Since there is competition between telecom companies and internet companies, there is a need for regulatory parity between them.
It is clear that the success of Internet firms and telecommunications companies go hand in hand. Although About 18% of Jio is owned by Facebook and Google Provides an indication that new mobility is on the horizon – with the development of 5G technologies, we are witnessing the development of an integrated area of cooperation as well as competition between telecommunications and internet companies due to substitute services and competition in complementary value networks. Huh. ,
asymmetric regulatory stance
Along with the increase in over-the-top (OTT) messaging services provided by internet firms, there has been a significant decrease in the revenue of text messaging services provided by telcos. For example, quarterly SMS volumes in the UK have dropped in half over the past five years to 10 billion by 2021. Similarly, the growth of Voice over Internet Protocol (VoIP) services offered by OTT service providers is also a threat to telecommunications.
Complementary value networks or ‘walled gardens’ include a bouquet of services provided by network operators, handset manufacturers, platform vendors and content providers. One example is made by Apple for its iPhones in the early 2000s with special wholesale agreements with AT&T Wireless. By subsidizing the iPhone with long-term contract agreements, and creating a proprietary App Store, Apple created a walled garden. Recently in India, RJio tied up with Google for JioPhone Next to create an ecosystem of handsets, connectivity and applications. These walled gardens often have a “platform captain” (i.e. Apple, RJio) who provides coordination mechanisms, regulations, key products, intellectual property, and financial capital. Platform captains typically derive commercial advantage from their pole position. Therefore, members of a walled garden may aspire to the position of captain. This brings a new element of competition to the telecommunications-internet companies relationship.
There is an asymmetric regulatory stance regarding telecommunications and internet companies, despite the fact that services can be replaced and increasing competitive pressure within the walled gardens. Some of this stems from fundamental differences in the nature of business such as the judicial nature of operations and the technology used. However, the asymmetry partly reflects a certain world view regarding the regulation of competition in telecommunications and Internet firms.
net neutrality regulation
One example is the net neutrality regulation. When net neutrality was conceptualized in the early 2000s, it was intended to curb the significant market power of telecommunications companies that provide an essential service. A vertical merger with a major telco content and application providers could hinder competition in the downstream market. The net neutrality regulation that prohibits discriminatory behavior of Internet companies – either in relation to pricing or traffic management – in a sense eliminates any incentive for vertical integration. Net neutrality regulation can also be explained as a way to prevent telecom companies from extracting all their revenue from Internet companies. This possibility arises because such firms have no option but to make themselves available through all the telecom service providers. On the other hand, customers limit themselves to one service provider.
Read also | Telecom companies asked the government to defer net neutrality rules
However, over the past decade, the Internet has evolved to a point where many Internet companies also provide an essential service and enjoy significant market power. For example, web search, a market dominated by Google, is often the starting point for navigating the World Wide Web. Without search neutrality, search results can be manipulated in favor of certain firms. This concern is compounded by the presence of vertical integration between the search engine company and the downstream companies. Therefore, there is a need to apply the principles of net neutrality to internet companies as well.
Beyond net neutrality, just as telcos are mandated to provide “equitable access” to interconnect with other telecom networks, social media networks, instant messengers and virtually any Internet service, and indeed demonstrate significant mass mobility Any Internet service that does this needs to be governed by the Interconnection Regulation.
In short, there is an element of competition between telecommunications and internet companies in terms of overlapping services and walled gardens. Therefore, there is a need for a measure of regulatory equality between the two. In the US and India, where the sector regulator sets rules for telecom companies, the competition regulator oversees the behavior of internet firms. It is time for a unified regulatory framework. A glimpse of this convergence is visible in the European Union. India also needs an integrated approach.
Rohit Prasad and V. Sridhar are professors at MDI Gurgaon and IIIT Bangalore respectively
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