Consultation Paper on Regulatory Framework for Promoting Data

Consultation Paper No.10/2021

Telecom Regulatory Authority of India

Consultation Paper

Regulatory Framework for Promoting Data Economy

Through Establishment of Data Centres, Content

Delivery Networks, and Interconnect Exchanges in India

New Delhi, India

December 2021

Mahanagar Door Sanchar Bhawan,

Jawahar Lal Nehru Marg,

New Delhi – 110002

Stakeholders are requested to furnish their comments to Advisor

(BB&PA), TRAI, by 13

January 2022 and counter-comments, if any

by 27

January 2022.

Comments and counter-comments would be posted on TRAI’s

website: www.trai.gov.in. The comments/counter-comments may be

sent, preferably in electronic form, to Shri Sanjeev Kumar Sharma,

Advisor (Broadband and Policy Analysis), Telecom Regulatory

Authority of India, on the email id: [email protected] with a copy

to [email protected] and jtadvbb[email protected] respectively.

For any clarification/information, Shri Sanjeev Kumar Sharma,

Advisor, (Broadband and Policy Analysis), may be contacted at

Telephone No - +91-11-23236119

CONTENTS

Chapter

Topic

Page No.

Chapter 1

Introduction

Chapter 2

Data Centres

Chapter 3

Content Delivery Networks

Chapter 4

Interconnect Exchanges

105

Chapter 5

Data Ethics — Privacy, Ownership, and

Security

136

Chapter 6

Issues for Consultation

158

TABLES

ANNEXURES

Annexure I

Data Centre Standards and Certifications

165

Annexure II

Illustrative List of approval/clearances

required before commencement of a Data

Centre operation

169

Annexure III

IXPs: Global Experience

173

List of Acronyms

179

Table 2.1

Number of Data Centres operating in India

Table 2.2

Data Centre policies of various states

Table 3.1

Global practices: regulatory Framework for

CDN service providers

Table 4.1

Non-profit IXP business models

120

Table 4.2

Number of ISPs connected at NIXI nodes over

the years

123

Table 4.3

IXPs operating in India (as of September

2021)

129

Table 4.4

APNIC cost structure for a new member for

obtaining ASN

132

CHAPTER 1

INTRODUCTION

1.1 During the last two decades, in an increasingly knowledge-driven

globalized world, telecommunication and the internet have emerged as

key drivers of economic and social development. They have enabled

better connectivity among users, increased the use of Information and

Communications Technology (ICT) services, and facilitated the

emergence of a variety of new business models. ICT not only

contributes directly to the GDP through the production of goods and

services but also spurs innovation in the ways of production and

delivery, leading to increased employment and labor productivity.

India has one of the fastest-growing ICT sectors in the world, with ICTs

being used to deliver critical goods and services to millions of Indians.

1.2 Communications services such as voice, video, data, internet, and

wideband multimedia have become indispensable in modern society.

With the proliferation of technology, for different purposes, the

Government, private enterprises, and people in general are relying

more and more on ICT services such as digital platforms, online

content, and broadband connectivity. The digital transformation is

emerging as a key driver of sweeping changes in the world around us.

The telecommunication industry is at the forefront of this

transformation, adding value to the Digital Economy.

A. Boosting Data Economy

1.3 Data economy is an integral part of modern economy. Data has also

become a key asset for innovation. The advantage of controlling data

by online platform-based companies is increasingly recognized and

such existing companies act as an entry barrier for new entrants,

leading to near monopoly in global digital markets. The data gap

applies not only at the country level between developed and developing

economies. It is also increasingly leading to debates on the need for

policy intervention to create level playing field. The gap is growing

wider for small and developing countries that are far behind in their

digital investments and capabilities. Moreover, countries are forming

different data protection and trade regimes. As per the Organization

for Economic Co-operation and Development, “The Digital Economy

incorporates all economic activity reliant on, or significantly enhanced

by the use of digital inputs, including digital technologies, digital

infrastructure, digital services, and data. It refers to all producers and

consumers, including Government, that are utilizing these digital inputs

in their economic activities”. Also, the Digital Economy Value Chain is

the innovation of the value chain, driven by the following key digital

elements:

a. Servers, Storage, and Networking Equipment

b. Data Centres

c. Cloud Computing and Services

d. Content and Applications

e. Connectivity – Leased Circuits, Internet, Content Delivery Networks

f. Interconnection – Internet Exchange Points

1.4 Almost everything has switched to the online mode during the

pandemic resulting in an enormous increase in data consumption.

With the rollout of 5G, IoT, and AI, more data would be created via

widespread, geographically distributed networks and new-age devices.

