OTT: Between innovation and regulation

OTT: Between innovation and regulation

The Nepal Telecommunication Authority (NTA) introduced the OTT Regulatory Framework (hereinafter referred to as “OTT Draft”) over two months ago to gather the public’s feedback and suggestions regarding the regulation of these in Nepal. Collecting feedback from concerned stakeholders is a positive step; however, discussions with them must take place to fully consider their perspectives.

OTT, or over-the-top, delivers content or conveys communications through the internet. OTT services can be broadly categorised into two groups: (i) Communication offerings encompassing messaging and telephony (voice/video conferencing) and (ii) Content material services encompassing video and audio dissemination. Platforms like Netflix, YouTube and Amazon Prime come under content material services as these platforms deliver various original television content on their platforms. Their subscribers pay a monthly subscription fee for unbound access to content at their convenience. Similarly, platforms like Facebook, Zoom, WhatsApp, Microsoft Teams, etc., offer messaging and telephony; hence, they fall under communication services. These are free to download and do not incur any cost for messaging or making calls.

OTT Draft

The OTT Draft has been issued under the authority provided by the Telecommunication Act 2053 (1997). This act defined licenses for operating telecommunication services, including basic telecommunication services and GSM licenses. As the OTT Draft has been issued under the Telecommunication Act, it is crucial to clarify whether all requirements (such as royalty, fees and compliance) also extend to OTT. The NTA should exercise caution and avoid applying traditional regulatory licensing requirements to OTT, as it operates on an entirely new technological platform, necessitating a redefined and advanced regulatory approach.

The 11th amendment of the National Broadcasting Regulation of 1995 includes OTT, video on demand (VOD) and internet television under “Other Means of Communications”. The regulation now requires OTT and internet television services to register to operate in Nepal. While the OTT Draft issued by the NTA for feedback specifically addresses OTT communication services (messaging, telephony), multiple apps (categorised as super apps) offer content and communication services in a single app. Therefore, the licensing and regulation of such apps must be clearly defined, whether through the Ministry of Communication and Information Technology, the NTA, or a separate authority.

Notably, stand-alone communication services that do not facilitate the provision of separate services may not qualify as communication services (for example, messaging/calls in gaming apps like PUBG, delivery services apps like Pathao/Tootle, or email apps like Gmail/Outlook). OTT regulations should, therefore, be approached cautiously, considering the advancement of these services and ensuring that the regulations do not hinder the growth of functionalities, innovation, competition and customer choice.

The OTT Draft requires the mandatory presence of OTT in Nepal for providing its services. However, considering the market size of Nepal and the supranationality of these services, mandating licensing and local presence may not be the best approach for regulating OTT. Furthermore, international OTT service providers have shown reluctance to establish a local presence in Nepal, as this implicates compliance with other laws for the company. Notably, OTT services operate across borders, making it challenging to determine the country’s laws that apply to them, resulting in jurisdictional ambiguity that hinders effective regulation.

The draft also envisages the appointment of an intermediary, but it lacks clarity on this matter. Clarity on the appointment of intermediaries should be improved, including whether an existing local company can serve as an intermediary and defining the roles, principles and responsibilities of the intermediary towards the NTA, as well as the operation of the apps. Moreover, OTT and telecom service providers are different as OTT cannot directly connect to traditional public switched telephone network (PSTN)/switched voice networks unless they have arrangements with local telecom service providers. OTTs depend on telecom service providers as the local providers control broadband access, and OTT services can only function through the Internet.

Safety concerns

The OTT Draft only briefly touches upon consumer safety and privacy. However, issues like consumer protection, data protection, net neutrality and interception should be addressed more clearly and concisely. The draft must ensure that online platforms provide clear information on data handling, guaranteeing confidentiality and lawful communication interception.

Lawful interception (LI) refers to legally authorised telecommunications network monitoring. It is crucial in investigating and prosecuting criminal activities, including online crimes and terrorism. OTTs do not follow the standard protocols essential for traditional GSM call services, posing challenges for security agencies in tracing the source of internet calls. For instance, during a terrorist attack, eavesdropping on calls that appear to originate from virtual numbers in other countries becomes extremely difficult. Additionally, some players use special encryption for messages, making eavesdropping difficult since encryption keys are not readily available to law enforcement. Moreover, service models like Snapchat, where data is automatically deleted from the server after delivery, present a new security challenge, especially regarding content regulation due to the real-time nature of the messages being broadcast.

Rather than adopting a “same services, same rules” approach by extending traditional regulatory licensing requirements to OTT, Nepal must encourage cooperation between all levels of government, industry participants and civil society to address these issues while promoting innovation, protecting national security and safeguarding consumer rights.