At present, most sectors and organizations are generating mountains of data on a daily basis. Therefore, to stay competitive, organizations are constantly working to optimize data to leverage it to their advantage. For instance, the banking sector uses data extensively to understand how their customers use data to identify potential security risks. Data plays a vital role in the real estate and property management sector by extending an improved property analysis mechanism, understanding the customers and deciphering the market trends. The telecom industry is also utilizing data to improve in several key service areas, including customer experience, fraud reduction, churn prediction, and dynamic pricing. Further, with the rollout of 5G, data plays a key role in network planning, monitoring and management. Hence, data is the central force for driving crucial innovative and advanced industry solutions for the systematic growth of the economy.
Digital advances have generated enormous wealth in record time, but that wealth has been concentrated around a small number of individuals, companies and countries. Under current policies and regulations, this trajectory is likely to continue, further contributing to rising inequality, not only at the country level between developed and developing economies but also at the level of big online players, controlling data acting as an entry barrier for new entrants, leading to near monopoly in global digital markets. The effect of globalization and the development of the telecommunication sector has also affected the Indian market vitally.
On 21 December 2021 TRAI- the Telecommunication Authority of India released a consultation paper on the ‘Regulatory Framework for Promoting Data Economy through Establishment of Data Centres, Content Delivery Networks, and Interconnect Exchanges in India’ where it discussed and opined thoroughly on the markets of data economy, its challenges and its growth and future opportunities in the sector.
The TRAI Consultation Paper and Data Centres
The new era of digitization has rolled out 5G, Internet of Things (IoT), and Artificial Intelligence (AI) leading to the creation of data via widespread, geographically distributed networks and new-age devices. Further, Enhanced Mobile Broadband (eMBB), Ultra-Reliable Low Latency Communications (URLLC), and Massive Machine Type Communications (MMTC) are set to emerge as dominant storage interfaces. 5G, along with edge computing, is set to fulfil the needs for ultra-reliable, low-latency, and high-throughput communication. Use cases driven by this intelligence-centric connectivity will catalyse computing at the edge as they effectively become mini data centres and bring a completely new paradigm to storage at the edge. This brings with it a need for advanced networking, computing and storage in edge devices and endpoints.
The main theme of the TRAI consultation paper is the development of a regulatory framework to make the data market more abiding and regulated for systematic development and protection of its users. While competing with the world data economy the need for a proper regulatory framework that can encourage the development of 5G, IoT, data centres, and associated services, data analytics, edge computing, digital platforms, and applications were discussed and their effect on the growth are discussed in the paper. For any economy to be competitive, it has become essential to become reliable and self-sufficient in terms of futuristic technology. This has bought the Indian government’s inaction to bring in various initiatives and policies to bring digitalisation to the forefront of the market. Policies like Digital India Programme 2015 and National Digital Communication Policy 2018 contributed tremendously to the development and population of the data economy and digitalization.
The TRAI paper clearly emphasized and questioned the potential of growth of data centres in India in light of various challenges in terms of economic/infrastructure and financial aspects. The paper sought views on:
(i) incentives and long-term measures to facilitate growth and investment in data centres, Content Delivery Networks (“CDN”s), and Interconnect Exchanges (“IXP”s).
(ii) building, safety, disaster recovery, and security standards for data centres.
(iii) access to facilities such as dedicated fibre and electricity, and provision of concessional tariffs or subsidies.
(iv) need for a unified data centre policy in India and centre-state coordination.
(v) need for a regulatory framework for CDN and interconnect exchanges in India.
Additionally, it was noted in the paper that the mere establishment of data centres will not efficiently meet the country’s data requirements. Initiatives to address challenges of data penetration in Tire 2 and Tire 3 cities also has to be addressed. The paper also discussed and opened itself to comments on the green data certification, building norms for data centres and other aspects important for the development of an economically efficient data economy. The paper further discusses the impact of Covid-19 on the digital economy that resulted in a data surge arising out of increased digital social interactions and online transactions.
The Infrastructure of the Data Economy
The paper recognises the following three main infrastructures for boosting the data ecosystem and facilities
- Data Centres
- Content Delivery Networks
- Internet Exchange Points
Together these three form the part of what can be termed as “Digital communication infrastructure and services”. It is important to note that with CDN the delivery of the data sought by the users is established and the players like Netflix, Youtube and Amazon establish their own CDN in locations that are near to users to make the use of the internet bandwidth less which ultimately reduces the cost and make it more economical for them. These CDN networks are not adequately regulated in the Indian market. TRAI with the consultation paper has sought opinions on the same and has also highlighted the point of whether the lack of a regulatory framework for these CDN networks in India affects the growth of the CDN market in the country.
The main mission of the paper was to connect India with proper digital communication infrastructure, propel India with the latest technology including 5G, AI, IoT Cloud, and empower India by securing its digital sovereignty and data protection.
