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Revenue-share model 2.0: Levy USO-like fee on OTTs, telcos tell DoT
The revenue-sharing tussle between telecom operators and over-the-top (OTT) apps has taken a fresh turn. Now, telcos want the government to play a role in getting data-guzzling OTTs — which they refer to as large traffic generators (LTGs) — to pay a charge for using the telecom networks to offer their services to consumers.
Telecom service providers, including Reliance Jio, Bharti Airtel and Vodafone Idea, have collectively proposed to the Department of Telecommunications (DoT) that a levy be imposed on such OTTs' income generated from India. That levy could get pooled into the Consolidated Fund of India or the Digital Bharat Nidhi (erstwhile Universal Services Obligation Fund meant for connectivity in rural and remote areas), the telcos have suggested.
According to executives familiar with the details, the idea is to help telcos use the fund, coming from the levy on such OTTs, to provide data and voice connectivity in the underserved areas of the country.
Queries to DoT, Reliance Jio, Bharti Airtel and Vodafone Idea did not elicit a response till the time of going to press.
Earlier, telcos' demands centered around a revenue-share agreement directly between the carriers and large traffic generators (LTGs) like Netflix, WhatsApp, Facebook, Instagram and other apps on the ground that the entities were not contributing towards supporting the data network infrastructure that telcos build.
LTGs take up a significant portion of the network bandwidth, the carriers claimed previously, while asking them to give a share of their revenues towards the infrastructure spend. Telcos have, for instance, spent more than $3 trillion in setting up 5G networks in the country.
'It is imperative that the LTGs, who transmit a huge volume of data over the networks established by telecom service providers, contribute to upgrading the network infrastructure,' SP Kochhar, director general of the Cellular Operators Association of India (COAI), said in response to queries from Business Standard.
SP Kochhar, director general of the Cellular Operators Association of India (COAI) said: 'As a solution, we have suggested that LTGs participate in the development of India by contributing a part of their income to the Digital Bharat Nidhi (DBN), for progressive development of digital infrastructure in India.'
'This would fund the much-necessary network growth and evolution, while helping bridge the urban-rural digital divide and eventually lead to a reduction in contributions to DBN by the telcos,' he added. COAI represents leading carriers, including Reliance Jio, Bharti Airtel and Vodafone Idea.
With not too many global examples, carriers have been watching the outcome of a revenue-sharing pact between South Korea Telecom and Netflix, said industry insiders. The agreement was inked in 2023 following a legal battle.
To be sure, the Indian market has telcos like Reliance Jio and Bharti Airtel that have their own OTT apps — JioHotstar and Airtel Xstream, respectively.
Officials indicated that DoT was looking at the proposal to levy fees on OTTs. While such a move might not provide direct financial relief to the companies, it might help carriers fund a portion of their network infrastructure spends which would have otherwise come from their balance sheets, according to analysts.
Telcos pay 5 per cent of the adjusted gross revenue (AGR) or applicable gross revenue to the government towards the DBN, besides spectrum usage charge, corporation tax on incomes and goods and services tax (GST).
Carriers have also asked for the 5 per cent DBN levy to be kept in abeyance, which would further reduce their financial burden. As of December 2024, more than ₹86,356 crore of the total collections of ₹1.7 trillion remained unallocated in the DBN, data from the DoT showed.
The LTGs like Netflix, WhatsApp, Amazon Prime, Facebook, Instagram, and Zoom, pay corporation tax as well as GST to the Indian government. 'There is likely to be an opposition to any such proposal, which has been the case traditionally as well,' said a senior executive from an industry body representing OTT apps who did not wish to be named.
An industry source argued that even as OTT apps rode on the telecom infrastructure, generating vast volumes of traffic, they contributed nothing to the network infrastructure they depended on. 'This creates an imbalance which directly threatens the quality and sustainability of mobile broadband in India,' the source said.
The telcos' proposal assumes significance after the Supreme Court rejected a review petition of Vodafone Idea, Bharti Airtel and Tata Teleservices seeking a waiver of AGR dues, interest, penalties and interest on penalties, totalling over ₹1 trillion. A large part of the dues belongs to Vodafone Idea.
The court had observed that the government was free to give any kind of relief to the companies. Under the current relief mechanisms, the government can pick up equity in lieu of the telcos' dues or interest on dues, on a case-by-case basis. While Bharti Airtel has sought this relief, debt-laden Vodafone Idea has already availed of this offer, making the government the single largest shareholder in the carrier with a 49 per cent stake. The government has told the court that it does not intend to increase its shareholding in Vodafone Idea.
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