Nine Principles for India's Digital Economy

Global mobile data traffic was around 456 exabytes in 2019, of which India accounted for around 75 exabytes or around 16 percent, according to Ericsson. Around 14 percent of the global population resides in India and, consequently, the country punches slightly above its weight in terms of mobile data consumption. The size of India’s opportunity to unlock value through such consumption, is perhaps without parallel in the developing world. This can be achieved through a principles-based framework for governance of information technology (IT). The nine principles detailed in this brief can also aid the design of a new-age IT legislation, that fosters innovation, competition and growth:

Principle 1: Legal Recognition

Provide adequate legal recognition and clarity to new digital businesses

Principle 2: Level Playing Field

Level the playing field for small digital businesses and entrepreneurs to compete effectively, through

deregulation

Principle 3: Risk-Based Regulation

Encourage regulations that are activity-specific and prioritise consumer welfare over state control

Principle 4: Functional Classification of Intermediaries through Co-Regulatory Model

Leverage coregulation to help digital intermediaries evolve, innovate and scale

Principle 5: Transparent and Accountable Self-Regulation

Employ self-regulatory and co-regulatory bodies to offset the need for legacy regulatory constructs.

Principle 6: Platform Neutrality

Ensure that large businesses do not discriminate between equal business partners, and consequently reduce the probabilities of gatekeeping.

Principle 7: Privacy and Security by Design

Promote product and platform design that helps local companies access global markets with low compliance costs.

Principle 8: Fair, Reasonable and Non-Discriminatory

(FRAND) Terms Guide business conduct through the FRAND principle, to minimise the need for economic regulation.

Principle 9: Trust and the Global Internet

Promote the use of standards and protocols that build trust in the internet and leverage the wealth of Indian experience in multi-stakeholder collaboration and open design.

Attribution: “Nine Principles for India’s Digital Economy” Special Report, September 2020, Digital India Foundation and Esya Centre.

Response to the Report by the Committee of Experts on Non-personal Data Governance Framework

We at the Esya Centre are grateful for the opportunity given to us by the Ministry of Electronics and Information Technology (MeitY) to respond to the Committee of Expert’s Report on Non-Personal Data Governance Framework (Report). We appreciate that the Committee has attempted to set out a broad framework that seeks to regulate several facets of the use of Non-Personal Data (NPD) while identifying possible areas of concern. In our suggestions, we engage with the Committee’s key recommendations and identify areas which require greater clarity. We recommend actions that assist in creating effective regulation geared towards achieving defined goals and outcomes. Part I contains the summary of recommendations, and Part II contains detailed analysis of the Report. We have structured our responses into 4 sections on Competition and Innovation, Ownership and Access, Privacy and Definitions, and the Regulatory Framework. Within each section, we analyse the key recommendations made by the Committee and propose alternatives. We have sought to engage with the Committee’s recommendations on a first-principles basis and highlight areas which require greater conceptual clarity.

E-Retail, Consumer Demand and the Road to Recovery

I. Demand and E-Retail

The Covid-19 pandemic and ensuing emergency responses across the world are expected to affect firms through supply chain disruptions in the short run and demand declines in the longer run. Given the high share of Micro, Small and Medium Enterprises (MSMEs) as well as the low income of households in India, the country is at risk of a protracted economic downturn, especially given the steady decline in GDP growth.

India needs a two-pronged approach to generate aggregate demand. First, to bring jobs and income back to poorer households, especially for the rural population. Second, to facilitate spending by households who have the willingness and capacity to pay, primarily in and around urban areas. This can be done by facilitating e-retail, which has been a preferred channel during this period. With the element of experience removed from physical shopping, we see a shift in the playing field between online retail and physical stores. E-retail is also more capable of complying with evolving government regulations such as distancing norms, making it both a safe and competitively priced channel to help meet consumer demand.

