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Summary: Consultation paper on setting up data centres, content delivery networks, and Interconnect Exchanges

Besides outlining measures to attract investments, the regulator touched on existing issues that need to be addressed.

A regulatory framework for the establishment of data centres, content delivery networks, and interconnect exchanges has been proposed by the Telecom Regulatory Authority of India (TRAI) in a consultation paper inviting comments until January 13, 2022.

Why this matters: The rollout of 5G, Internet of Things, and Artificial Intelligence will lead to an exponential growth in the consumption of data which will be possible only with the necessary infrastructure. India does not have a national policy that enables the establishment of data centres, CDNs, and Internet Exchanges (IXP) but this paper may be the first step in that direction.

Comments can be sent to Sanjeev Kumar Sharma, Advisor (Broadband and Policy Analysis), Telecom Regulatory Authority of India, at advbbpa@trai.gov.in along with jtadvbbpa-1@trai.gov.in and jtadvbbpa-3@trai.gov.in.

Summary of TRAI’s observations on Data Centres

“A data centre is a physical facility that is used to house applications and data. Online platforms and websites’ digital data, content, and information are stored in the cloud servers located in data centres, and the same is accessed by users through broadband connectivity,” the paper stated.

What are the measures needed to attract data centres?

Land, power, telecom and IT networks, and ease of doing business are four critical aspects for a data centre to thrive, and the policy framework should keep these factors in mind, TRAI recommended. A new data centre requires close to 30 approvals/permissions from different central and state governments’ departments before it can start operations, it added.

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Some of the proposed non-fiscal measures are:

  • Specified timelines for clearance should exist to prevent delays.
  • 24×7 water supply, special provisions in building norms
  • Preference in public procurement
  • Providing power and internet facilities to edge DCs
  • Single-window approvals and permits for companies willing to establish captive firms
  • Exemption from inspections under factories, wages acts, etc.
  • Exemption from provisions of factories act; shops and commercial establishment act; labour act, etc.
  • Waiving of import restrictions and duties on essential Data Centre operational equipment.

TRAI proposed that the government’s fiscal incentives should be in the form of tax exemptions to promote data centres along the lines of several Indian states.

“A country-wide data-centre-specific tax and duty incentive may be adopted to encourage investors to operate here.” — TRAI in consultation paper

Offer fuel subsidies in the beginning: “The establishment of dual power grid networks to ensure uninterrupted quality supply of electricity to the data centre is required considering the power deficiency situation that exists in various parts of the country,” as per the paper. The governments should also leverage solar and wind farms to supplement power sourcing.  “Energy or duty tax may be exempted to benefit the industry in a situation where many outsourcing companies are experimenting with renewable energy for bundling or part-powering their units,” it concluded.

What are the challenges listed by TRAI?

Lack of expertise hampers capacity building: “The labour cost in India is much lower than in developed countries, thereby reducing the construction cost to a considerable extent. However, the consolidated challenges faced at present arise heavily from a lack of expertise, little or no retrofit industry knowledge, and standardisation,” TRAI commented. It called for the involvement of expert consultants in design, especially during the early project initiation.

Provide vocational training to meet skillset demand: “The skill set demand in the data centre sector is high, and the competition is fierce. This calls for the planned implementation of suitable capacity building initiatives as part of vocational training along with the extant university education,” read one of the suggestions. It said that the introduction of vocational certification courses in the field of Computing System, Data Centre Infrastructure Management, Certified Network Associate/Network professional will contribute to the field of DCs in the country.

Ensure Centre-state coordination: TRAI pushed for greater Centre-State coordination favouring the implementation of uniform tax abatement code, analogous labour laws, and a common framework to facilitate ease of doing business as there is a lack of cooperation in certain states, and many departments don’t coordinate with each other.

Why does India need to come up with a data centre policy?

TRAI laid down the following reasons-

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  • Data Explosion: Digital adoption has become critical for personal and business needs ever since the pandemic hit as the data-usage-per-subscriber rose at an all-time high of 12 GB per month in the quarter ending September 2020. The data centre storage space growth is inevitable as data usage is projected to increase to 25 GB a month by 2025.
  • Cloud adoption: The pandemic has accelerated the rate of cloud adoption, and India’s public cloud services are expected to reach $5 billion by 2023. India is expected to account for 2.3% of the global DC market investments expected to reach $200 billion per annum by 2025.
  • Big Data and IoT: Big data analytics is expected to grow at a CAGR around 29% to reach $68 billion by 2025. Number of IoT devices is expected to reach around 75 billion in 2025, generating 79.4 zettabytes of data, accounting for a need for more data storage space.
  • 5G rollout: It is being said that the introduction of 5G in India will bring forward more content in the marketplace, and thereby generate demand for more storage. Small cell technology will be used heavily to roll out 5G coverage. Data Centres will need to be close enough to these cells to maintain 5G’s low latency performance and meet service-level agreements.
  • Data Localisation: “With the data localization rules coming in, existing data centre capacity will end up being highly constrained. Data localization has laid the stone for the development of hyperscale data centres in India to cater to this increasing data consumption demand,” the paper explained. It added that India needs to ramp up its data centre capacity by at least 15 times in the next 7 to 8 years to be able to handle the massive amount of data influx that will enter its borders because of data localisation.

