Representational image of employees at the assembly line of a mobile phone manufacturing plant
| Photo Credit: Reuters

Semiconductor design initiatives have to be encouraged with improved domestic fundraising opportunities and incentives for using domestically registered intellectual property (IP), the India Cellular & Electronics Association (ICEA) said in a report released Thursday. As China’s semiconductor industry faces hesitant investors due to geopolitical tensions, the report says, India must seize the strategic opportunity that semiconductors present. 

Referring to arguments by economists like Raghuram Rajan that the semiconductor push may not present optimal opportunities economically (or in terms of jobs), Pankaj Mohindroo, the ICEA’s chairman, pushed back strongly, calling such arguments “self-destructive for India”. “Capacity building for high tech and semiconductors is important,” Mr. Mohindroo said.

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“Though we have 20% of the world’s semicon engineers, none of the IPs are with India,” A.M. Devendranath, the CEO of research firm Feedback Advisory pointed out. Engineers instead work for global firms from India, which register the IP in the U.S. or elsewhere. Mr. Mohindroo suggested that incentives should be provided to use domestically registered IP in key sectors, such as in expanding telecom networks.

The report highlights the strengths of other countries who have had some success in the semiconductor supply chain: China has “over-invested” in low-tech chips, crashing global prices and investment appetite for researching them, while opening up initiatives that make access to funding easy with early exits for investors; Malaysia has focused sharply on outsourced semiconductor assembly and test (OSAT) units, an area where it is number four, after Taiwan, China and the US. 

S. Krishnan, the Secretary of the Ministry of Electronics and Information Technology, said in a foreword to the report that the government’s efforts “aligns perfectly” with the ICEA report’s suggestions already. “While India has made appreciable strides in electronics manufacturing, the semiconductor industry demands targeted policy actions,” Mr. Krishnan said. 

A key suggestion that the report makes is to follow China’s example of subsidising photomasks (also known as mask sets), equipment similar to photocopying plates that allow light to selectively shine on silicon wafers with precision. Photomasks are an expensive but critical component in chip fabrication. China subsidises 80% of photomask costs for semiconductor firms; a similar incentive should be provided for in the design-linked incentive scheme run by the IT Ministry, the ICEA suggested. 

In recent weeks, the telecom industry loudly demanded a ‘network usage fee’ from Big Tech platforms whose traffic constitutes a major part of the data flowing through the Indian internet. Internet rights groups have pushed back on these demands, saying that they are a violation of net neutrality, the principle that all data online should be treated equally. These demands come following years of setbacks to the telecom industry’s efforts to get more revenue for data services. 

Meanwhile, Telecom Regulatory Authority of India (TRAI), India’s telecom regulator, has sought public comments on this subject, and on whether messaging apps should be regulated. The regulator is asking whether it is possible for telecom operators to work with messaging apps, and social media platforms to block access to their services instead of imposing an internet shutdown. These two issues need some perspective to assess them.

In 2015, TRAI launched a consultation paper on a regulatory framework for ‘OTT services’. Netflix had not yet launched in India, and OTT, which stands for over-the-top, had not yet become strongly associated with streaming services in India. OTT services ride ‘over the top’ of internet networks, and don’t own the infrastructure of telecom networks through which their services ultimately reach people. 

The consultation included a section on ‘Network Neutrality’. Bharti Airtel Ltd had, in the previous year, announced that it would start charging users more for data that they used for placing online calls, such as on apps like Viber. The announcement sparked a pushback, and TRAI said it would consider the public’s views on the subject. Airtel dropped its announced tariff while the issue was being considered. 

Overwhelming public support for net neutrality

The public responded overwhelmingly in support of Net Neutrality, aided by advocacy tools and ready-to-send emails drafted by the Save the Internet coalition, which would later become the Internet Freedom Foundation. Facebook, which sensed an existential threat to its Internet.org offering that offered some parts of the internet on participating telcos’ networks for free, entered the fray with its own public outreach and advocacy. 

TRAI ended up spinning Net Neutrality off into a separate consultation, asking the public if ‘differential pricing’ of data should be allowed. That is, should telecom operators be allowed to charge people different amounts for accessing different services online? Internet rights groups — along with groups of start-ups — said no. In 2016, TRAI prohibited telecom companies from charging what it now called ‘discriminatory tariffs’. The Net Neutrality proponents had scored a victory.

Net neutrality includes different pricing for apps and platforms

However, Net Neutrality is about more than just what the consumer pays for access. It’s also about speeds, and whether telecom operators can selectively slow down traffic on their networks. Another issue is whether telecom operators can demand payments from the owners of websites and apps from which they receive a lot of traffic, and restrict data from them if the latter refuse. The net neutrality debate in the US since 2014 has centred around this issue.  

Telecom companies are all licensed by the Union Government’s Department of Telecommunications (DoT), and wireless telecom operators often obtain a Unified Licence, which sets out the exhaustive legal framework that telcos have to comply with. In October 2018, the Unified Licence was amended to hard-code Net Neutrality in the licence telcos obtain to operate. 

TRAI seeks consultation on contours of net neutrality rules

From 2017 onwards, TRAI consulted the public on how Net Neutrality rules must be understood, and what kinds of ‘traffic management practices’ should be allowed. The regulator recommended that a multi-stakeholder body be set up with participation from telecom operators, civil society and academia. 

Due to the COVID-19 pandemic and the government’s austerity measures in 2020, the DoT decided against forming this committee, even though TRAI argued that the public exchequer would not have to bear the brunt of the associated expenses. 

All this while, telecom operators have constantly argued that services like WhatsApp should be regulated, and that the ‘same service’ (voice calling and messaging) should be treated by regulators with the ‘same rules’. Telecom operators have not made much headway in realising these demands thus far. 

The European Commission began exploratory consultations this February on whether telcos can seek revenue sharing from online platforms. This renewed Indian telcos’ own demands. Telcos have argued from both national security and business grounds: that there is no mandated surveillance on messaging apps, and that they are only asking for a small share of the most successful companies’ profits. 

Government considering alternatives to internet shutdowns

In all these years, the Government imposed several internet shutdowns all across India. In Jammu and Kashmir, the longest shutdown in India was imposed following the abrogation of Article 370 of the Constitution. In Manipur, the internet has remained shut down for months, and after briefly lifting the ban, the government reimposed it. 

The Government is considering more targeted responses, as communications shutdowns lead to massive disruptions across sectors. Licensing these services is one suggestion, even though TRAI recommended against regulating OTT apps in September 2020. 

Meta, which owns WhatsApp, has not directly participated in these consultations this time, and its views are likely expressed through filings by various industry associations, which it is a part of. The ITI Council and the Asia Internet Coalition, two such associations, told TRAI that such moves would be counterproductive, and advised against it. 

Telecom industry more receptive to net neutrality now

On Net Neutrality at least, the telecom industry seems optimistic. The Cellular Operators Association of India (COAI)’s Director General S.P. Kocchar said in a media briefing in September that the Government was being more receptive to their demands than before. Minister of State for Electronics and Information Technology Rajeev Chandrasekhar also said on X, formerly Twitter, that Net Neutrality was important to defend. (Mr. Chandrasekhar’s work allocation in the Ministry does not include telecommunications.) 

Ultimately, telecom companies and advocacy groups have dug their heels in, finding themselves in a consultative process on Net Neutrality as well as regulating OTT services, the same situation they were in eight years ago.