Response to the Department of Telecommunications Committee Report on Net Neutrality. August 18, 2015

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1 Response to the Department of Telecommunications Committee Report on Net Neutrality August 18, 2015 Hong Kong-headquartered CASBAA (formerly the Cable and Satellite Broadcasting Association of Asia) thanks the DoT and its expert Committee for their report, and request for comments, on the above topic. CASBAA is a non-profit trade association of 110 companies dedicated to the promotion of multi-channel television via cable, satellite, broadband and wireless video networks across the Asia-Pacific region. Our member companies operate and invest in 17 different Asian markets, and many of them are substantial cross-border investors; those that are not international investors themselves are the business partners of foreign investors. They have extensive experience in building and creating television infrastructure and quality programming to meet the needs of this region s more than 500 million multichannel TV households. Following the TRAI consultation paper on OTT services, the level of public discussion has achieved remarkable levels. Unfortunately, many of the expressions have boiled down to little more than sloganeering, which offer little insight to guide rational decision-making. But the fact that the issue is the object of so much attention ensures that the government will actively participate in policymaking on the issues, and in a democracy this can only be regarded as a good thing. We see several crucial factors that need to be borne in mind when considering India s policy choices in this domain: -- Indian policy on these issues should be made with a view to India s particular circumstances in the world. Policies that might (or might not) be appropriate for other jurisdictions may not be appropriate for India, given its level of development, fundamental values, economic and social needs. -- That said, within the context of the global information society, there are lessons that can be gleaned from the objective development of data networks in other countries and India

2 -2- should seek to make its policies with a forward-looking view, that uses the experience of others to anticipate likely trends in India, and leaves flexibility for market participants to grow and change rather than a backward-looking one that chooses certain business models and locks them in via regulatory frameworks. One key aspect of overseas experience with growth of data networks has been that they quickly become dominated by transmission of video content. -- The values of a democratic and humanist society are part of the bedrock on which India s policies must be built. So is recognition that the laws of economics must shape wise policymaking and that they should constrain governments from actions that will undermine growth and investment. India will have lasting needs to mobilize investment resources for continued network development, and inevitably there will be a tension between policy populism and pragmatism. The need for forward-looking policies Discussion in both the Committee s report and the preceding consultation paper from the TRAI focused to a large degree on OTT applications that are used as communications services. Our focus is somewhat different we are concerned with development of highcapacity broadband networks capable of delivering large quantities of high-quality video content to consumers. India s development path is likely to follow the trajectory set by other large and diverse societies, and we should therefore anticipate that the future principal use of the broadband networks will be to provide video, which consumers will use to watch at the time of their choosing on many different kinds of devices. In much of the developed world, the Internet has in fact become a TV network with some other uses, and Indian policy should be made with that in view. We present the following facts and projections 1 for consideration: IP Video traffic made up two-thirds of global internet traffic in 2013; the percentage will rise to around 80% by For the Asia-Pacific region alone, the corresponding numbers are 63 % in 2013 and 75% by Even with respect to mobile networks (leaving out fixed line connections), the latest forecast is that nearly three-fourths (72%) of the world s mobile data traffic will be video by Video was already 55% of mobile traffic in Drawn from Cisco s authoritative Visual Networking Index

3 -3- A key means of accommodating this level of mobile traffic growth will be offload of traffic from mobile devices to the fixed network by means of Wi-Fi devices and femtocells. By next year (2016) half of all mobile data traffic will be offloaded by these means, each month. Indian mobile network operators will have to invest to develop such options, or risk network overload. We therefore accord significant weight to the need of Indian telecom service providers to make heavy investments in the coming years. Our industry wants and needs to be able to reach consumers with service offers that meet them where they want to be; that means a different future the content industry will be moving online, and THAT means having networks that are capable of accommodating demand. We do not believe the government should adopt policies that result in reducing or rationing of funds for network investment. Advocates of networks for all, open to all sometimes tend to forget that capable networks are costly, and they will not build themselves. We do not believe a government role in financing such networks is appropriate, both because governments have shown themselves to be incapable of moving with sufficient alacrity and flexibility to accommodate dynamic market demand/technological change, and because we do not think governments need to devote taxpayers scarce resources to building networks to be used primarily for entertainment (see above on the future use of networks for video). The private sector could and should mobilize the necessary resources to make these investments, as long as government policy recognizes and facilitates that resource mobilization. Like India s broadband networks, the online content industry in India is only at an embryonic stage of development. Market actors are just beginning to frame consumer