On Content Delivery Networks

Content Delivery/Distribution Network (CDN) is a geographically distributed network of proxy servers and their data centres at various points of presence working together to deliver pages and other web content to a user based on the geographic location of the user, the paper read.

What are the issues highlighted by TRAI?

TRAI proposed regulatory interventions in order to facilitate CDN market growth. It outlined the main issues and gave a few suggestions:

Revenue sharing between CDN-ISPs: “There is a need to see that the market is not misused to create dominance, hurting the business of smaller players by way of arbitrary demands because the relationship between CDN players and ISPs is that of a mutual facilitator. The market for the interconnection of CDNs and ISPs is at a nascent stage, as per the consultation paper.

Lack of equal access to CDN: “Some of the big OTT players have started their own content delivery platforms. Such dominant players can dictate terms for interconnection with smaller ISPs refusing them direct peering,” the paper warned. It becomes imperative to have a regulatory framework for interconnection between various players which is fair and just and gives equal opportunities to each player, the paper urged.

Unequal access may upset net neutrality: “The issue of net neutrality may arise if the access to CDNs is not on equal terms, as customers of preferred players may be provided with better quality CDN services,” the authors cautioned. They pointed out that a formal mechanism to enforce net neutrality on CDN players does not exist whereas ISPs have to abide by the norms. It called for TRAI to frame appropriate regulations to specify the disclosure and transparency requirements.

DNS filtering, Content blocking and Security: “URL blocking is implemented effectively in DNS systems maintained by ISPs, but some of the blocked websites/URLs still remain accessible to subscribers of ISP networks who are using public servers or other third-party DNS servers or DNS-based CDN servers,” the paper said. It called for an effective framework that can ensure that CDNs follow the directives to block content hosted by them.

Create a level-playing field between telco CDNs & other players: “While Telco CDNs are subjected to various licence-conditions imposed responsibilities like lawful interception, content blocking, etc., other CDN players are not,” the paper underscored. It is an issue of a level-playing field that must be addressed via a regulatory framework.

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Avoid concentration of CDNs around major cities: The performance of CDNs depends on the geographical location of edge servers and PoP locations. The paper argued that the user experience will only improve if users are served through CDN servers operating near them. Data Centres, and IXPs must be strategically located to provide access to multiple upstream providers (e.g., content providers or transit ISPs) and peering PoP locations. It wrote that it is imperative to promote connectivity between the ISPs operating on a regional basis and CDNs to provide the benefits of CDNs for subscribers of smaller ISPs.

Need for Incentivisation: The initial costs associated with establishing a CDN are quite high, and it takes time to get the returns on investment. Private investments are required to set up a large number of CDN servers in India. It recommended that suitable fiscal incentives through policies can support the companies during initial investment.

Why is there a demand for CDNs?

Here’s a summary of why TRAI thinks CDNs are crucial:

Faster web hosting: The paper explained that CDNs’ primary customers are website or platform owners, as they facilitate quick transfer of information that is required for loading various internet content. CDNs can have applications in non-video domains such as websites, local hosting, file downloading, e-services, e-commerce solutions, etc. for faster page loading, reducing bandwidth consumption, securing websites from attacks, and blocking spams, the paper noted.

Increased video consumption: “Video consumption is growing at a much faster rate with the rise of smartphone availability and usage,” the paper said. Video is expected to generate the majority of the mobile traffic growth through 2022, as mobile video content has much higher bit rates than other mobile content types. “CDN has been critical in delivering video, large files, and other web content to users quickly and reliably. Distributing video using CDN requires a different approach than distributing other types of content because of latency sensitivity and high bandwidth utilisation of video data,” the paper observed.

Impact of the COVID-19 pandemic: “The use of media and online content services has heavily increased during the lockdown. The COVID-19 outbreak has led to adopting new technologies and ways for business houses, education institutions, analytics, computing, and data management methods. Online courses involving live streaming of classes require unhindered and continuous access,” the authors said.

