Thursday, March 28, 2019

Why armed escalation is not of interest, Priyesh Mishra, The Pioneer, 4 March 2019

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Achieving intended outcomes by deploying escalation as a policy objective is dependent on external factors that are beyond effective control of parties to a conflict. Most of these factors may not exist in objective reality. This is exactly what India and Pakistan cannot afford
The chain of events following the Pulwama attack has plunged the security environment in the Indian sub-continent to its lowest point since Operation Parakram. Media-led clamour for retaliatory use of force against Pakistan has been gaining decibels ever since. And such has been the predictability of Government response in the post-truth world that limited use of military force was instantly foretold.
However, the air strikes on Jaish-e-Mohammad training camps inside Pakistani territory came as a surprise to both Pakistan as well as analysts on both sides of the border. While India termed the strikes as “non-military” and “pre-emptive”, the use of sophisticated terminology did not deter Pakistan from carrying out retaliatory airstrikes, which led to an Indian Air Force (IAF) pilot and his Mig-21 being shot down.
Amid claims and counter-claims of who inflicted how much damage, the two nuclear powers are once again on the verge of a full-fledged military conflict. What is appalling is that despite the criticality of the situation, prominent intelligentsia is suggesting that India must seek escalation. Their argument is that previous piecemeal military actions have failed to establish credible deterrence. While precedents may favour this argument, there is a fundamental flaw with the use of escalation as a deliberate policy measure — its propensity to spiral out of control.
Numerous externalities impact the deviation between intended objectives and actual outcome of an escalatory action. To begin with, what should be the escalatory threshold? The subjectivity of escalatory threshold is one of the reasons that escalation is so difficult to manage and/or successfully exploit. Escalatory threshold may be symmetric — where a threshold is viewed similarly by both parties or asymmetric — situations where a threshold may loom large for one party but may seem obscure to the other. Second is the anticipated response from an adversary. Generally, when one party to a conflict crosses the escalatory threshold, it expects the other side to follow suit. Once again, this response may be symmetric, asymmetric or sometimes even absent.
For example, during World War I, when the German Army introduced gas warfare, the Allied forces responded in equal measure, which kept the perceptive breach of escalatory threshold in balance. However, such a symmetric response may not be available if the prospect of equal retaliation seems less appealing or unavailable to the other party. For example, during Operation Desert Storm, frustrated by the sustained air strikes of the US-led forces, Iraq deliberately sought to escalate the conflict by firing ballistic missiles at Israel. The idea was to irk the coalition forces and draw them into war. However, Israel did not retaliate and coalition forces refused to be drawn into a premature full-blown war.
To sum up, achieving intended outcomes by deploying escalation as a policy objective is dependent on external factors which are beyond effective control of parties to a conflict. Most of these factors are presumptive in nature and may or may not exist in objective reality. This increases the chance of a miscalculation exponentially and that is exactly what two nuclear-armed nations cannot afford.
Even if India is certain to attain escalation dominance, it makes for little practical sense, given that stakes are higher for India as compared to Pakistan. An armed conflict at this point will have a multi-modal impact on India. The immediate casualty would be the economy. Wars are expensive. Just to add to perspective, the US federal price tag for the post 9/11 wars is pegged over $5.9 trillion till date (more than double of India’s GDP). The Indian economy is already facing headwinds from a rebound in global oil prices amidst a host of other macro-economic concerns, besides uncertainty over the upcoming general elections. While the near $3 trillion economy may stay resilient in the face of a limited armed conflict, an escalated conflict may lead to diminished foreign investment and consequent economic slowdown. India is currently jockeying, some would argue not particularly successfully, a limited time-frame during which it can leverage its demographic dividend to transition into a higher-income and productive economy.
Further, an armed conflict at this point will also derail the modernisation of the armed forces. The much-needed force modernisation has only recently started to show some form. Indian armed forces are in the process of acquiring as well as developing new platforms and structures to boost defence preparedness. Key amongst these is the restructuring of the Indian Army into a leaner force by creating integrated battle groups. Strides have also been made in creating a separate command for cyber and space warfare. These reforms are critical to the enhancement of the combat capability of the Indian forces. China, too, is undergoing similar reforms, under which its territorial Army has been downsized. An economically and militarily fragile India will not enjoy the same strategic advantages as it currently does, which puts at risk its membership of the Nuclear Suppliers Group and the UN Security Council.
The risks of an escalation gone wrong far outweigh any perceived benefits. With the release of the captured IAF pilot, India’s option to escalate has become politically unviable. In this backdrop, non-military escalation would be the most viable strategy.
It would be in India’s utmost interest to maintain sustained multi-pronged pressure on Pakistan and ensure that it is declared an international pariah. To begin with, India must rise over the rhetoric and officially treat Pakistan as a terror-sponsoring state in its foreign policy. India’s economic heft and the recent uptick in Indo-China relations post the Wuhan summit, must also be leveraged to score a diplomatic upper hand in its initiatives to blacklist terrorist organisations breeding on Pakistani soil. Non-military punitive actions like weaponising the Indus Water Treaty must be duly considered. Above all, India must carve out a consistent Pakistan policy as the extant mixture of hard and soft approach has far outrun its course.
(The writer is legal associate and defence analyst, Koan Advisory Group)