E-retail regulation in India has a chequered past. For instance, the Government of India’s Draft e-Commerce Policy, which envisions e-retail as a segment within e-commerce, looks to regulate aspects ranging from data and digital infrastructure development to export promotion. It is essential that any future policy on e-commerce should support and incentivise technology adoption and sectoral transitions, such as from offline to e-retail.

II. Restrictions on E-Retail during the Lockdown

A survey of more than 2,000 online sellers conducted between April 27 and May 4 indicates the need for a facilitative policy direction. We find that most firms selling online prefer this channel to offline selling, but faced problems primarily of supply and demand during the lockdown period. A shortage of manpower was another important factor in this period, especially for firms that were previously operating at a larger scale.

Policy also played a role in hindering the operation of e-retail during the lockdown. A great deal of confusion was caused by unclear phrases and terms, for instance the definition of ‘essential goods’ was left unclear.  There was further a degree of inconsistency and differentiation in policy formulation. The adoption of differing standards for online and offline retail during the pandemic, despite the benefits of e-retail such as contactless delivery, is of particular concern.

The lockdown had a substantial impact on retailer supply chains, both online and offline. The initial impact seems to have derived from the lockdown’s sudden nature, and the resulting administrative confusion regarding passes, curfews, and freedom of movement. Businesses operating in multiple states or districts faced a significant challenge in obtaining the necessary permissions for their staff. Later in the lockdown they faced a shortage of labour as several migrant workers had shifted back to their villages or towns.

III. Road to Recovery

Actions by state governments will play a critical role in determining how well small retailers are able to recover. A rapid recovery will require cohesion and collaboration between governments at centre and state. With this in mind a five-step recovery process is suggested in our report.

The first steps are aimed at building trust and confidence in the policy-making process. We suggest that governments at various levels engage with different stakeholders to understand their concerns. Authorities should frame rules on the basis of feedback obtained in such consultation, and the principles of non-discrimination and non-arbitrariness. This will facilitate a level playing field that allows retail market participants to leverage their strengths and explore synergies between the digital and traditional channels.

Authorities must also review the crisis management playbook, including the legislative framework, keeping in mind lessons from the pandemic. A framework governing e-retail, or e-commerce more broadly, can take inspiration from the sectoral development bodies in Malaysia and Singapore, which have enabled local businesses to scale and compete globally.

Attribution: Dr. Megha Patnaik and Mohit Chawdhry. “E-Retail, Consumer Demand and the Road to Recovery,” Report No. 004, September 2020, Esya Centre.

Compulsory Licensing for Radio-Play Of Music in India: Recent History and Economic Context

Compulsory licensing of sound recordings is practiced in different countries, though the trajectories and rationale for arriving at this framework may differ. Developing countries often introduce measures to protect “infant” industries, but policy persistence can make subsequent changes hard. In 2010, the Copyright Board of India passed an order prescribing 2% of net advertising revenues to be paid by radio stations as compulsory license fees to copyright owners, citing the infancy of the private radio industry and the lack of access to music in India. Since the original order, the private radio industry has matured in size, coverage and listenership. Access to music today is facilitated through a far-reaching radio network, as well as widespread mobile and internet usage. The original order will be reviewed in September 2020.

The immediate issues that arise from this order include lack of clarity who the order applies to, a potentially short-sighted approach through subsidizing the radio industry at the cost of the underlying music industry, and a long lock-in period that fixes the rate despite advancements in broadcasting technologies. The radio industry has grown in revenue at an annual average of 15.6% over the past decade. Companies have expanded into new distribution platforms and revenue sources such as online platforms and YouTube, and can be expected to benefit from digital transmission, which allows multiple stations to be broadcast on a single frequency.

With a large number of private and public radio stations that together cover 92% of India geographically and 99% of the population, access through radio has arguably been achieved. In addition, consumer surveys show listeners have affordable access to music via the internet on smartphones.