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Popularity of over-the-top (OTT) services: “The popularity of OTT services provided by media giants like YouTube, Netflix, and Amazon Prime, on-demand video/music streaming, and live streaming of sports, news, and events, resulted in huge video consumption,” TRAI pointed out in the paper. The Indian OTT market is likely to outperform the global market and may be ranked among the top 10 by 2022, as per the paper.

Uptake of e-commerce business and financial services: E-commerce, banking, and financial companies require CDNs to improve their site performance and make their products or services available online, the consultation paper revealed. CDN provides 100% uptime of e-commerce sites, and this leads to improved global website performance, according to Computer World.

Reducing Bandwidth costs: CDNs lower bandwidth costs as installing CDN servers reduces international bandwidth requirement by ISPs, improves network performance and offers efficient bandwidth usage.

On Interconnect Exchanges

Internet Exchange Points (IXPs) are the physical internet traffic exchange nodes, wherein ISPs and other Autonomous Systems (AS) exchange traffic between themselves. The requirement of creating an Internet exchange point was recognised in India as early as 2002 and a taskforce set up by TRAI recommended establishing an IXP for the exchange of internet traffic within the country— National Internet Exchange of India (NIXI)

The paper wrote: “It was observed that despite NIXI’s infrastructure having been established in 2003, only few operational ISPs had joined NIXI nodes at various locations and the total number of connections to NIXI from these ISPs was very less. There were many issues in the efficacy of NIXI and a big chunk of domestic traffic was still not routed through NIXI, negating the very purpose. The TRAI expressed concern over the limited number of ISPs linked with NIXI resulting in sub-optimal utilization of the infrastructure.”

Existing regulatory issues

Performance of core networks: Some of the stakeholders raised concerns about the performance of core networks affecting the performance of the fixed and mobile broadband together. The paper also wrote about concerns expressed regarding frequent congestion of National Internet Exchange of India (NIXI) ports for some TSPs and stepping up of investment in NIXI and increase in capacity at the peering sites was suggested to avoid latency and give a boost to the domestic traffic.

Ambiguity in the licencing framework of IXP in India:  “While some IXP players in India are operating under ISP licence, one of the major players, i.e. NIXI does not have any licence. Lack of clarity and confusion has resulted in litigation and new private investment is getting affected therefore, clarity is required,” the paper advised.

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Lack of neutral players: “Those IXPs who are operating under Internet Service Provider licence to provide interconnect exchange facility to the users (most of whom are other ISPs), cannot be considered to be neutral players,” the paper warned. These exchanges can discriminate and refuse/delay interconnectivity. This conflict of interest may lead to a problem of trust with the competitors and can result in abuse of their position as IXP. A regulatory framework was suggested to tackle these problems.

Location and Resource availability: The internet exchange must be located in a building that can fulfil its space, power, cooling, and security needs. Identifying potential site locations and managing them is one of the primary issues faced by an IXP. However, due to lack of connectivity and infrastructure, most states and Tier-2 cities do not have IXP presence, and they miss on the incidental benefits that an IXP presence can give. Companies or small exchange operators need to be encouraged/incentivized to set up IXPs at locations closer to the Tier-2 cities.

Connectivity and Infrastructure limitations: “The cost of connectivity for ISPs up to IXP is at times prohibitive, and most small ISPs are left with no other option but to transit their traffic through bigger ISPs who may interconnect at a location that suits their own traffic rather than the small ISPs”, the paper explained. Moreover, major ISPs, with selective policy, try to increase the cost of transit traffic of smaller ISPs.

Incentivising establishment of more IXPs

The consultation paper believed that the provision of incentives for encouraging investment to establish IXP can help the growth of internet exchanges in India.

  • Fiscal incentives:  The paper writes that schemes, including tax exemptions, investment benefits, and credit facilities, can attract players to set up IXPs. Financial aid can also assist market growth in small cities. Easy accessibility to bank loans may be made possible at competitive interest rates and collaterals.
  • Peering incentives:  TRAI was in favour of encouraging direct peering with content providers and hosting data centres. The provision of incentives in terms of peering costs and port charges for interconnection to more than one IXP, an ISP will be able to competitively expand its connections beyond a single exchange.
  • Data Centre and IXPs coordination: “The synergy between Data Centres and IXPs can promote cost-effective strategies for an IXP establishment,” the paper suggested. The authority called for a commitment to long-term budgeted funding, and plans to make the exchange self-sustaining and preferably self-governing. The government must also look at free, or subsidized skill development programmes as the majority of the initial IXP expenditure is on the training of staff to establish and maintain the facility, TRAI wrote in the paper.

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I cover several beats such as crypto, telecom, and OTT at MediaNama. I will be loitering at my local theatre and consuming movies by the dozen when I am off work.

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