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Summary

Bharti Airtel's Airtel Zero platform, which allows users free access to sponsored data services, generates revenue by having OTT players pay for a presence on the platform. The OTT players in turn get a wider audience on Airtel's network and consumers can access these services for free. This launch is particularly interesting because it comes at a time when India is grappling with its stand on net neutrality. The Telecoms Regulatory Authority of India (TRAI), after being urged on by mobile operators, has published a consultation paper and is exploring guidelines to put into place for OTT services.

TRAI guidelines must foster digital progress

TRAI has invited feedback from all stakeholders (including consumers) on the market impact that its guidelines might have. This has led to negative feedback from consumers about perceptions of paying incremental amounts in addition to their current data package. It is important to remember that mobile operators had approached TRAI to levy a charge for use of OTT services, such as WhatsApp and Viber, but TRAI quickly dismissed the idea.

The timing of the consultation paper falls neatly with the launch of WhatsApp Voice in India (Android users only). Operator SMS revenue in India has come under pressure due to popular services like WhatsApp, with over $1.5bn in SMS revenues lost by mobile operators in 2014. However, SMS revenues are a small part of their total revenues; voice is their main revenue channel. Therefore, the growing popularity of voice services such as WhatsApp and Viber will have an even stronger negative impact on voice revenues. This makes the TRAI's possible guidelines to OTT players even more important to mobile operators.

In the past two years, a large number of operators and OTT players had begun to partner and offer value-added services to consumers, in the form of chat bundle data packs or even music-streaming services. Airtel Zero follows a similar theme, but OTT players will pay for their services to be featured on the platform, enabling Airtel to offer the service to consumers for free. Chat packs worked in the market because both OTT players and operators benefitted, in terms of a growing user base and increased mobile broadband revenues, respectively, and it is unlikely that OTT players will object to Airtel Zero. However, the platform's success depends on consumer adoption of the platform, which is tied to the popularity of OTT players that opt in.

Around the world, policymakers are asking similar questions. As the debate evolves, so too does the approach to things like zero rating. At one point it looked set to be outlawed in Europe, but that position has weakened for now. Mobile services are fundamental to Indian consumers because they are the first access point for a large number of services, both online and offline. If India chooses to regulate the market, it needs to balance the interests of consumers, mobile operators, and OTT players. OTT players play a crucial role in providing access to services at a mass scale. This massively mobile market needs operators and OTT players to work together to realize the promise of Digital India set by the government and to further the development of Internet services and infrastructure.

Appendix

Further reading

"The fight for net neutrality in the US and Europe intensifies," TE0007-000798 (May 2014)

"Net Neutrality: FCC head calls for Title II regulation for fixed and mobile broadband," TE0001-000955 (February 2015)

"India is becoming a hot spot for social messaging," TE0003-000819 (December 2014)

"Under new government, India inches closer to digital dream," TE0016-000213 (December 2014)

Author

Neha Dharia, Senior Analyst, Consumer Services

neha.dharia@ovum.com

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