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Big Tech May Face Higher SMS Costs in India
Context:
The Telecom Regulatory Authority of India (TRAI) has proposed new recommendations that redefine international traffic, significantly impacting global tech companies like Amazon, Meta, Google, Uber, and WhatsApp.
- The move comes amid growing concerns over the misuse of existing regulations and the financial implications for telecom operators.
- TRAI’s recommendations aim to address “grey traffic” issues while imposing higher costs on companies sending SMSes to Indian consumers via servers located outside the country.
About the New Recommendations:
- TRAI has proposed that any Application-to-Person (A2P) messages, such as one-time passwords (OTPs), promotional messages, or transactional notifications, sent by global tech firms to Indian consumers, should be classified as international SMS.
- This classification applies even if these companies operate in India, as the servers used to generate the messages are located abroad. As a result, these messages will now be charged at international tariffs, which are significantly higher than domestic rates.
- TRAI rejected requests from Big Tech to regulate these international tariffs, leaving the rates at the discretion of telecom operators.
International vs Domestic Tariff:
- Domestic Tariffs: Typically set at around 13 paise per SMS.
- International Tariffs: Substantially higher, often exceeding 30 times the domestic rate.
- Reason for Higher Tariffs: Telecom operators argue that SMS routed through servers located abroad, even partially, qualify as international SMS and should attract international tariffs.
Definitions of International SMS According to TRAI:
TRAI defines international SMS as any A2P message where any part of the process—creation, transmission, or reception—uses computer systems or software located outside India. This includes OTPs, KYC-related messages, and promotional notifications.
How Big Tech Misuses Current Regulations:
- Disguising International SMS as Domestic:
- Big Tech uses foreign servers to generate messages, which are routed to India through internet or leased lines.
- These messages bypass international long-distance (ILD) routes, entering the Indian Public Switched Telecom Network (PSTN) via mediation gateways or servers in India.
- Use of Telemarketers in India:
- Companies often engage telemarketers who use Distributed Ledger Technology (DLT) to transmit messages, effectively camouflaging international traffic as domestic.
- Exploitation of Loopholes:
- Telecom operators refer to such practices as “grey traffic,” arguing that they result in revenue loss and undermine transparency.
Impact on Global Tech Firms: The proposed changes are expected to burden global firms with increased operational costs.
- Higher Costs: International tariffs for SMS are over 30 times higher than domestic rates, with domestic SMS tariffs being around 13 paise per message.
- Dependency on Telcos: Companies will remain reliant on telecom operators, who have the flexibility to interpret the definition of international SMS in their favor.
- Escalation to DoT: Global firms are expected to appeal to the Department of Telecommunications (DoT), which has the authority to amend or accept TRAI’s recommendations.
Issues with the New Recommendations:
- Ambiguity in Definitions: The recommendations provide telecom operators with significant leeway to interpret traffic as international, potentially leading to exploitation.
- Favoring Telcos: Critics argue that the recommendations are skewed in favor of telecom operators, ignoring the operational realities of global tech companies.
- Increased Financial Burden: Big Tech firms will face higher costs without any cap on international SMS tariffs.
What Are the International Firms’ Arguments Against the Recommendations?
- No Telecom Network Interaction: Big Tech argues that messages originating from apps do not involve telecom networks, making international tariffs unjustified.
- Technological Advancements Ignored: The current definition fails to account for advancements where message origination occurs entirely on digital platforms without traditional telecom infrastructure.
- Restrictive Definition: Including applications and software in the definition of international SMS is seen as a myopic and outdated approach.
Broader Implications of TRAI’s Recommendations:
- For Telecom Operators: Increased revenue from international tariffs, potentially reducing grey traffic.
- For Indian Consumers: Higher costs for tech firms might translate into increased prices for consumers or reduced availability of free services.
- For Regulatory Framework: Sets a precedent for stricter oversight of global companies operating in India, particularly those relying on cross-border infrastructure.
Future Course of Actions:
Global tech firms are likely to:
- Engage with DoT: Present their case and request amendments to the recommendations.
- Highlight Unfair Practices: Emphasise how current SMS pricing structures disproportionately impact their operations.
- Explore Alternatives: Potentially consider other methods to deliver messages to Indian consumers to reduce reliance on telecom operators.
