Telecoms to lock horns with OTT players as TRAI brings consultation paper

The next level of face-off between Indian telecoms such as Bharti Airtel, Reliance Communications, etc. and OTT  players like Skype,  Viber, WhatsApp, Chat On, Snapchat, WeChat, Line, etc. will kick off soon with TRAI announcing its latest consultation paper.

Telecom Regulatory Authority of India (TRAI) in its latest consultation paper has listed benefits and key challenges to both telecom operators and OTT players.

Some of the following statistics – shared by the TRAI in its consultation paper – will be an eye opener for the telecom industry to review their business model.

For instance, the Microsoft-owned Skype in 2013 carried nearly 214 billion minutes of international on-net calls (from  one Skype app to another). Skype’s traffic was almost 40 percent the size of  the  entire  conventional international  telecom  market. In  growth terms,  it far outpaces  the  combined growth in  the  voice minutes of the  global telecom  industry.

TRAI points out that the impact on voice services is not considerable. First, India has one  of  the  lowest  voice  calling  rates. Indian mobile consumers pay around Rs 0.40  to 0.60. Second, the mobile  internet penetration – mainly on 2G — is only  around 20 percent. Third, the Quality of Service  (QoS) of  such   OTT  apps  is  not as  good  as  traditional  voice services offered by TSPs.

Incidentally, TRAI is not alone in the digital communication space to review activities of OTT giants. On March 12, 2015 Ofcom, telecom regulatory in Britain, launched a strategic review of the UK’s digital communications markets as it seeks to ensure that the industry continues to meet the needs of end users.

The last such review lasted almost two years, and ultimately led to the separation of BT’s access network. This time round the review is unlikely to focus on a further separation of the incumbent; instead it will ask where further deregulation can take place as a result of competition coming from so-called OTT players.

OTT messaging  traffic explodes

In 2013, the worldwide annual SMS traffic was around 8.16 trillion messages against 18.3  trillion messages by OTT players. The OTT messaging  traffic was expected  to  double  in  2014.

In Spain in 2012, 63 percent of smartphone users used OTT apps for messaging primarily because  the  SMS  was  too  highly priced. The OTT  apps  are popular due to the additional value they add to traditional messaging. The worldwide amount of messaging  revenue loss to  telecoms because  of OTT apps  will be around $50 billion in 2016.

OTT challenges and declining Non Data Revenue of TSPs

Declining telecom messaging

The SMS traffic for the TSPs have shown  declining trends in  the  recent past.  The messaging  traffic fell from  5346  million in June   2013   to  4367   million  in  June   2014,   a  decline   of  18.3 percent.   This decrease can be attributed almost  entirely to an increase  in traffic of OTT messaging  apps.  In  the  fourth quarter of  2014,  Bharti Airtel   and  Idea Cellular,  both   Indian  TSPs,  have  shown   a  significant  drop   in   their messaging  and  Value  Added  Service  (VAS) revenues  as a percentage  of total revenues.

OTT moves ahead

WhatsApp soft-launched its voice call functionality for Android devices in the version of the app released on 27 January 2015.

“WhatsApp’s expansion into voice calls is a significant event in the communications market. WhatsApp is probably the last major messaging platform to enable voice calls, but it is also the largest, with 700 million active users as of February 2015,” Stephen Sale, principal analyst and Aris Xylouris, research analyst at Analysys Mason.

Analysys Mason notes that services such as Skype have addressed limited use cases, such as video calling or cheap international calls, and have therefore typically functioned as a secondary voice service. However, WhatsApp’s high levels of service penetration in many countries (such as Germany and Spain) mean that the service will be viable as a primary voice service for many.

Growing WhatsApp

TRAI notes that WhatsApp’s subscriber base in India   has  increased to  70  million  and  it has  a  free  subscription model (unlike  in  developed  markets where  the  annual fee is $1). Similarly, the India-grown Hike messenger has a subscriber base of around 35  million as of August 2014  sending  0.5  billion messages  per day. 83 percent of Indian internet users  access the net through a mobile  phone.

In January 2015,  WhatsApp  had   700   million monthly  active   users   across   the globe.  WhatsApp    is  delivering  on  an average  about  30  billion messages each day and  this  had grown  to around 64 billion during April 2014.


In   India,  as  on  December   2014,  WhatsApp  topped   the   messaging application market  with  52 percent   of  all  the  users   using   OTT  messaging services, followed  by Facebook Messenger with 42 percent, Skype with 37 percent and WeChat  with 26 percent  share.  Viber  stood  at fifth spot with 18 percent  share  and Line  stood  at sixth position with 12 percent.

While Apple’s  iMessage  is integrated between approximately 800 million iOS devices, Apple claims  that 40 billion iMessages were sent each day during January 2014.

“Because of low call tariffs, 80 percent of the customers prefer using the TSPs voice services.  There is some amount of cannibalisation on international calling, where rates are substantially higher,” said TRAI.

TRAI said the revenue from international calls is less than 10 percent of an Indian operator’s total revenue.

Bharti Airtel has  recorded  2.89 billion international outgoing minutes in  the  quarter ended June  2013, down  from  3.79  billion  minutes in  the  previous quarter  while   Idea’s outgoing minutes fell 7 percent sequentially in April-June 2013.

Reliance Communications’ international outgoing minutes  also  dropped   nearly 10 percent   in   a  quarter  in   the   same  period.  The drop could be directly attributed to the growth of free calling services such  as Skype or Viber.

OTT supports data growth

The TRAI note, quoting several analysts report, said the wholesale data usage also increased in recent times for the TSPs. In India, the mobile data revenues of Airtel rose from 6.5 percent of the mobile revenues in Q4 FY 2013 to 16.2 percent in Q3 FY 2015 with the mobile data revenue growing 74.3 percent in Q3 2015.

In India, data usage has increased from 49645 TB in Oct 2013 to 90267 TB in December 2014, showing a cumulative annual growth of 65.2 percent. The data revenue has nearly doubled, from Rs 3057.83 crore in June 2013 to Rs 5910.28 crore in September 2014. It is estimated that data revenue as a percentage of overall mobile revenue will reach 32 percent by 2015 against 14 percent in 2010.


Facebook recently used its F8 developer conference to announce two developments for Facebook Messenger: the introduction of the Messenger Platform and the preview of Businesses on Messenger.

“Facebook’s decision to open up its APIs to Facebook Messenger to third-party developers for the creation of content and apps is a vital step in the evolution of the messaging service which has, to date, lagged behind competitive offerings from the likes of Line, Kakao and Tencent (WeChat),” said Pamela Clark Dickson, principal analyst, Consumer Services at Ovum.

Will OTT challenge continue in India?

Analysys Mason said that operator service substitution is more extensive in the messaging market than in voice, and this is likely to continue in the short to medium term. However, the sheer size of WhatsApp’s network could disrupt the market and some operators are already adopting a defensive stance. For example, Etisalat has already banned the voice feature in the UAE. WhatsApp’s voice launch is yet another wake-up call for operators to improve their feature set in communication services.

TRAI must regulate OTT players if such initiatives bring additional revenue to India government. But such TRAI initiative should not penalize consumers of OTT services. If a carpenter in Kerala is sending an image of his work – through WhatsApp — in a rural place to get an order from Mumbai or Dubai, TRAI should encourage such technologies and services.

Baburajan K
[email protected]