4 -4- offerings to see which can succeed in the Indian context. We are confident that much more experimentation can and must take place in the coming years, and we have two overriding concerns in that regard: -- The government and the TRAI must avoid seeing the online content industry as another facet of the mature television content supply industry, ripe for extension of the same regulatory approaches governing the traditional TV industry. This would be a colossal mistake, especially at this new stage of development of online content supply in India. Over-regulation will constrain development of newer business models which could be of great benefit to consumers and to India s overall economic development. Stated differently, in India s specific circumstances, submission of online content suppliers to the entire panoply of regulations (rate regulation, must provide, interoperability, interconnection regulation, etc. etc.) that have evolved in the cable and satellite sectors would kill innovation. We favor leaving sufficient scope for commercial actors to develop new services and offer them to consumers without having to deal with the heavy hand of regulation. -- Even as the Indian industry develops legitimate content supply options, we see a strong likelihood that the consumption of pirated content already a substantial factor in the market will continue to grow. There are numerous actors, big and small, in the internet economy who see other people s content as attractive underpinnings for services for which the goal is simply sales of bandwidth or attraction of eyeballs where more is better. Further development of the online pirate economy will sap legitimate content production of its energies (and in turn make it much harder to finance network development.) Moreover, online pirate content sites have been found in a number of Asia Pacific jurisdictions to be associated with and substantially funded by enterprises promoting pornography, gambling, malware and scams 4. Government policies must support protection of intellectual property and promotion of a fair return on creative investment. In the context of this consultation paper, what that means is that no policy favoring consumer access to the internet (e.g. net neutrality ) should be interpreted as giving consumers a right to access unlawful (including pirated) content. Net Neutrality Much public debate surrounding policies on OTT services uses (and abuses) the term net neutrality. There is no universally-accepted definition of what a net neutrality framework ought to include, and various interests are prone to define the term to suit their own interests. Rather than express support (or opposition) to an ill-defined concept, we 4 Research carried out by Dr Paul Watters, at the Internet Commerce Security Laboratory, at Massey University in Auckland, New Zealand on the nature of advertising found on pirate content websites in Australia, Canada, Indonesia, New Zealand, Singapore and Thailand has found that up to 90% of advertising on illegal content websites popular in those countries is high risk.

5 -5- prefer to focus on specific aspects of regulation, and convey to the government our views on what policies make sense for India. Certainly there are key consumer interests with respect to use of internet services that need to be protected, and key principles that should be established and defended. But in developing their approaches to these issues the regulators should beware of extending a smothering regulatory blanket over a new and still dynamically-growing industry. The real consumer needs must be balanced against the very real dangers of overregulation. To achieve this balance, we urge the government to focus primarily on defining and protecting legitimate consumer interests, without extending extensive regulations into upstream dealings between services and network providers. The principles should be defined and protected are these: Consumer access Consumers should have access to all lawful content on the internet; they should be able to use whatever lawful services and devices they wish whether from India or overseas. (The internet in this respect will necessarily differ from walled garden IPTV network services. Both can and should co-exist.) There should be no blocking of services whose main business is distribution of lawful content, and no unreasonable discrimination among service providers by network operators. This is what we understand to be the essence of net neutrality. Key information disclosure Consumers should have a guaranteed right to accurate, comparable and relevant information about the management practices of the operator from which they choose to buy internet service, and about the full costs and conditions of the service they purchase. Legitimate network management measures, including data caps and bandwidth limitations, are inevitable, in current situations of limited network capacity, but they should be clearly specified and understood. Consumers who want to buy better service should be able to easily migrate to another provider 5. 5 In the UK, regulator OFCOM provides a valuable service collecting, interpreting and freely publishing information from multiple broadband service providers. Its use of consistent, common methodologies for measurement of various network parameters enables subscribers with technical knowledge to make fair comparisons of performance of different service providers and journalists and researchers to provided simplified reviews for subscribers with less technical knowledge. In addition, OFCOM checks that marketing claims made by service providers are factual and reasonable and from time to time requires corrections to be made by one service provider or another. These are useful functions that very considerably enhance consumer transparency. See, for example, this publication:

6 -6- No cross-subsidies Each and every consumer should not be expected to pay for their network services at rates that subsidize service to the heaviest users. If a consumer doesn t want to buy Netflix, for example, he/she should not have to pay internet service rates set to provide Netflix-like bandwidth. Differential consumer pricing should be recognized as an essential element in meeting the needs of vastly different groups of consumers. Non-discrimination at the basic service level If judged necessary to meet the public concerns expressed during the different consultations, the regulators may define the parameters for a basic level of internet service, setting minimum bandwidth and speed standards, and the types of services that must be supplied in a completely nondiscriminatory manner at the basic service level. (At this service level, essential network management practices may still be applied, but policies must be transparent.) Examples of services to be included in the definition of basic services might be all services related to health, education, government service and social messaging. We do not see the advisability of including entertainment-oriented services in this basic service level. Leaving them out of the regulatory net will allow more scope for experimentation and innovation, to meet the needs of different consumer groups. Internet consumers may then be offered the opportunity to purchase superior service levels (above the basic service). Those who do not buy superior service will find it difficult to access high-bandwidth entertainment applications; this should be expected, as long as consumers have clear and accurate disclosure of any prioritization being applied (e.g. exemption from bandwidth caps, or zerorating of certain services.) Overall, the approach should be to give consumers clear information and clear rights, and to preserve their downstream access to all the knowledge (but not necessarily all the video) on the internet. Upstream, detailed interconnection type regulation of video supplied over the internet should be avoided; an extension of the current pay-tv regulatory framework into the online ecosystem is unwarranted and would be highly damaging to innovation in developing new internet business models. Indeed, we would support a legislative approach to the latter issue enshrining in a law the principle that entertainment services on the internet should not be subject to upstream regulation (of relationships and contracts between content suppliers and network operators). Questions and Answers on Two Key Questions Is it too early to establish a regulatory framework for OTT services, since internet penetration is still evolving, access speeds are generally low and

7 -7- there is limited coverage of high-speed broadband in the country? We believe that it is probably premature for establishment of a detailed regulatory framework for OTT services, given their embryonic state. It would be preferable for the Indian authorities to let the market develop without intervention. That said, the political debate in recent weeks may make a statement of policy or general principles necessary. If such a policy statement is required, we recommend it avoid adopting vague shorthand such as the expression net neutrality, and focus on consumer rights and expectations, as described above. Do you agree that imbalances exist in the regulatory environment in the operation of OTT players? If so, what should be the framework to address these issues? How can the prevailing laws and regulations be applied to OTT players (who operate in the virtual world) and compliance enforced? Imbalances in the regulatory environment clearly exist, both in India and globally. The one that is of greatest concern to us is the imbalance in respect for intellectual property rights. The online environment is a no-man s-land, where both users and suppliers of services frequently see it as their right to grab whatever they can in the way of digitized content and use it as they please. This is a long-term systemic threat to the survival of quality television content creation. This is a complicated and multifaceted problem and we believe a number of different actions legislative, judicial and police/enforcement are required to deal with it. We do not believe the current consultation is the most suitable forum for detailed discussions; we would simply confine ourselves to stating the principle that policies even those which we advocate, to defend consumer rights, must make a clear distinction between lawful and unlawful content on the Internet: no policy favoring consumer access to the internet (e.g. net neutrality ) should be interpreted as conferring a right to access unlawful (including pirated) content. The various regulatory imbalances need examination at different levels and by different agencies of Government. Policy choices on specific issues should be the subject of detailed individual consultation processes, rather than in this umbrella proceeding. We would hope in any case that these examinations would be guided by an understanding that growth of the internet economy is good for Indians and good for India; policies that would result in regulatory suffocation should in general be eschewed. (ENDS) If more details are requested by DoT kindly get in touch with John Medeiros, Chief Policy Officer, CASBAA at or Anjan Mitra, CASBAA s Representative in New Delhi, at ; Mobile:

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