Vivan Sharan moderates panel on "Specialisaiton vs. Scale: What work for Indian M&E?" at FICCI FRAMES, March 2019

 Specialisation vs. Scale: What works for Indian M&E?

The Indian M&E space is in the throes of transition. Production processes are becoming increasingly specialized as a result of technological changes and fragmentation of global supply chains. Simultaneously, convergence and consolidation are driving the need for creative businesses to achieve scale, to reach more consumers and remain export-competitive in global markets. The panel will debate how stakeholders in the Indian creative economy, including within civil society and government, should balance these imperatives.

Vivan Sharan, Partner, Koan Advisory Group
Arun Thapar, Head of Content, A+E Networks
Shohini Sengupta, Fellow, Esya Centre
Shreyas Srinivasan, Founder and CEO,
Dinraj Shetty, Director, Digital Sales, licensing and Business Development, Sony Music Entertainment
Karan Ahluwalia, Senior President and Country Head, M&E, Fine Arts, Luxury and Sports Banking Group, Yes Bank

Coverage link:

Kaon Advisory's coverage of FICCI FRAMES, March 2019

Koan Advisory experts blog about various sessions held at FICCI FRAMES 2019, for the Motion Pictures Association.

The blogs can be found at this link:

Koan Advisory's response to public consultation on amendment to Cinematograph Bill

Uncertain steps towards an E-commerce policy, Co-authored by Vivan Sharan, 10 March 2019

