In light of the emergence of net-neutrality and regulation of Over-the-Top (OTT) services as popular topics in national policy debates, in January 2015, the Department of Telecommunications under the Ministry of Communications and Information Technology (MCIT) constituted a Committee chaired by Shri A K Bhargava [Member (T), DOT] with the following terms of reference:

1. To examine the pursuit of net-neutrality from a public policy perspective, its advantages and limitations.

2. To examine the economic impact on the telecom sector that arises from the existence of a regulated telecom services sector and unregulated content and applications sector including OTT services.

3. To examine, assess and specify qualifications on the applicability of the principle of net-neutrality from the security, traffic management, economic, privacy and other stand-points.

4. To recommend overall policy, regulatory and technical responses in light of examination and assessment of the issues in the first three terms of reference.

The 110-page outcome report of said Committee's inquiry, presented before the MCIT in May 2015, was made public on July 16, 2015. Below are excerpts from the report highlighting the core recommendations made by the Committee.

Conceptually on net-neutrality

• The Committee is of the view that there is no need to hard code the definition of Net Neutrality but assimilate the core principles of Net Neutrality and shape the actions around them. The core principles of net-neutrality must be adhered to. However, this would need to be circumscribed by certain unequivocal conditions that do not breach the core requirements of net-neutrality as they are commonly understood. Said conditions would include but aren't limited to the intrinsic need to protect networks from disruptive attacks, management of Internet traffic, need to comply with legal obligations, and maintenance of acceptable Quality-of-Service (QoS) levels for some real time services.

Generally on the policy approach to net-neutrality

• Considering the large Internet user-base and the critical role of the Internet in our economic, social, and political spaces, India should initiate action in formulating an objective net-neutrality policy tailored to the needs of the nation.

• The endeavor in the policy approach should be to identify and eliminate actions that inhibit innovation in an open Internet or severely inhibit investment in infrastructure.

• The primary goals of public policy should be directed towards achieving developmental aims of the country by facilitating "affordable broadband", "quality broadband", and "universal broadband" for its citizens. Accordingly, public policy should:

  • expand access to broadband;

  • endeavor (through Digital India) to bridge the digital divide and promote social inclusion;

  • enable investment, directly or indirectly, to facilitate broadband expansion;

  • ensure the functioning of competitive markets in network, content and applications by prohibiting and preventing practises that distort competition;

  • recognize unbridled right of users to access lawful content of their choice without discrimination;

  • support the investment-innovation virtuous cycle, and the development of applications relevant to and customized for users.

• User rights on the Internet need to be ensured so that Telecom/Internet Service Providers (TSPs/ISPs) do not restrict the ability of the user to send, receive, display, use, or post any legal content, applications, or services on the Internet, or restrict any kind of lawful Internet activity or use.

On regulation of Over-the-Top (OTT) services

For the purposes of the report, OTT services are broadly classified into (i) OTT communications services [real time person-to-person telecommunication services], and (ii) OTT application services [media, trade & commerce, cloud, social media etc.]. The Committee notes that while both OTT messaging and international voice calling services have affected TSP revenues, neither have completely disrupted TSP revenue models. The Committee is also of the view that the statement of the TSPs that they are under financial stress due to rapidly falling voice revenues and insufficient growth in data revenues is not borne out by evaluation of financial data. However, OTT domestic voice calling services have the potential to significantly disrupt existing TSP revenue models. The existence of regulatory and pricing arbitrages further exacerbates the problem, and calls for a calibrated response to ensure a level playing field. The immediate imperative for the Government is to facilitate investment in broadband infrastructure and bring out policy certainty in the investment climate. Consequently, the Committee finds that ensuring a policy and regulatory level playing field in OTT domestic voice calling services is extremely important. With this in mind, the Committee recommends the following:

• OTT application services have been available in the market for some time, and enhance consumer welfare and productivity. Therefore, such services should be actively encouraged and any impediments in expansion and growth of OTT application services should be removed.

• OTT messaging services should not be interfered with through regulatory instruments.

• As public policy requires that regulatory arbitrage does not dictate winners and losers in competitive markets, the Committee favors regulation of OTT voice calling service providers. In case of OTT international voice calling services, a liberal approach may be adopted. However, in case of domestic calls, communication services offered by TSPs and OTTs must be treated similarly. The nature of regulatory similarity, calibration of regulatory response, and its phasing may be appropriately determined after public consultations and the Telecom Regulatory Authority of India's (TRAI) recommendations to this effect.

Specific policy recommendations on net-neutrality

• A clause should be incorporated in the license agreements of TSPs/ISPs that require licensees to adhere to the principles and conditions of net-neutrality as specified by guidelines issued by the licensor (DOT) from time to time. The guidelines can describe the principles and conditions of net-neutrality in detail and provide applicable criteria to test any violation of the principles of net-neutrality. (Annexure IV of the report contains a set of suggested guidelines, which includes several indicative criteria against which adherence to the core principles of net-neutrality may be tested. Said criteria include non-curtailment of freedom of expression, non-discriminatory access, freedom to connect devices of one's choice to networks and services, non-hindrance of competition, observance of privacy and security standards etc.)

• Since net-neutrality related cases would require specialized expertise, a cell in the DOT headquarters may be set up to deal with such cases. In case of violations, the existing two-stage procedure involving the review and appeal processes may be followed.