Given the advancements since the original order, the main recommendation of this paper in the review by the IPAB that is coming up in September 2020 is to aim to determine the fair market value for music in the Indian market and try to achieve the “efficient” outcome. These cannot be currently determined due to lack of data in the public domain, but the regulator can calculate this with data requested from the radio broadcasters and applying strategies described in the past literature for countries with mature markets. Any positive or negative spillovers from the radio industry in terms in of exposure and substitution as well as on the diversity of content can be then be incorporated to adjust the initial allocations.

Attribution: Review of Economic Research on Copyright Issues, 2020, vol. 17(1), pp. 60-77

Note: This paper, published in the RERCI, is shared here with the author’s permission, who is a Fellow at the Esya Centre. It is not a co-publication.

COVID-19 and India’s Media and Entertainment Sector: Recommendations for Recovery

The Reserve Bank of India (RBI) expects negative economic growth this year. The slowdown has adversely affected production and distribution across most industries, and will likely hit markets fuelled by discretionary spending the hardest. These include the Media and Entertainment (M&E) sector— comprising TV, radio, print and digital media, as well as Over the Top (OTT) platforms for audio and video streaming—which is expected to see an “L-shaped recovery”.

In April 2020, the Observer Research Foundation (ORF) and the Esya Centre organised a roundtable to identify the M&E sector’s challenges, emergent trends, and potential pathways to recovery. The discussion was framed using the triad of (a) policy and regulatory environment; (b) future of work and of production; and (c) the imperative of value preservation, with a focus on achieving consensus on remedial action. The key government ministries and regulators that were discussed include the Ministry of Information and Broadcasting (MIB), which plays a central role in the M&E sector. Other relevant nodes include the Ministry of Finance, the Reserve Bank of India (RBI), and the Telecom Regulatory Authority of India (TRAI).

This special report builds on the insights shared during the ORF-Esya Centre roundtable. The following were the key themes that emerged from the discussion:

i. The M&E sector must offset growth slowdown through investments in production efficiency, human capital, and innovation.

ii. The Government must provide a level playing field to functionally similar industries, by deregulating traditional industries like TV, radio, and print, and allow them to compete with digital counterparts through value for money services, product differentiation, enhancements in consumer experience, and choice.

iii. The Government must enable digital transformation by increasing economic freedom for traditional M&E businesses to operate, and by easing digital payment frictions and promoting their wide adoption. In addition, the Government must nudge traditional industries towards better quality of service for its own sustenance.

iv. A focus on M&E exports can be leveraged to offset contraction and reallocation in domestic consumer spends. This requires a strategic approach and public-private collaboration to increase export competitiveness. Lessons can be learned from best practices from other jurisdictions.

v. Economic crises lead to a decline in margins across all rungs of the supply chain, and Micro Small and Medium Enterprises (MSMEs) in M&E will be most affected. Consequently, there is a need for industry and government to collaborate in mapping and targeting MSMEs with capacity-building measures to improve firm productivity.

vi. Cable TV households represent low-hanging fruits in terms of expanding high-quality broadband connections. They also represent addressable demand for video content – which accounts for a large share of broadband consumption globally. Resource sharing, and simpler right of way regimes are required.

Attribution: Vivan Sharan and Laetitia Warjri. “COVID-19 and India’s Media and Entertainment Sector: Recommendations for Recovery,” Special Report No. 109, June 2020, Observer Research Foundation and Esya Centre.

Towards a National Broadcasting Policy: For an Industry in Transition

Since the introduction of broadcasting (radio in 1927, which later included TV broadcasting in 1959), the broadcast industry has become a key part of India’s social fabric. For instance, broadcasting has served as a key medium for the government to disseminate information to the masses, and serving as a mirror to society. In terms of monetary value, broadcasting generated revenues of INR 771 billion in 2018, which is projected to increase to INR 994 billion by 2021. It was also estimated by the Media and Entertainment Skills Council (MESC) that the broadcasting industry would have employed 3.1 lakh people by 2017.