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India recently unveiled a second draft of its ‘E-commerce Policy’, for feedback from the public. Although one may laud the attempt to put a long-term lens on complex and uncharted technology-market issues through such a policy, the draft fails at locating the drivers of innovation and value generation within the digital space. Specifically, it draws a direct correlation between access to data and the rate of innovation and success in the digital economy. However, while data is valuable, it is not the foundational catalyst for digital innovation.
Rather, innovation stems from the provision of incentives – a fundamental premise of the many intellectual property (IP) frameworks that safeguard the value generated by innovation the world over. IP rights are granted to innovators for their creations, allowing them to commercialise their work without fear of misappropriation. Illustratively, Section 2(o) of the Indian Copyright Act, 1957 deems computer compilations, tables and databases as ‘literary works’, thereby rendering them eligible for IP protection, and therefore, creating incentives for their generation. The broader point is, data in and of itself is not necessarily useful. It’s the way in which data is harnessed or curated for commercial use or public services, that determines its true value.
If the state removes incentives to generating value from data, by labelling itself the self-declared ‘trustee’ of all data generated domestically, which seems to be a central premise of the draft policy, it does not offer any service to the growth of digital India. Consider for instance, if Indian start-ups were forced to share proprietary datasets and source-codes with larger domestic competitors under the guise of unfettered access. What incentive would a small business have to get involved in a data-driven business? Is such expropriation completely out of question in our uncertain political economy? What safeguards have been put in place for any business to survive similar future state-interventions?
Additionally, let’s invert the prism to question why small businesses in India have to struggle to get their hands on public data that should already be universally accessible. Is it not the state’s responsibility to first and foremost unfetter local innovation by sharing non-sensitive public data? Consider the case of the Open Government Data portal. Launched in 2012, the portal was meant to serve as a comprehensive and universally accessible repository of public data sets. However, a majority of such data sets are either missing, incomplete, or outdated. As the largest repository of individual and community data, the state has the greatest responsibility to share data openly. Yet, it retains its monopoly over public data and simultaneously threatens to throttle value generation by creating an over broad interpretation of ‘open data’ to include almost any data in the commercial domain.
Lastly, even though this policy document is chiefly aimed at addressing domestic policy questions, it lacks vision in terms of how Indian businesses will generate value from delivery of digital products to international markets. Ironically, the drafting of the policy was triggered due to growing pressures to negotiate on e-commerce issues at the World Trade Organisation, and the absence of a negotiating position, were India to enter such discussions. It is striking, then, how international market-access is not even a passing concern within the draft policy, despite the fact that the logic of entering into any future multilateral discussions would be to negotiate better access for Indian businesses.
If access to international markets was of real concern, the draft policy would not delve into areas that leave India vulnerable to reciprocal denial of access. For example, if India were to impose economic protections in the form of customs duties on inbound digital products, as the draft policy intends to do, it will surely suffer disadvantages as trade partners will impose reciprocal duties on outbound Indian products headed to their markets. An emphatic instance of this is the recent trade fracas between the US and China. In 2018, the US imposed 25 percent tariffs on USD 16 billion worth of Chinese goods. China, in turn, hit back immediately with a tariff on an equivalent amount of goods from the US.
India is considering nipping its own international market-access in the bud at a time when it has not lost a theoretical comparative advantage to advanced countries in digital products. Illustratively, a third of the population is actively engaging with the internet, making domestic markets an excellent proving ground for new digital products ranging from video games to e-books. Moreover, India has immense human capital and a knack for low-cost innovation in digital industries – where the overall lack of physical infrastructure is not always a binding constraint like it is in manufacturing.
Conversely, if policymakers think that India is already so behind the innovation curve in digital markets, that the country needs economic protections that are exceptional in a global context, they cannot simultaneously claim that ‘Digital India’ is an unqualified success. We cannot have our cake and eat it too.
-The authors are technology policy experts based in New Delhi. These are their personal views. 

Koan Advisory's response to public consultation on Amendment to the Sports Broadcasting Signals Act, January 2019

Twitter furore shows need to empower local executives, Vivan Sharan and Trishi Jindal, Mint, 12 February 2019