The consultation paper further analysed the idea of the dark fibre cable network, data centre and the regulatory framework or other limitations these data centre companies are facing and how these avenues can be incentivised.
Infrastructure Requirements for Data Centres
The paper discussed the resources which are required for the establishment of the data centres and how their availability or shortage can add to the hardships of the establishment of economical units of the data centre. While opting for and establishing a data centre it’s essential to look into the availability of the power supply and water. India faces an energy deficit of 1,44,1 Million Units (MU). The most affected areas are the rural areas in India. The cost of power can also not be overlooked. The major cost which is approximately 50-60% of the total operating cost of these data centres is the cost of power. The power and cooling segment of the Indian Data Centre power and cooling market is expected to reach $1,065.5 million by 2025, growing at a Compound Annual Growth Rate (CAGR) of 9.4% during the forecast period 2019–2025.
Water resources were another facility for which data centres might face challenges. The major work of the water is to cool off. As per the report around 15- megawatt of energy in a Data Centre can use up to 360,000 gallons of water a day as the scale of the data centre will rise more reliable sources of water has to be looked into. In the process of cooling off some amount of water is also evaporated leading to loss of water. The question which arose is whether India is ready to meet these power and water supply requirements for the establishment of a highly popularizing segment of data centres. This remains a question of concern to meet the cooking up future requirements
Looking into the matter the TRAI suggested developing renewable energy and development of green data centres. In Europe, the climate-Neutral Data Centre pact is the law that aims to make all of the European Union Climate-neutral by 2050. These green data centres will have low emission rates. A vision to create such data centres and emphasis on the establishment of data centres driven by renewable energy was also emphasised.
Telecom Data and its Security Issues
Telecom data is the first digital footprint created by any household. For proper functioning of the services collecting such user data and establishing robust infrastructure for the services providers to proffer better services becomes very essential. For this, the mechanisms of the consented sharing of telecom data and data empowerment and protection Architecture were explained in the paper.
Even though the intention of the Personal Data Protection (Bill) 2019 was to extend legislative protection to users wherein purpose-driven collection of data, user consent to sharing of personal data etc. were addressed, it is yet to be seen how the law progresses in the future.
Telecom Industry and the OTT Platforms
The functioning of the telecom industry and its importance and assistance in the development of Over the Top (OTT) platforms like ‘Netflix’, ‘Amazon’, ‘Hotstar’ can be understood easily. The telecom industry provides the oil to these OTT industry players for smooth functioning and better market reach. In the recent paper released by the Competition Commission of India (CCI) on the market study of the telecom sector, it highlighted the raising trends of a partnership between the telecom Industry and these platforms and how this can act as an entry barrier.
CCI’s Concern over the Growth of the Telecom Market and its Nexus with TRAI
The market study of the telecom sector released by the CCI on 22nd January 2021, highlighted various contemporary competition issues, including upcoming competition issues as the telecom sector is set to see further transformation and innovations with 5G around the corner, discussing:
(a) Financial stability and competition
(b) Vertical integration and competition.
(c) Data privacy and competition.
(d) Infrastructure and competition.
The CCI raised concerns over the data privacy of the users from deals like Jio- Facebook, where the users are robbed of their right to data privacy. Raising concerns of such kind in its study, the TRAI also channelized its discussions on similar lines in its paper where a huge threat to the data privacy of the users was discussed and a strong need to regulate and limit the data sharing and purpose-driven data collection was identified.
Regulatory Framework for the Data Centres, Current Scenario and the Way Forward
A strong surge in the consumption of data has been projected for the coming years. This massive increase in the use of data shall require a robust mechanism for data management, data security, and good data infrastructure. However, India still lacks a centralized regulatory framework that properly regulates or prescribes compliance standards with respect to the establishment of such data centres. This consultation paper by TRAI is the first concrete step in this direction.
The paper received comments from various significant stakeholders. While addressing the issue of data penetration at Tier 1 and Tier 2 cities, Vodafone Idea Limited (‘VIL’), one of the stakeholders, suggested that the Government should extend tax benefits to Service Providers that are building disaster recovery sites to ensure reliable services. Development of Special Economic Zones (‘SEZ’) in TIER 2 & 3 cities should be undertaken to motivate data centre players, rationalization of electricity tariffs across all states and ready infrastructure facilities inclusive of power, transport, water supply, fibre connectivity etc. should be set up in those Tier 2 & 3 cities. VIL further observed that a central law governing data construction and operation should address aspects relating to the entire lifecycle of data centres. Since the National Broadcasting Company (‘NBC’) covers maximum data centre related guidelines, it is recommended to form a single regulatory body under NBC, which should develop India-specific building standards for the construction of data centres operating in India.