Further, as a core avenue of dissemination for India’s creative economy, the broadcasting sector has successfully created synergies with other segments of the creative economy, especially films, where distribution avenues remain limited. For instance, India’s screen density remains abysmal, with eight screens per million people, compared to China’s 16, and US’ 125 screens per million people. Unsurprisingly then, broadcast rights accounted for 21.2 percent of the film industry’s revenues in 2018, and radio remains one of the most important platforms for marketing and promoting new music.

Moreover, broadcasting holds immense value economically, socially and politically, serving as a powerful development tool. As recognised by the World Bank, the power of broadcasting is premised on the “widespread accessibility”, “ease of use” of technologies, and the wide spread of distribution networks. Different countries have sought to regulate broadcasting to realise the emancipatory potential of the sector. Countries such as the US and the UK use economic regulation to remedy market failure, whereas Canada and France intervene to ensure that the broadcasting industry promotes creative expression and local cultures and diversity. The EU, with which India’s policy stance is aligned in several technology-driven areas, is situated in the middle of this spectrum. It endeavours to ensure that high-quality and diverse content is available and ‘findable’, and that the widest possible audience has access to such content.

In India, the broadcasting sector was initially leveraged by the state to facilitate national integration and dissemination of information to the masses. With privatisation and liberalisation, the approach to regulating broadcasting changed to enable access and promote competition. Today, maximising access to broadcasting as a policy objective has been largely addressed, as 197 million households today subscribe to TV, with private radio channels in over 100 cities and the All India Radio (AIR) reaching 99.19 percent of Indians in 23 languages. Moreover, 88 per cent of TV households have now been digitised, enabling access to a wider selection of channels and content, and a better quality of service. However, quality and choice of content remains suboptimal, with homogenised and formulaic content serving a characteristically diverse and heterogeneous populace. As per the latest figures from BARC, the highest number of channels in most languages today fall in the general entertainment content (GEC) genre.

On an average, approximately 52.07% of fictional GEC programming in every language consists of dramas and soaps. On the other hand, programming for other genres like horror, action/thriller, and comedy remains miniscule in comparison. Viewership patterns, on the other hand, indicate higher demand for certain genres, in comparison to the proportion of such programming carried.

This is paradoxical, since there are few other industries which are as strongly driven by consumer preferences as the media industries. Cultural sensibilities, demographic diversity and socio-economic evolution directly and constantly affect the success of content offerings and distribution platforms. Therefore, it is imperative for systemic reforms to incentivise the creation of high-quality content which is accessible to the widest audience possible, and to strengthen the forces of market competition towards delivering a rewarding consumer experience. Policy and regulatory impetus should thus be geared towards maximising consumer welfare, which entails providing consumers with high quality, diverse content at affordable prices.

Evolving Scope of Broadcasting

With the advent of internet-based content services, and the growing adoption of IP-based broadcast transmissions, competition in the content consumption and distribution spaces has improved. The TV and Radio industries are seeking to address related market challenges through network expansion, consolidation and strategic leveraging of digital opportunities. For instance, advertising on TV is being bundled with digital advertising to provide better value to advertisers. Similarly, TV programming is being coupled with a host of interactive services on digital platforms to drive stickiness of linear television. Illustratively, on air programming of television shows like Satyamev Jayate were coupled with engagement campaigns on social media. Consumers are also presented with increased content and service standards through personalized feeds on the digital medium. This is complemented by a wide availability of affordable and niche content on demand. Thus, digital content disruptions have presented opportunities for the broadcast industry to provide more interactive and creative content along with a heightened viewer experience.

Owing to these crossovers with the digital content space, the scope of ‘broadcasting’ has come to be revisited in law and policy frameworks around the world. For instance, Canada is currently awaiting recommendations on a joint review of its broadcasting, radiocommunications and telecommunications regulations. In this regard, a key question for consultation is how broadcasting (encompassing radio and TV services) can remain relevant as part of a broader, shifting, communications landscape.