The quicker technology companies operating in India realize the merits of empowering their local executives, the faster the Indian digital economy will come of age. Technology regularly outpaces regulation globally, necessitating nuanced debates between industry and government in every major jurisdiction, and therefore, decision-making agility on both sides. Additionally, India has a complex digital culture that doesn’t easily lend itself to quick fixes by government or industry. This is evident in the case of ongoing discussions on regulating social media platforms that are marred by the lack of a solutions-oriented approach on either side.
India’s Standing Committee on Information Technology recently summoned Twitter to testify before it on matters relating to “safeguarding citizen’s rights on social media platforms". This ostensibly followed from a protest lodged with the committee on selective censorship of political views online. Though some local Twitter officials did appear before the committee this week, the company had initially sought a deferment citing short notice and reportedly submitted that “no one who engages publicly for Twitter India makes enforcement decisions". If reports are true, the submission is a rare and candid admission that local executives are not empowered to negotiate their own interests.
In the past, policymakers were predominantly concerned with providing access to the internet, which led to many debates on privatization of information infrastructure. Good sense prevailed in letting private sector investments flourish, precipitating a virtuous cycle of greater connectivity and consumer access. While India still has millions of “digital have-nots"—individuals who remain unconnected—it also has a substantial infrastructural backbone with close to half a billion broadband users expected to come online before 2020.
A corollary of exponentially greater consumer access to the internet is that policymakers must now contend with much more complexity in digital markets, a reality that industry executives must also empathise with. Moreover, the government’s under-preparedness to manage new challenges at the intersection of technology and society may prompt overregulation of new markets. Where the internet was meant to liberate society as a force removed from it, it now appears closer to a manifestation of many of the ills of society, such as hate speech and violent extremism, phenomena that are particularly concentrated on social media. While curtailing online speech would be antithetical to democratic values, global companies must recognize local context. Online speech is largely unregulated in advanced jurisdictions because of better state-capacity to deal with negative outcomes offline.
Tech scholars like Daphne Keller have characterized internet policies today as fighting poorly defined harms with remedies that remain untested. Indian policymakers have been unable to pinpoint the nature and quantum of harms caused through social media platforms. To wit, there is no official report on the mechanics of lynch mobs—how are they triggered, how online misinformation campaigns are funded, or even what role political actors play, if any. Equally, adequate remedies such as the balancing of stricter enforcement with institutional and legal safeguards for protecting free speech and expression are rarely discussed within government.
Protectionism adds another dimension to the mix of new digital policy questions that are only just being addressed. Recent debates on e-commerce policies, data protection laws, and regulation of online intermediaries, characterize this dimension. How do we protect interests of domestic companies without being brazenly discriminatory? Should we look at global standards to mould domestic templates for internet governance? Or should we forge our own prescriptive and exceptional regulatory norms in isolation?
Local executives of global companies can play an important role in resolving such questions from their informed vantage points. They have line of sight on the dynamic landscape of global markets. Simultaneously, they are well-placed to leverage global exposure to the cutting-edge of internet governance. Instead, most such executives are compelled to take conservative positions in India and resist any hint of enhanced government interface, even as their global counterparts engage in serious debates in the US and EU. Consequently, the Indian state acts in its limited self-interest by overregulating what it feels it can’t control.
Equally, it is about time that the state recognizes that not all solutions can come from within. Some global companies have shown the ability to propose and implement practical solutions to local challenges. For instance, government-industry dialogue has led to the adoption of a Code of Best Practices by nine large online curated content firms this January. The code redoubles industry commitment to protecting kids from accessing adult content. Transparent self-regulation can protect free speech and promote plurality of opinions, whereas prescriptive government regulation almost always leads to excessive censorship. Proactive standard-setting must be welcomed as a first wave of corporate enlightenment in digital India, a wave that can truly lift all boats by securing values shared by policymakers, industry and citizens.
Vivan Sharan & Trishi Jindal are technology policy experts at Koan Advisory Group, New Delhi. Views are personal.

How to realize value from digital markets in 2019, Vivan Sharan, Mint, 14 January 2019

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Digitalization has rapidly altered the contours of the Indian economy, especially in terms of improved consumer access to goods and services. Tens of millions of new participants have been added to digital markets through the expansion of telecom and internet services in 2018. In the midst of this feverish activity, confusion persists over what constitutes a definitive and durable vision for a digital India—exemplified by debates on why Indian companies struggle to generate value within domestic digital markets. 
China has about 15 times as many unicorns—billion-dollar startups—as India does, despite the fact that the Chinese economy is 2.5 times that of India’s in terms of gross domestic product (GDP) adjusted to purchasing power parity. Such asymmetry of outcomes reflects in global comparisons too. India has some of the lowest average revenues per user in telecom markets despite some of the highest data consumption volumes in the world, and a tiny subscription market for digital products such as audiovisual services, which is dwarfed by small countries such as Singapore.
Value creation tends to involve innovation in the production of goods and services that people are willing to pay for. Naturally, intellectual property must lie at the heart of this process, finely balanced alongside consumer access. However, a form of “digital socialism" seems to have manifested itself in India’s digital economy discourse as a panacea for the lack of value. This school of thought seems to emphasize a large role for state intervention in redistributing the value created in digital markets, which largely resides in data. 
The desire for state intervention is most visible in regulatory consultations on areas such as data protection and licensing of online applications, parts of which focus on treating all data as a public good. Ongoing discussions lack nuance in differentiating between the implications of unrestricted access to government data and private data. China is naturally a source of inspiration for those who evangelise the benefits of state-intervention to actualise what is essentially an over-broad interpretation of the notion of “open data".
Admittedly, China’s micromanaged market growth has been nothing short of astonishing. The country accounted for just under 4% of world GDP in 1991 and now accounts for 15%. Mandating data-sharing is not dissimilar to mandated joint ventures in China’s industrial ecosystem. However, both dilute incentives to innovation and lower chances of safeguarding privately held intellectual property. It is important to recall that China appropriated space in the global economy from emerging markets such as India. Conversely, countries with a strong culture for innovation and monetization of intellectual property such as the US have held on to their share. The US has consistently accounted for around 25% of global GDP despite China’s swift rise over the last three decades. 
It is likely that if India lowers its focus on incentivizing and safeguarding innovation in favour of creating an unqualified and unfettered open data ecosystem, China will be its biggest beneficiary.
Chinese firms are already dominating India’s digital markets, from devices to online applications. And the modus operandi of China’s digital giants strongly resembles that of its manufacturing giants. China’s industry majors are offloading their excess capacity in India and focusing on extracting incremental value. For instance, Chinese smartphone brands account for a two-third market share in India—and seem to be the biggest beneficiaries of India’s aspirational consumption. Similarly, the imposition of digital socialism will not deter China’s cash-rich online giants from extracting value from India’s digital markets— consonant with its expansionist Belt and Road Initiative. 
The fact is that Chinese businesses will willingly acquiesce in over-regulation in return for a captive market. They have had more than a practice run at embracing the notion of state-controlled digital economy. So, how should India prevent Chinese colonisation of its digital markets, and build focus on creating competitive IP-based digital ecosystem that delivers both access and value?