Internet freedom foundation, another stakeholder, has also provided its comments and suggestions on the considerations raised in the Paper. The foundation advocated the urgent need for the creation of a multi-stakeholder body for the enforcement of net neutrality. The need for a more efficient data policy specifically designed for the telecom industry was also put forward promoting evidence-based policymaking for the CDNs. In order to ensure a more streamlined functioning of the telecom industry, the foundation emphasized overall sectoral transparency. It raised concerns over data monetization and its threats. Additionally, it placed stress on proper surveillance of these data centres as sensitive data of users would be involved.
The National Association of Software and Service Companies (‘NASSCOM’) in their comments on the paper focused on the development of the CDN market and its growth potential in India. NASSCOM raised concerns over regulatory compliances that can potentially make the Indian CDN market less competitive and advised on initiating strategies to combat the same. It also raised concerns over the reduced network efficiency because of the regulatory requirement of interconnection with Telecom Service Provider (TSP) and Internet Service Providers (ISP) and network neutrality. It opined that both will be affected negatively by the criteria proposed by the paper. It urged TRAI to refrain from imposing ex-ante obligations for mandatory interconnection between CDNs and ISPs.
With all these regulatory challenges the stakeholders also provided their point of view on the issues and challenges of the data centres, from advocating for the establishment of special economic zones and providing some tax benefits for the establishment of the data centres to the need for proper authority for the certification of the data centre as adopted globally has been highlighted. The stakeholders also highlighted the portions wherewith not much effort skilled labour can be found and up-gradation of the existing skills can be done. Data privacy matters took the spotlight in almost all the stakeholders’ comments. They advocated for the implementation of a comprehensive law to deal with the matter at hand. Further, on compliance, the stakeholders emphasized structuring an all-encompassing competent channel for the use and availability of the resources such as power, land, and water for smooth functioning of the data centres.
In 2020, Singapore imposed a moratorium on the establishment of the data centres because of the disparity in the use of resources by 7%. India is already facing challenges in sustainable development and is aiming to become a global hub for data centres, without a practical mechanism in place. It is interesting to note that, states like Karnataka and Tamil Nadu have formulated their policy on the same. They have also sought amendments in the state legislations to incorporate congenial provisions for the establishment of the data centres but until now no steps have been taken.
As per some of the suggestions, in addition to notifying a national policy on data centres, the government should also identify and proffer various incentives for the players keen on undertaking the establishment of such data centres, especially with respect to considerations like electricity, water resources, infrastructure, technology and Research and Development. Before formulating and enforcing anything it’s evident for the government to into consideration all the aspects of labour, resources, real estate etc. before devising a perfectively addresses the challenges of the sector and works in concert towards the benefits of its stakeholders.
In 2020 the Ministry of Information Technology formulated a Data Centre Policy, 2020 discussing the challenges and how a centralised system for clearance and approval for the establishment of data centres has to be structured and new building norms specifically dealing with the construction of the data centres are to be developed. More stress on a smooth regulatory framework for ease of doing business was emphasised.
While the central government is yet to formulate comprehensive legislation to govern data centres, various state governments have undertaken the initiative to regulate the sector within their jurisdiction.
Maharashtra’s Data policy extends fiscal incentives such as stamp duty exemption, electricity duty exemption, value-added-tax refund and property tax benefits for data centres that comply with specific criteria.
Telangana’s Policy extends fiscal incentives like power, building fee rebates and land at subsidized costs. Additionally, other non-fiscal incentives like exemption from the purview of the Telangana Pollution Control Act, exemption from statutory power cuts and from inspection under specified labour legislation and permissions to file self-certificates have also been offered.
The Tamil Nadu Data Centre Policy 2021 has established a single-window facilitation portal to maintain time-bound processing of applications and coordination with various agencies and departments. Further, incentives such as electricity tax subsidies on power, concessional open access charges and cross-subsidies, dual power and stamp duty concessions and permits for self-certificates pertaining to compliance with respect to statutory registrations and forms under respective labour legislation are provided.
The Data Centre Policy 2021 of Uttar Pradesh provides incentives with respect to data centre park developers and data centre units. Interest/capital subsidy, land subsidy, stamp duty exemptions and dual power grid network, as well exemption from inspection under labour legislation and permissions to file self-certificates have also been provided for under the legislation.
West Bengal data centre policy 2021 is a 5-year plan providing various power, water and infrastructure facility for the smooth functioning of the data centres.
Haryana and Karnataka are still finalising their state policy while the Odisha government has also rolled out a policy that needs further development and the status of its implementation is not yet confirmed.
As per some of the suggestions of the stakeholders, in addition to notifying a national policy on data centres, the government should also identify and proffer various incentives for the players keen on undertaking the establishment of such data centres especially with respect to considerations like electricity, water resources, infrastructure, technology and Research and Development. Before formulating and enforcing anything it’s evident for the government to into consideration all the aspects of labour, resources, real estate etc. before devising a perfectively addresses the challenges of the sector and works in concert towards the benefits of its stakeholders.