Indian Regulator Bans Zero-Rated Services

The Telecom Regulatory Authority of India (TRAI) has issued a ruling that zero-rated data services will be banned in the country. The rules state, in part, “No service provider shall offer or charge discriminatory tariffs for data services on the basis of content.” Violators will be fined INR 50,000 (US $734.00) per day. While this dictum (which makes permanent a temporary measure put in place in December 2015) is general in nature and singles out no entity, in practical terms its principal target is Facebook’s FreeBasics service. Offered under the company’s global Internet.org initiative and in partnership with Indian mobile operator Reliance, this service offers users access to Facebook without it counting against their data allotments. TRAI’s announcement comes after months of criticism of Facebook by industry participants and net-neutrality advocates in India. It also follows a campaign by Facebook called “Save FreeBasics,” which created controversy and provoked more opposition than support. By issuing this ruling, TRAI has apparently decided that net neutrality is more important than spreading the internet throughout the country. Facebook’s FreeBasics was created to serve the internet giant’s stated goal of increasing access to the internet by making data available to emerging users who otherwise might not be able to afford it—or at least to incentivize them to use mobile data more than they ordinarily would. Facebook CEO Mark Zuckerberg sees Internet.org as a public service (although ultimately a revenue driver), but it seems that Facebook miscalculated in assuming that FreeBasics would be seen as a disinterested contribution to India’s welfare. In a sense, TRAI may be responding to public opinion in ruling against Facebook; the negative reaction to the “Save FreeBasics” effort indicates that the U.S.-based internet company has generated less goodwill in India than it had hoped.  Reliance’s competitors, such as market leader Airtel, will doubtless appreciate the ruling. The question remains, though, whether TRAI’s ruling truly helps the Indian data ecosystem. This is an emerging market in which a rapidly growing number of customers are using data for the first time. While we sympathize with TRAI’s desire that they not be exploited or misled by MNOs or content providers and that fair competition be encouraged, we wonder whether an initiative that spurs adoption of data services might not be ultimately more beneficial to the Indian market.

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American Tower Corporation Explores M&A Options in India

American Tower Corporation (ATC), a U.S.-based global provider of mobile telecommunications infrastructure, is exploring the possibility of acquiring India’s largest tower operator, Viom Networks, which is controlled by Tata Teleservices and has over 40,000 towers. ATC currently owns more than 12,000 towers in India and wants to expand its presence there.

As of year-end 2013, ATC had almost 28,000 towers in the U.S. and over 39,000 in 12 international markets. Its desired expansion into the Indian market could more than double the number of ATC’s towers outside of the U.S. India has the world’s fastest growing smartphone market due in part to the size of the country’s population and also because of the country’s development potential, both in terms of devices and infrastructure. Year-over-year smartphone adoption in India increased by 84 percent in Q2 2014, and further adoption seems very likely, as 71 percent of the market still uses feature phones. Furthermore, rural India still lacks strong network infrastructure.

ATC is venturing that in addition to operators upgrading existing infrastructure—as Bharti Airtel and Aircel did when they launched 4G services in some areas in India—there will also be a need for new towers as several of the country’s telecom operators start to show signs of expansion. Reliance Jio, which will launch 4G service across India early in 2015 as a broadband wireless access license holder, will need to have a large number of new towers built as opposed to upgrading existing infrastructure. ATC hopes Reliance Jio’s 4G launch will induce India’s other MNOs to accelerate their 4G service rollouts, which up until now have been proceeding at a sluggish pace. As 4G adoption becomes more widespread in India, data demand will increase. To satisfy customers’ needs, all of the country’s operators will need to add more towers to their networks in addition to upgrading existing sites. While many pieces of the puzzle, including tower purchases by Indian operators, need to fall into place for ATC to recoup its investment in the country, it appears that the timing is good for the infrastructure provider and that India’s mobile operators will also benefit from ATC’s move.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues:  http://www.tarifica.com/TarificaAlert.aspx