Value creation will require a fresh policy mindset in 2019. A point of departure could be to better understand how countries such as the US have retained their economic strength in times of global flux. Part of the answer lies in the correlation between trade and intellectual property (IP). The US accounts for around one-third share of global IP exports—far outpacing China, which does not even figure in the top ten IP exporters despite frenetic patenting activity. While China has understood the need for more IP, its markets remain state-controlled. 
Nevertheless, it is axiomatic that innovation-centricity impacts the realization of economic value. In 2018, researchers found that while less than 10% of US manufacturing firms made IP filings, those that did accounted for 90% of its total merchandise exports. The nexus between innovation and competitiveness is universal. A balanced vision for domestic digital markets must therefore reflect the centrality of incentivizing and protecting innovation. And to be clear, this will require active state support in the entire spectrum of innovation, from engendering a culture of research to stronger enforcement of IP.
Vivan Sharan is a technology policy expert and partner at Koan Advisory Group, New Delhi.

Koan Advisory's response to TRAI's public consultation on regulatory framework for OTT communications services, January 2019

Koan Advisory's response to public consultation by Competition Law Review Committee, December 2018

Koan Advisory's counter-comments to Public Consultation on Draft National Policy on Electronics, November 2018

TRAI OTT Consultation Paper: Need To Level Regulatory Playing Field, Give More Teeth To CCI, Firstpost, Vivan Sharan and Mohit Kalawatia, 06 December 2018

