COAI Advocates for OTT Players to Contribute to Network Costs

The Cellular Operators Association of India (COAI), the industry body representing telecom operators, has urged the government to create a regulatory framework that would require over-the-top (OTT) players to share the network costs of telecom firms. OTT players are those who provide online services such as messaging, video streaming, gaming, etc. over the internet without having any direct agreement with the network providers.

Why COAI wants OTT players to pay?

According to COAI, OTT players generate a lot of data traffic on the telecom networks, but do not invest in building or maintaining the infrastructure. This puts a huge burden on the telecom operators, who have to spend billions of dollars on spectrum, licenses, towers, fiber, etc. to provide quality services to their customers. COAI claims that OTT players are free riders who enjoy the benefits of the telecom networks without paying a fair share of the costs.

COAI says that this situation is unfair and unsustainable, especially in the context of 5G deployment, which will require massive investments from the telecom sector. COAI cites examples from other countries, such as the European Union, the US and Australia, where regulators are considering or implementing measures to make OTT players contribute to the network costs of telecom firms.

COAI also provides some data and numbers to support its demand. It says that OTT players account for more than 80% of the total data traffic in India, which is expected to grow at a compound annual growth rate (CAGR) of 36% and reach Rs 11,944 crore by 2023. On the other hand, telecom operators are expected to spend as much as $75 billion on 5G network alone until 2035. Moreover, OTT players do not pay any license fee or taxes to the government, unlike telecom operators who contribute about 30% of their revenue to the exchequer.

How much do OTT players earn?

While COAI argues that OTT players should pay for using the telecom networks, it is also important to understand how much revenue these players generate from their services. According to a report by Statista, India recorded over 1.8 billion U.S. dollars in revenue from OTT and video services in 2022. This figure was estimated to increase by 2027, to nearly 3.52 billion U.S. dollars.

The OTT market in India is dominated by players such as Disney+ Hotstar, Netflix, Amazon Prime Video and YouTube, who have a combined market share of 86%. These players offer various subscription plans and ad-supported models to attract and retain customers. According to another report by KPMG and FICCI, Disney+ Hotstar had an estimated revenue of Rs 1,200 crore in 2018-19, followed by Netflix with Rs 466 crore and Amazon Prime Video with Rs 223 crore.

The OTT market in India is also witnessing the entry of new players and the growth of existing ones, such as SonyLiv, ZEE5, MXPlayer, Voot and AltBalaji. These players are investing in original content and regional languages to cater to the diverse and evolving preferences of Indian consumers. The OTT market in India is expected to witness further consolidation and competition in the coming years.

How COAI wants OTT players to pay?

COAI has suggested a few models that can be used for making OTT players pay for using the telecom networks. One of them is to charge OTT players an equivalent of “usage charge” for the actual traffic carried by these OTTs on telcos’ network, which can be easily measured. Another option is to charge OTT players a percentage of their revenue or profit derived from using the telecom networks. A third option is to levy a license fee or a regulatory fee on OTT players based on their category and scale of operations.

COAI says that these models can be implemented through mutual agreements between OTT players and telecom firms, or through a legal framework and empowerment by the government. COAI also says that these models will not violate the net neutrality principles, which pertain to non-discriminatory treatment of content by telecom firms.

How OTT players react?

OTT players have opposed COAI’s demand, saying that it is an attempt to undermine net neutrality and stifle innovation and competition in the digital ecosystem. They argue that they already pay for accessing the internet through internet service providers (ISPs), and that they also invest in their own infrastructure and technologies to provide quality services to their users. They say that imposing additional charges on them will increase their costs and affect their viability and affordability.

OTT players also contend that they provide value-added services to the consumers and create demand for data consumption, which benefits the telecom firms as well. They say that they are not competitors but partners of telecom firms, and that they should work together to create a win-win situation for all stakeholders.



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