Why Skype is skipping India

Microsoft’s announcement that it is shutting down its voice calls originating from Skype applications to devices connected to telecom (landline/mobile) networks within India is startling. This, when Google and Whatsapp are trying to extend their services from pure play Internet Telephony to voice calls to devices on the telecom network.

At a generic level, Internet Telephony can be of four types: (i) from a device (mobile/computer) connected to the internet to another device also connected to the internet; (ii) from a device connected to the internet within India to a device connected to telecom network outside India; (iii) from a device connected to the internet outside India to a device connected to the telecom network in India; and (iv) from a device connected to the internet within India to a device connected to the telecom network in India. What Skype has barred is type (iv).

In India, as with many emerging countries in the world, types (iii) and (iv) have been regulated quite a bit. TRAI and DoT always indicated that Internet Telephony was a different service in its scope, nature and kind from real time voice as offered by other licensed telecom operators. Hence, there is asymmetric regulation between traditional voice telephony over telecom networks and internet telephony.

India opened up a restricted form of Internet Telephony, allowing the first two types, but disallowing (iii) and (iv) way back in April 2002. The reason was for the Internet Telephony calls not to bypass the International Long Distance (ILD) and National Long Distance (NLD) carriers, who paid crores of rupees for their licence compared to the internet service providers (ISPs) who paid ₹1. This restriction permeated a slew of grey market Internet Telephony service providers who would masquerade the calls, especially of type (iii), to offer low-cost voice service.

However, realising the potential of Internet Telephony in providing low-cost voice service and the futility of restricting it, the Indian Government took a lead role amongst emerging countries and allowed unrestricted Internet Telephony (thus including types (iii) and (iv)) for Unified Access Service Licensees (telcos) in 2006. Today, Skype calls of type (iii) to India are among the cheapest in the world at 90 cents/minute. This is partially due to the high price elasticity of demand of India-calling customers and deregulation.

However, unlike the Over The Top (OTT) players such as Skype, the telcos never promoted this service for fear of losing their lucrative traditional voice service revenue. India became one of the very few countries where, though legally allowed, the unrestricted Internet Telephony service was not widely available to users, thanks to the nonchalant telcos.

With all good intentions, TRAI recommended in August 2008 that even ISPs could provide unrestricted VoIP (Voice over Internet Protocol aka pure play Internet Telephony), as it would bring down the price of NLD and ILD calls. However, in March 2008, the Telecom Commission of the DoT buckled under pressure from incumbent telcos and sent back the recommendations to TRAI for further review. Finally, the Unified License (UL) issued by the Government in January 2014 included the provisioning of unrestricted Internet Telephony through Access Service authorisation.

However, the entry fee of ₹1 crore per telecom circle for provisioning of unrestricted Internet Telephony is a steep rise from ₹2 lakh for a restricted access to (i) and (ii)] Internet Telephony service provisioning under ISP authorisation.

Though the reason for Skype’s decision to shut down is anyone’s guess, it may be related to either uncertainty in Internet Telephony regulation in India and/or arm-twisting by telcos for higher termination charges for type (iv) calls thus making it a losing proposition. What is bizarre is the timing of the withdrawal, when other OTTs such as Whatsapp and Google are trying to offer full-fledged Internet Telephony services. Since voice has become commoditised, it is not the cost of service that users are looking for. It is the flexibility provided by an integrated Internet Telephony app that provides advanced features including voice SMS, messaging, video calling, and document and media sharing, that the users want which one cannot get over the vanilla telecom service!

Though TRAI has initiated discussions on the regulation of OTT services, it is time this asymmetric regulation of Internet Telephony is done away with. The Digital India campaign will succeed only if we remove regulatory bottlenecks and leverage the value of technology.

The writer is a professor at the International Institute of Information Technology, Bangalore