• There should be a separation of the "application layer" and the "network layer", as application services are delivered over a licensed network. OTT application services are not similar to licensed communication services, thereby precluding the possibility of regulatory arbitrage arising from competition between licensed service providers and OTT application service providers. Where regulatory intervention is not required (i.e. in the cases of OTT international voice calling services and OTT chat/messaging services), licensing requirements can be dispensed with. On the limited aspect of OTT domestic calling services, the Committee reiterates its view that such services should be regulated through the exercise of licensing powers available under Section 4 of the Indian Telegraph Act.

• A new legislation, when replacing the existing legal framework, must incorporate the principles of net-neutrality. Till such time as an appropriate legal framework is enacted, interim provisions enforceable through license agreements may be the way forward.

• Tariff shall be regulated by TRAI as at present. Whenever a new tariff is introduced, it should be tested against the principles of net-neutrality. Post implementation, complaints regarding tariffs violating net-neutrality may be dealt with by the DOT.

• Net-neutrality issues arising out of traffic management would have reporting and auditing requirements, which may be performed and enforced by the DOT.

• QoS issues fall within TRAI's jurisdiction. Similarly, reporting related to transparency requirements will need to be dealt with by TRAI.

On traffic management

The Committee recommends that legitimate traffic management practises may be allowed, but should be tested against the core principles of net-neutrality. The following are identified as general criteria against which traffic management practises can be tested:

• TSPs/ISPs should make adequate disclosures to users about their traffic management policies, tools, and intervention practises to maintain transparency and allow users to make informed choices.

• Unreasonable traffic management, which is exploitative or anti-competitive in nature, may not be permitted.

• In general, for legitimate network management, application-agnostic control may be used. However, application-specific control within the "Internet traffic" class may not be permitted.

• Traffic management practises like DPI should not be used for unlawful access to the type and contents of an application in an IP packet.

• Improper (paid or otherwise) prioritization may not be permitted.

• Traffic management being complex and specialized, adequate capacity building needs to be done before undertaking such an exercise. Mechanisms to minimize frivolous complaints are desirable.

On tariffs and zero-rated services

The Committee feels that there are multitudes of possibilities in designing tariff plans, and it would not be possible to pre-determine all possibilities and their standing with respect to net-neutrality principles. Conclusions on whether specific tariff plans breach net-neutrality would have to be made in the context of their designs and the outcomes they generate, including their ability to distort consumer markets. Therefore, the Committee proposes that tariff plans (including zero-rated plans) be dealt with in the following ways:

• Ex-ante determination - Before a licensee launches any tariff plan, the same would need to be filed before TRAI within a reasonable period prior to the launch of the plan. TRAI would examine each such tariff filing carefully to see if conforms to the principles of Net Neutrality principles and that it is not anti competitive by distorting consumer markets. Such a filing requirement would include a deemed approval clause, if the regulator does not decide within a reasonable period. This would ensure balance of interests protecting the liberty of TSPs/ISPs to design specific tariff plans attuned to specific customer demands and at the same time ensure that the principles of Net Neutrality are not breached.

• Ex-post regulation - Complaints on tariff plans may be dealt with on a case by case basis through an adjudicatory process to be specified by the regulator and after giving a reasonable opportunity of being heard. Imposition of penalties or financial disincentives could be considered if the principles of Net Neutrality are violated. However, the measurement principles are to be defined to gauge whether the tariff plans impinge on Net Neutrality principles.

Specifically on zero-rated services, the Committee finds that content and application providers cannot be permitted to act as gatekeepers and use network operations to extract value, even if it is for an ostensible public purpose. Collaborations between TSPs and content providers that enable such gatekeeping should be actively discouraged. The Committee notes that in the market for content provision, clear market leaders emerge in a short while. If such market leaders are able to dictate the path to specific content, the principles of non-discriminatory access from a user view-point can be compromised, leading to distortions in the content provision market and consequent implications for the larger Internet economy and innovation.

On security and privacy

The Committee finds that Internet-based communication and application services transfer the ability to lawfully intercept traffic moving over networks away from Governments to private companies, who are not amenable to national legal jurisdictions. Loss of this ability has the possibility of compromising national security and law enforcement capabilities. Therefore, there is a need for a balance to be drawn to retain the country's ability to protect the privacy of its citizens and data protection without rendering it difficult for business operations. One possibility is to identify critical and important areas through public consultations where there may be a requirement to mandate local hosting or retaining enforcement capabilities in cases of breach.

Further, the Committee believes that national security is paramount, regardless of the treatment of net-neutrality. It therefore recommends inter-ministerial consultations to work out measures to ensure compliance of security related requirements from OTT service providers.

On content delivery, interconnection, and managed services

• Content Delivery Networks (CDN) are arrangements for managing content as a business strategy. Making available one provider's CDN to others on commercial terms is a normal business activity. Discrimination in access or adoption of anti-competitive practices by them is best left to be covered under the law relating to unfair trade practices.

• Managed services are necessary requirements for businesses and enterprises, and suitable exceptions may be made for treatment of such services in the net-neutrality context.

• No specific recommendations are made on search neutrality, but the issue is flagged as a concern for public discussion.