fiscal 2015 as against the same three months of the previous year!
Data usage in India has increased 65% from October 2013 to December 2014.
Data revenue has nearly doubled from June 2013 (Rs 3058 crore) to September 2014 (Rs 5910 crore).
So, while the average revenue that an SMS earns for a telecom company is 16 paise as against 1 paise for the same text to be sent via a WhatsApp, but the ability to send pictures, videos, attachments, etc make the consumer use more data and hence end up sending more messages, or more data.
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