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Online service providers operate in a largely uncharted regulatory space in contrast to their cousins and progenitors in the offline world. For instance, telecom service providers (TSPs) and broadcasting linked distribution platform operators (DPOs) are licenced by the Telecom Regulatory Authority of India (TRAI), whereas applications used to communicate or distribute voice, text or video content over the internet are not. This lack of licencing or regulatory parity has led to repeated calls by traditional incumbents for levelling the regulatory playing field – particularly as their own profits have shrunk with the expansion of competing for online services.
The influence of the internet on society has also grown inexorably – best exemplified by the US Senate hearings on social media platforms following allegations of Russian interference in the 2016 elections. This, in turn, has raised legitimate questions about whether there are enough regulatory safeguards to protect users (and democracies) from vulnerabilities linked to now ubiquitous online services. Such services are also known as Over the Top (OTT) services owing to the fact that they are delivered over the public internet.
OTT services would technically fall under the jurisdiction of a regulator under the Information Technology (IT) Ministry. However, much to its chagrin, the IT Ministry has no dedicated regulator of its own. Naturally, the importance that regulators enjoy within governments the world over is directly proportionate to the size of their jurisdictions. Therefore, calls for parity from regulated entities has provided an enthusiastic TRAI with ready rationale to try expanding its remit to include OTT services.
TRAI has recently begun a process of public consultation, ostensibly on designing a regulatory framework for a subset of OTT services, that provide functionality akin to TSPs. These include OTT communication services like voice and text messaging. The origins of this process and its scope can be traced back a few years.
In 2015, TRAI had initially attempted to paint the entire OTT ecosystem with a broad brush, but the Department of Telecommunications (DoT) which has always had mixed feelings about an independent TRAI, quickly redrew the perimeter for future consultations. It essentially prioritised regulation of OTT communication services over other services such as e-retail, content and media.
At the heart of the latest TRAI consultation is whether the construct of ‘substitutability’ between TSPs and OTT communication services should be applied for comparing regulatory burdens applicable to both markets. That is if services like WhatsApp allow similar functionality to text messaging, should they not be equally regulated? Such logic can be extended indefinitely and prompt legacy approaches to regulations that may not be appropriate for digital markets.
For instance, online taxi aggregators can potentially be called substitutes to black and yellow taxis, online video providers to broadcasters, online retailers to offline counterparts and so on.
Therefore, there is merit in looking at metrics other than substitutability alone to ensure clarity of regulatory scope and compliance.
The fact is that the market impact of large OTT services should be a matter of concern for antitrust regulators globally – and this is directly related to whether OTT services and TSPs operate in the same markets. The subsequent moot question is whether they act as a substitute for each other within these markets.
To be clear, sectoral regulators like TRAI have a legitimate interest in such antitrust matters, that impact the jurisdictions they regulate. However, using substitutability as the sole determinant of future regulation deviates from the approach adopted by the nodal antitrust regulator, the Competition Commission of India (CCI).
Even-though the CCI is new to the digital economy and has limited technical expertise, its evolving determinations of relevant markets should inform the TRAI process. For instance, in a complaint against Snapdeal in 2014, it was alleged that the e-retail platform had abused its dominant market position by entering into an exclusive agreement with sellers using its platform. The CCI subsequently held that online and offline markets are merely two different channels of product distribution and do not constitute distinct markets. This was akin to the functional approach that TRAI is now exploring.
However, the order passed by the CCI in a complaint against WhatsApp highlights a sharp learning curve. In 2016, a complainant alleged that WhatsApp held a dominant position in the relevant market for ‘free messaging apps available for various smartphones globally’. The CCI held that such communication services cannot be compared with “the traditional electronic communication services such as text messaging, voice calls etc.” made available by TSPs. This is because they differ in characteristics such as accessibility (wherein the former can only be used via a smartphone), pricing models and additional functions available to users. Subsequently, even in cases against Ola (2016) and Google (2018), the CCI held that online markets differ from their offline counterparts, due to the presence of specific characteristics.
Evidently, the identification of market characteristics is a nuanced exercise with constant scope for technical improvements – something that the TRAI must acknowledge in its assessments, however preliminary.
More recently, the CCI also employed available policy definitions to determine relevant markets in a case against Flipkart. Since the IT Act provides legal recognition to all electronic communications and commerce of which OTT services are a subset, the IT Ministry should take on the task of defining various OTT services through a modern IT policy. This should ideally precede any regulatory pronouncements by the TRAI, since it is a settled principle of law that the delegated power available to regulators is limited to what is imagined under their parent legislation. Importantly, a legislature cannot delegate ‘essential legislative functions’ to a body such as TRAI.
Additionally, global best-practices can provide templates to engender greater institutional coherence between regulators like TRAI and CCI. For instance, the UK’s Enterprise and Reform Act, 2013 has enhanced the role of the Competition and Market Authority (CMA – UK’s competition regulator) and mandated consultations with relevant sectoral regulators to settle jurisdictional questions. Further, it mandates the exchange of information about possible antitrust issues across markets.
Similarly, South Africa’s Competition Commission has entered into several MoUs with sectoral regulators. Such agreements are guided by the provisions of South Africa’s competition law under which the competition regulator is responsible for negotiating agreements with sectoral regulators with which it shares jurisdiction.
In 2011, a high-level committee constituted by the Ministry of Corporate Affairs (MCA) had also recommended that India’s Competition Act be amended to provide for mandatory consultation between CCI and sectoral regulators like the TRAI. Despite this, and the increasing role of antitrust in digital markets, the CCI is an emaciated body today – without a specialised appellate tribunal and lacking full strength of its Board Members. Since yet another MCA Committee has been formed to review competition law this year, perhaps it can revisit such pending recommendations and consequently attempt to level the playing field between regulators.
The authors are technology policy experts at Koan Advisory Group, New Delhi.