While the understanding of broadcasting was previously based on analogue transmission of content for reception by the public, the meaning of broadcasting has come to be understood more broadly to include encrypted transmissions through cable and satellite as well. For instance, the Prasar Bharati Act defines broadcasting based on “transmission of electromagnetic waves”, and the intention for reception by the public through relay stations. As such, the understanding of broadcasting has typically taken a conjunctive understanding of the following considerations:

a. Means of transmission (wired or wireless): Where wireless implies transmission through Hertzian/ electromagnetic waves as well as satellite, and wired implies by cable or fibre;

b. Control over the transmission (close or managed versus open communication networks): Where the transmission takes place under the control and responsibility of the broadcasting organisation; and

c. Manner of consumption (one to many, and push based): Where the transmission has been made publicly available for reception by the public, such that transmission signals have been emitted; it is immaterial whether or not they are in fact received by specific members of the public.

Such an understanding of broadcasting has thus typically excluded dissemination of content over computer networks, and where the venue and timing of receiving the transmission is chosen by the consumer. However, such definitions are being revisited with the advent of convergence as transmission protocols, means of access, and the range of services rendered across different media overlap.

Distinguishing Regulation from Policymaking

At the same time, regulation of broadcasting continues to remain a complex issue, even if the scope of the sector has come to broaden through additions to existing definitions. For instance in India, the Sports Broadcasting Signals (Mandatory Sharing with Prasar Bharati) Act, 2007, includes continuous streaming of content in “digital data form on the computer networks”, which may be accessible to single or multiple users. At the same time, content and carriage distinctions remain vital to defining the scope of services regulated, whereby ‘broadcasting content services’, and ‘broadcasting network services are distinctly defined and corresponding obligations tailored specifically.

The distinct rationale for regulation for radio and TV broadcasting stems from such services being reliant on scarce spectrum: as spectrum is a scarce public resource, its use remains licensed by the government so as to fulfill its role as a custodian of this resource. Furthermore, the Supreme Court has also underpinned the use of a teleport, which is only allowed by operators licensed under the Wireless Telegraphy Act as the basis for regulation of broadcasters. Therefore, TV and radio have been tightly regulated -- beginning from complete monopoly of the government to licensed regulation for private broadcasters post liberalisation and privatisation.

In the internet realm, the absence of dependence on scarce spectrum and teleports does away with the need to regulate services in the same manner as TV and radio. Thus, the contemplation of any regulation of digital streaming must account for the specific market failures that need remedy through state intervention. Notably, digital media accounted for only 11.8% of the Media and Entertainment sector in 2018. However, the absence of regulation has facilitated tremendous growth with digital media being the fastest growing segment at 41.9% in 2018, when it reached an estimated 12-15 million households.

Looking Forward

In this evolving context of broadcasting, it will be necessary for policy and regulatory frameworks to be reimagined to reflect the realities of this transition. To this end, government focus must be on:

1. Enabling TV and radio broadcasters to keep pace with their digital counterparts: It is important to liberalise existing regulatory frameworks to ensure they do not hold back investments in a consolidating and evolving business environment; and

2. Facilitating innovation and consumer welfare: Given the nascence of online media markets, any regulation should be tailored to address clearly identified harms, and based on assessments of its impact on innovation and consumer welfare.

At this stage, it is prudent for government to undertake an independent assessment of the country’s broadcasting landscape. Here, relevant considerations are: trends and likely drivers of change; potential for new services and models; sustainability of revenues; the needs and preferences of audiences; consumer behaviour; platform and distribution developments; and, the efficacy of the extant regulatory frameworks. At the same time, the complex of legislative and regulatory frameworks must be harmonised. Illustratively, the Ministry of Information and Broadcasting (MIB) is currently tasked with legislation and policymaking for television, radio, and the press, while the Ministry of Electronics and Information Technology (MEITy) holds the mandate over all matters relating to information technology and the internet. The ambit for telecommunications, including licensing and policymaking for telegraphs, telephones, wireless and data, along with the administration of the Telegraph Act, Wireless Telegraphy Act and the TRAI falls within the Department of Telecommunications (DoT).In this context, it would be prudent for the MIB to establish a National Broadcasting Commission along the lines of the Digital Communications Commission (erstwhile Telecom Commission), which was set up in 1989 to serve as the policy-making wing of the DoT. Such a commission could include technical members from different arms of government, as well as from industry and academia, who can help shape the future of harmonized policymaking for broadcasting.

