Can the Government License OTT?

The very first question that TRAI has asked in its consultation on Net Neutrality and Over The Top services is whether the time has come for the Government to regulate the Internet and OTT Services. I’d like to ask a more fundamental question — does the government have the executive authority to implement such regulations even if it wanted to?

The Legislative Framework

In India, telecommunication services are regulated under the Indian Telegraph Act, 1885. The Government derives its powers of regulation from the wide, though clearly anachronistic definition of “telegraph” in the Telegraph Act:

“telegraph” means any appliance, instrument, material or apparatus used
or capable of use for transmission or reception of signs, signals, writing,
images and sounds or intelligence of any nature by wire, visual or other
electro-magnetic emissions, Radio waves or Hertzian waves, galvanic, electric or magnetic means.
Explanation. — “Radio waves” or “Hertzian waves” means electro-magnetic waves of frequencies lower than 3,000 giga-cycles per second propagated in space without artificial guide;

Section 4 of the Telegraph Act bestows on the Central Government an exclusive privilege to establish, maintain and work all telegraphs:

4. Exclusive privilege in respect of telegraphs, and power to grant
licenses.
(1) Within India, the Central Government shall have exclusive
privilege of establishing, maintaining and working telegraphs: Provided that the Central Government may grant a license, on such
conditions and in consideration of such payments as it thinks fit, to any
person to establish, maintain or work a telegraph within any part of
India…

It is from here that the Government derives the executive authority to issue Unified Licenses to Indian telecom companies under which they derive their right to provide mobile and landline telephone services, SMS and other forms of messaging, long distance carriage of voice and data, the Internet, broadcast services of all sorts and many other services (including many that are yet to be invented).

Regulating the Subscriber

The Telegraph Act only allows the Government to regulate the appliances, instruments, material or apparatus used to provide telecom services. It says nothing of regulating telecom services or the subscribers who avail of them.

As a matter of actual practice, government regulation extends much further. The Unified License imposes various broad obligations on the telcos with regard to the manner in which they must manage their telecom network and the content they are allowed to carry on their network. For instance, even though it is not at all in their hands to prevent, telcos are required to ensure that objectionable, obscene or unauthorized content is not carried over the network and must “take necessary measures to prevent carriage of such messages in its network immediately”.

Of course, Telcos can’t pre-emptively control what each of their subscribers do on the Internet, so they do the next best thing. They reproduce these license obligations into their subscriber terms and conditions so that if ever the Government hauls the telco up for a violation of license conditions, the telco can, in turn, switch off telecom services to the offending subscriber. Though the Government does not directly control what subscribers can or cannot do, it enforces compliance by requiring licensed telcos to deny service to defaulting subscribers.

Implicit in the establishment of this complex regulatory mechanism is the fact that under the present legislative framework, the Government cannot regulate the internet itself — it merely controls the infrastructure on which the internet operates.

Regulating OTT Providers

Which brings us to Over The Top service providers — a category of persons neither regulated under the Telegraph Act nor bound by the terms and conditions that subscribers have signed up to. These are companies (for the most part based outside of India and beyond the scope of the Telegraph Act) that provide communication-equivalent services using Internet infrastructure.

The Government of India currently has no statutory authority to regulate OTT Companies or the services they provide. It has no contractual basis, either directly or indirectly, to prevent these entities from continuing to offer their services over the Internet. All it can do, is use the terms of the Unified License to instruct telcos to deny access to OTT services. Remember RIM? Even in the height of its Blackberry server negotiations, the worst the government could do was threaten to instruct licensed telcos to deny access to the Blackberry service.

What Next?

In the absence of legislative authority under the Telegraph Act, 1885, the Government cannot regulate OTT Service Providers under the current telecom regulatory framework. OTT Service providers do not establish, maintain or work any apparatus that would fall within the definition of a telegraph under the Telegraph Act. As such they cannot be brought within the current license-based framework of regulation.

The TRAI could recommend (and it has the explicit power to do so under Section 11(1)(a)(iv) of the TRAI Act, 1997) that OTT service providers need to be regulated. If that recommendation is to be acted upon, the legislature must take it upon itself to enact a law and go through the legislative exercise of rigourous parliamentary debate.

If instead it merely issues a new license, I’d argue that they exceeded their legislative competence.