Here’s Why Facebook India Joining Operator Association COAI Is A Smart Move

Facebook India's joining operator association COAI is a smart move considering the present times where COAI is lobbying TRAI to regulate messaging apps in India

Last week was intense, you would agree if you follow the digital space closely in India. Two big news revealed. One was Telecom Regulatory Authority of India (TRAI) finally initiating the process of bringing in a regulation for over-the-top (OTT) companies or providers of apps like WhatsApp and Viber to pay connectivity charges to telecom companies and share revenue with the government as well.

OTT refers to “the delivery of content or services over an infrastructure that is not under the administrative control of the content or service provider.”

If that wasn’t enough, we also read that the Cellular Operators Association of India (COAI) has decided to induct Facebook India Online Services as an associate member. Facebook is the first non-telecom company to join COAI.

Both the developments have a common string of connection - COAI. Established in 1995 by the first few GSM operators, COAI is the same body that has been lobbying TRAI for months to bring the messaging apps into a regulatory framework. Right now COAI’s core members include Bharti Airtel, Vodafone India, Idea Cellular, Aircel, Unitech Wireless (now Telewings Communications), Videocon Communications (now Videocon Telecom).

Associate members include Alcatel-Lucent India, Cisco Systems India, Ericsson India, IBM India, GTL Infrastructure, Huawei Technologies, Indus Towers, Intel Corporation, Nokia Networks, Qualcomm India, ZTE India, and now Facebook.

Facebook which bought WhatsApp earlier this year for a $19B price tag, happens to be the leading messaging app in the country. WhatsApp has more than 50M monthly active users in India and will be one of the messaging apps that would be extremely affected if the regulations come in place.

Get the connection?

But Facebook India states that there is no such connection. Ankhi Das, public policy director (India and South Asia) at Facebook, said: “Joining COAI as an associate member reflects our focus on mobile technologies, access, and our continued desire to work in collaboration with the industry to increase connectivity. We look forward to playing an active role as a member.”

Problem of telecom operators with OTTs

The problem started when operators globally realised that making money from charging for minutes and texts is increasingly becoming irrelevant with the advent of third party applications such as Skype, Viber, WhatsApp, among others.

Earlier this year,  Ovum had predicted that global telecom companies will lose $386 billion between 2012 and 2018 from customers using over-the-top VoIP (Voice over Internet Protocol) solutions such as Skype and Microsoft Lync. These losses will be mostly from international call revenues and roaming services. The companies lost $32.5 billion in texting fees in 2013 and the figure is projected to reach $54 billion by 2016.

In India, voice calls and text messages (SMS) comprise about 75 percent of the revenues of telecom operators in India. With the proliferation of third party apps or the OTTs, Indian operators received a set back on their revenues. For example: SMS comprised 12% of profit for Bharti Airtel in 2009-10. In Q3FY14, SMS revenues were down to a mere 6% of top line.

This led COAI to lobby TRAI and bring the messaging apps into a regulatory framework. Earlier we had reported, Bharti Airtel CEO Gopal Vittal asking TRAI to regulate the  messaging apps but then the demands were quashed by TRAI saying that messaging apps are within the rules and if any decision has to happen on the regulation part then it will happen from the government.

Times have changed with the new government in place, it is being said the COAI has produced a white paper on “over-the-top” (OTT) services that highlights the issue from the operator’s perspective. TRAI is understanding perspectives now such as new developments in OTT, impact of OTT on telecom services providers and their counter measures, legal and regulatory framework for OTT.

Subsequently, TRAI would come up with a discussion paper on OTT players.

Smart move by Facebook India

While Facebook may stress that it has joined the group just as an associate member, it wouldn’t surprise many if Facebook would not press its case forward as a OTT player. In fact there is no word also on the fee structure of associate members. Director-General at COAI, Rajan S Mathews has said the fee structure would be different for associate members.

Talking to Medianama, Ankhi informed that while Facebook is looking forward to work with industry bodies but again it isn’t supporting the lobbying efforts of COAI. ” We are signatories to various industry papers, and we’ve had a public position on this consistently. I think the Internet ought to be free. That position will never change. That position is never going to change. It is free, it ought to be free. I doubt how much receptivity is there to these ideas. These are just bad ideas.”

Mathews, for the moment, agrees to the fact that Facebook joining the group is a mutual value addition. He further said,“We feel that Facebook’s active participation in COAI activities will result in mutual value addition and bring the much needed synergy of functioning between the service providers and the content / VAS players.”

While there is a decision to be taken for the OTTs by TRAI, it is clear that much would also depend on the role and influence that Facebook has in the COAI. It is just not with Indian operators, Facebook is forming such strong bonds with global operators and bodies too. Facebook knows that it can’t survive on its own in this mobile first world and it also can’t ignore the fastest growing smartphone country in Asia.

The move to join COAI is a futuristic and smart one from Facebook India.