Attribution: Research Team, “Towards a National Broadcasting Policy: For an Industry in Transition,” Policy Brief No. 201, June 2019, Esya Centre.

Non-Personal Data: Policy and Regulatory Considerations

The past year saw significant developments in India’s data protection landscape. The Personal Data Protection Bill (PDP Bill) was introduced in Parliament in December 2019, and is under consideration by a Joint Parliamentary Committee. It aims to set out the governance framework for personal data and establish a Data Protection Authority for the purpose. Non-personal data, which does not relate to the data of identified individuals, remains outside the ambit of the PDP Bill. The Union Ministry of Information and Technology (MeitY) also constituted a committee under the chairmanship of Kris Gopalakrishnan (Committee) to suggest pathways for the regulation of Non- Personal Data (NPD). In this introductory brief we introduce the concept of NPD, trace related developments, and suggest the contours of subsequent research.

Attribution: Mohit Chawdhry, “Non-Personal Data: Policy and Regulatory Considerations,” Policy Brief No. 202, May 2020, Esya Centre.

Response to the Consultation Whitepaper on the Strategy for National Open Digital Ecosystems (Node)

We at the Esya Centre greatly appreciate the opportunity given to us by the Ministry of Electronics and Information Technology (MEITy) to respond to the consultation whitepaper on the ‘Strategy for National Open Digital Ecosystems (NODE)’ (Whitepaper), which solicits public comments for developing a comprehensive national strategy on NODE. We appreciate that MEITy has identified design principles to develop a framework for digital governance through the Whitepaper, and that it has also identified key concerns that would need to be accounted for in developing the NODE framework. In answering the questions posed in the Whitepaper, we have focused our feedback on those relating to design principles, governance, and the potential risks of open digital ecosystems. We have approached this analysis from a broad, techno-legal perspective, and focusing on the rights and obligations of various stakeholders. Part I of this response will provide a brief snapshot of our recommendations under the relevant questions, which will thereafter be explored in detail in Part II. We hope that these discussions will prove instructive in a larger discourse about digital governance in India.

Comments on the: Personal Data Protection Bill (PDP Bill), 2019

The copyrightability of databases has been settled by the Supreme Court in Eastern Book Company v. DB Modak. Here, the question was whether the petitioner, a company which created databases of Supreme Court cases (which are in the public domain) could claim copyright protection for their databases. It was held by the Court that the petitioner’s input of independent skill, labour and capital, in editing and arranging the information as well as adding inferences from it in the form of headnotes, resulted in the database being a copyrightable work.

Response to the Draft Information Technology [Intermediary Guidelines (Amendment) Rules], 2018

We at the Esya Centre, greatly appreciate the opportunity given to us by the Ministry of Electronics and Information Technology (MEITy) to respond to the draft ‘Information Technology [Intermediary Guidelines (Amendment) Rules], 2018’ (“Draft Rules”), which seek to replace the rules notified in 2011. We appreciate that MEITy has undertaken to reform and clarify issues on Internet governance through these rules. However, after a thorough analysis of these rules, we believe a more holistic understanding of evolving technologies, and global trends in Internet governance may be instructive for MEITy to take this discussion forward. As such, we have approached this analysis from a broad, technological perspective, highlighting the major thematic areas under each proposed rule, rooting our arguments in broader discourses on internet governance and the attendant rights and obligations of stakeholders. Therefore, Part I of this response will provide a brief snapshot of some of the proposed Rules, and how they can be revised to comply with prior legislative jurisprudence, and best practices. Part II will delve into a more detailed discussion on the broader principles of regulatory governance. We hope that these thematic discussions will prove instructive in a larger discourse about the growing Internet ecosystem in India.