Telecom Body COAI Advocates for Revenue Sharing with Traffic-Heavy Apps

The Cellular Operators Association of India (COAI) has once again brought to light its request for a revenue-sharing model between telecommunications companies and major traffic-generating applications such as Netflix and Instagram. This call for a new financial arrangement comes at a time when telecom operators are under pressure to upgrade their infrastructure to accommodate the surging demand for bandwidth. In a detailed letter addressed to the telecom secretary Neeraj Mittal, COAI emphasized the critical need for government intervention to address the challenges currently faced by the telecom sector.

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According to COAI, the telecom industry is at a pivotal point where significant investments are necessary. These investments are aimed at acquiring Graphic Processing Unit (GPU)-based high-speed servers essential for supporting AI-based applications and high-definition video streaming services provided by large traffic generators (LTGs) like YouTube, Facebook, WhatsApp, and Netflix. COAI suggests that LTGs should contribute a portion of their revenue to telecom operators. This financial contribution is seen as vital for building robust networks capable of delivering enhanced user experiences.

However, this proposal has met with resistance from various quarters. Advocacy groups and industry bodies such as the Broadband India Forum have criticized the revenue-sharing idea, arguing that it could stifle innovation and negatively affect the startup ecosystem. Despite these objections, COAI highlighted an incident involving a global LTG, which it did not name explicitly but was clearly referring to Google. The tech giant began removing apps of 10 Indian companies, including Bharat Matrimony and Naukri, from its platform over disputes related to service fee payments, starting March 1, 2024.

The government has since intervened, urging Google and the affected Indian apps to find a resolution by the end of June. In support of its proposal, COAI cited international precedents such as the Lowering Broadband Costs for Consumers Act of 2023 in the United States, which proposes a revenue share fee on apps generating significant traffic. Similar discussions on revenue sharing between telecom operators and LTGs are also underway in regions like the European Union, Brazil, and South Korea.

COAI Director General S.P. Kochhar elaborated on the technological advancements necessitating these investments. He pointed out that newer technologies would lead to new demands, including video optimization on OTT streaming platforms and the integration of GPUs for data computing and processing. Kochhar emphasized that these made-to-order equipment require advance payments with a delivery lag of 12-18 months. He argued that fair share contributions from LTGs could help telecom service providers (TSPs) manage their cash outflows more effectively.

In conclusion, while COAI's proposal aims at creating a sustainable financial model for telecom operators amidst growing technological demands, it faces opposition from those who view it as potentially harmful to innovation and startup growth. The ongoing discussions between Google and Indian app companies may serve as a litmus test for future negotiations on revenue sharing in the telecom sector.