By Dr. Jaijit Bhattacharya
As we move to a new year, the telecom industry continues to face existential challenges due to pressures of ever-increasing investments into spectrum and into new technologies such as 5G, upcoming 6G and satellite telephony.
Even though telecom is the life-blood of a modern economy with everyone in the society and all businesses being a stakeholder and a beneficiary, who funds the telecom infrastructure remains an outstanding question.
As I had argued in one of my previous articles on the phenomenon of the “Kalidasa Effect” on telecom, wherein those who are generating large data and are pumping humongous amounts of this data into the telecom network, thereby consuming much of the network capacities, are not the ones who are paying for it.
It therefore poses a problem that those who do not consume such data, have to subsidize those who are consuming such data.
More importantly, it puts pressure on the telecom networks, thereby raising the analogy to Kalidasa, wherein those who are using the network the most, are the ones who are apparently also chopping down the network, leading to potential demise of the network providers, similar to Kalidasa, who chopped the same branch that he was sitting on.
“The telcos are sitting on the physical branch of network infrastructure and cutting it off. The (dumb) pipes would be bereft of content flowing through them if they didn’t have the LTGs. The apps are what are giving them a sustainable business. The pandemic would have rendered the telcos bankrupt if there had been no OTT apps. The two have a symbiotic relationship. Each needs the other,” notes Ramachandran.
The above statement may not be entirely true as a large number of people got onto the internet in order to earn their livelihood under the now well-understood concept of Work From Home or WFH and not for watching video content.
However, the key takeaway from the above observation is that there is a symbiotic relationship between the Large Traffic Generator (LTG) apps and the network. Networks need data to flow through and LTG needs a network to reach their target customers. This symbiotic relationship breaks down when we observe that even though the LTGs use the network, they do not share their revenues with the network.
This is how those network subscribers who do not subscribe to LTG (such as OTT platforms) end up subsidizing those who consume LTG data such as those from OTT.
To delve back into the evolution of entertainment delivery through networks, the early entertainment delivery through networks was through cable television wherein the networks were operated by what was called MSO (Multi-System Operator).
They reached out to each house and provided the network and did the grunt work of repairs and maintenance of the cable network and did the fee collection from each household for the cable TV provided. They kept a small fee for the end consumer for these services and for the network.
How did they manage to keep a small fee for the end consumer? It was a simple arrangement where the channels who were sending their signals through the network, and who were earning from advertisers, shared a part of their earnings with the cable TV network in the form of “carrier fees”.
This revenue of the cable TV from the channel providers kept the network costs low for the end users, thereby leading to a proliferation of cable TV networks. This was a perfect symbiotic model.
It is this model that needs to be replicated in the Internet world, wherein the LDGs (such as OTT platforms) need to share their revenues with the internet network provider, in order to keep the cost of network low, and to further democratise access to internet in a financially sustainable manner.
It is a natural model where symbiotic partners contribute in a manner determined by the market, for the benefits that they accrue because of the underlying platform that they use.
Unless we let the market forces play out, we will continue to have a distorted business structure for telecom, which can threaten the existence of the telecom networks.
Unlike startups and smaller users of the network, who do need free access to the Internet. Large corporate LTGs with multi-billion dollar turnovers, and with many of them being based outside of India, do not require any regulatory protection and should play by free and open market rules, in a manner similar to what TV channels used to do in the cable TV era.
If we do not bring in such reforms, it will threaten the existence of our telecom networks.
This article first appeared in ET Government, https://government.economictimes.indiatimes.com/blog/telecom-conundrum-roadmap-for-telecom-networks-to-avoid-the-quagmire-of-kalidasa-effect/106423391
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