IT rules 2021 — Over the top?

To regulate or not to regulate? That is the $3-billion question for India’s nascent OTT (over-the-top) market. The industry is the fastest-growing globally with 40+ digital platforms, both domestic and global (PwC). This boom is not accidental. The growth is driven by two factors: heavy consumer demand for content online, and the progressive regulatory environment that helped foster innovations and investments.

But the new IT Rules 2021 notification on February 25, 2021 added heavy mandates on this sector that may be too impractical to implement. OTT players, notably smaller domestic ones, will be weighed down by higher administrative costs. And to what end? The rules seem to act as speed-breakers on a runway — working against, and perhaps making it almost impossible to achieve the goal of smooth take-off.

The main objective of the IT Rules 2021 was to create a single regulatory framework for OTT platforms under the IT Act 2000. Unfortunately, while intentions may be noble, the rules themselves could have benefited from more consultations. And more surprising is that implementation is expected from the date of release! Part III of the IT Rules 2021 brings an entire overhaul of the Indian digital media and content landscape. But critical stakeholders — the OTT players themselves — needed to have been more involved.

Consultation is a standard practice which worked successfully for Telecom and other sectors. Tight constraints on OTT players only create an antagonistic environment and sets them up for failure and costly penalties.

Initially, the goal of the IT Rules 2021 was to regulate social media content. However, the rules now cover OTT platforms that are publishers of original content, including news networks. It may be convenient for regulators and legislators to widen their areas of purview under one set of rules, it is highly confusing and prohibitive for OTT players and their consumers.

OTT Players are estimated to make hefty investments of approximately ₹2.5 billion for content creation and distribution in India. These investments will be re-assessed if each player has to set up heavy regulatory and legal infrastructure to process every complaint from anyone who happens to be offended by content online. This is directly in opposition to the Centre’s commendable Ease-Of-Doing-Business initiatives. Content creators will have to divert substantial funds to dealing with grievance addressal. Instead, focus should be towards generating better content for consumers.

Implementation, a challenge
The rules are also tricky to implement. For Indian audiences, where there’s a will, there’s always a “jugaad.” If the goal of censorship is to restrict what content Indians consume, it is a losing battle. Porn is a prime example. The Centre banned over 3,500 porn websites, but India is still the world’s third-largest consumer of porn with no sign of letting up.

Additionally, restrictive regulations will incentivise a black-market boom and bankrupt smaller OTT players who follow the rules. Legitimate OTT players are already losing up to 30 per cent of their annual revenue to piracy. Conducting legal battles over a single piece of content is costly and time-consuming. Meanwhile, those who deliver content over illegal platforms can change their online addresses within mere seconds and escape penalisation.

Sure, the new rules attempt to curb some of these issues by applying only to platforms with 50 lakh users or more. But in the world of OTT, even a physically smaller organisation can cater to a large audience base. So, just because an OTT player has over 50 lakh users, it does not mean it can afford the expensive regulatory and compliance-related resources required for a heavy-handed regulatory framework. Who ends up paying the highest price? Not the English-literate audiences who will consume globally-generated content. Regional-language Indian OTT players and their consumers will suffer most.

Also, presumably to curb online harassment and fake news, the IT Rules 2021 require all platforms to track the original creator of any message. This directive debilitates those organisations whose main value is encryption. The appeal of end-to-end encrypted messaging is why WhatsApp has 500 million users in India and consistently wins over all other free OTT messaging services. Clearly, Indian consumers place a high value on the privacy and security of their messages due to growing awareness of cybercrimes, hacks, illegal surveillance, and more.

Need for light-touch
Regulatory bodies need to listen to what market forces and Indian consumers tell them — or risk being out of touch with the industries they wish to regulate. Regulations play an important role, but for a new industry like OTT, they need to be light-touch. Insisting that the market complies from the date the rules are first issued is futile.

Let us lead with the carrot, not the stick. Empower OTT players to comply versus hitting them with non-compliance penalties. Give them a year or more to hire and train teams, plan budgets, and make and test any necessary changes to their platforms. It only results in more red tape and hefty penalties. Ideally, the rules are re-examined in consultation with key stakeholders to encourage healthy market competition while allowing genuine grievances to be heard and addressed.

Regulations in other industries can serve as an example. To help curb pollution from automobile and two-wheeler emissions, the Centre mandated that vehicles transition to a new type of engine, the BS 6. The regulation was introduced in 2016, but the deadline for automotive manufacturers to comply was in 2020. While some faced challenges due to the unexpected COVID-19 pandemic, many had used the extended time of four years to prepare, phase out older products, and get newer ones ready. Why not apply this type of co-operative regulatory environment to the digital world?

Busy airports juggle several runways and multiple flights in a tightly controlled environment. There are systems and regulations in place to ensure flights are ready for take-off and landing. However, once a flight begins the act of taking off or landing, smooth and clear runways help them get passengers from one location to another, faster than ground transportation. Ultimately, this is the overarching goal of the airline industry without which, it would fail.

Similarly, just when the OTT market has begun to take off in India, why put speed-breakers along the runway? Instead, implement the digital versions of road markers, flags, and other growth-enabling regulations to guide OTT players. This will help Indian OTT achieve its projected potential of a $2.9 billion market by 2024 (PwC).

The writer is Hon. Fellow of IET (London) and President of Broadband India Forum. Views are personal. Research inputs by Chandana Bala. The Hindu Business Line