Further, 5G would bring new use cases of Enhanced Mobile

Broadband (eMBB), Ultra-Reliable Low Latency Communications

(URLLC), and Massive Machine Type Communications (MMTC). 5G,

along with edge computing, would fulfill the needs for ultra-reliable,

low-latency, and high-throughput communications. This convergence

of computing and communication services will pave the way for a boon

in the data economy for any nation. For undertaking successful data

economy initiatives by any nation, having distributed edge computing

infrastructure, massive data storage facilities, and a robust, and

efficient internet exchange point infrastructure are pre-requisites.

1.5 Figure 1 depicts the notable key drivers for boosting data economy of

India.

Figure 1.1: Boosting data economy

1.6 To keep pace with the global data economy initiatives, it would be

necessary to formulate reliable frameworks and policies that would

encourage development of 5G, IoT, Data Centers, and associated

services, data analytics, edge computing, digital platforms, and

applications. As these services can be delivered remotely, India can

become a global hub for such systems and services.

1.7 As India aims to strengthen its position in the digital economy, it

becomes imperative for the country to use futuristic technologies as a

lever for growth. This becomes even more important while considering

the various policy initiatives that the competing economies have come

up with, along with the amount of investment and resources they are

committing towards digital transformation. The Digital India program

of the Government, launched in 2015, brought the topic of digitization

to the forefront of public discourse. Since then, considerable progress

has been achieved in several areas such as the construction of

Boosting

Data

economy

Application SPs,

aggregators,

platform SP and

intermediaries

Communica

tion

networks

Content

creators

Content

delivery

networks

Interconnect

Exchanges

Cloud

computing

and

services

Data

privacy,

ownership

and

security

Data

centers

and data

parks

broadband highways, development of local Data Centres, public

internet access, e-governance, development of basic information

technology skills etc.

1.8 National Digital Communications Policy (NDCP)-2018 also emphasizes

that “Digital infrastructure and services are increasingly emerging as

key enablers and critical determinants of a country’s growth and well-

being. With significant capabilities in both telecommunications

and software, India, compared to most countries, stands poised

to benefit from harnessing new digital technologies and

platforms to unlock productivity, as well as to reach unserved

and underserved markets; thus, catalyzing economic growth and

development, generating new- age jobs, livelihoods and ensuring

access to next-generation services for its citizens.”

1.9 Digital infrastructure is boosting the data economy, and the services

are fast moving beyond the traditional telecom services domain. With

large- and small-business companies embracing innovative

technologies and more users connecting to the internet, data is the key

input for firms to develop and deliver digital services and products.

The key contemporary infrastructure that is required to boost the

digital ecosystem and facilities include:

I. Data Centres – used for edge computing, hosting of content, and

delivering cloud-based services,

II. Content Delivery Networks – used for delivering the content from

the cloud to the edge of the network, and

III. Internet Exchange Points – enables networks to exchange traffic

with each other in the internet infrastructure.

Together these three form the part of what can be termed as “Digital

communication infrastructure and services”.

I. Data Centre (DC)

1.10 The world is going digital at a pace faster than expected. Partly, this is

driven by the pandemic-induced ‘Global Lockdown’, which has

resulted in a data surge arising out of increased digital social

interactions and online transactions. From enterprises to individuals,

usage of cloud services has increased to enable online mobility and

easy sharing of data. Cloud services facilitate the flow of user data from

front-end clients, through the internet, to the provider’s systems, and

back. Users can access cloud services with nothing more than a

computer, operating system, and internet connectivity, or virtual

private network (VPN).

1.11 Data Centre is a physical facility that is used to house applications

and data. The value chain comprises a mix of segments, including real

estate and construction, hardware equipment, utilities (power, water,

cooling), networking and software services. 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. On user requests, servers in the Data

Centres compute and process the required data to make available

desired information to the user. Due to the vital role of Data Centres

in the digital world, the development of local Data Centres is a priority

for both private players and Governments across the countries.

1.12 The Indian Data Centre market size is projected to reach USD 1.5

billion by 2022

, growing at a CAGR of 11.4%, and is expected to reach

~$5 billion by 2025

. The market is primarily driven by growing

internet penetration, increased cloud adoption, Government’s

digitization initiatives, and the push towards data localization.

II. Content Delivery Network (CDN)

1.13 CDN is a system of distributed group of servers and networks that

deliver pages and other web content to a user, based on the geographic

location of the user, the origin of the webpage, and the content delivery

server. The group of servers works together to provide fast delivery of



NASSCOM Report  India The Next Data Center Hub, February 2021

internet content. CDNs have emerged as overlay networks on the

internet to provide better support for delivering commercial content

than was available using basic, best-effort internet packet transport

services. A CDN allows for the quick transfer of assets needed for

loading internet content, including HTML pages, JavaScript files,

stylesheets, images, and videos. The content delivery with and without

CDN is shown in Figure 1.2.

Figure 1.2: Content distribution with and without CDN

(Source: globaldots.com)

1.14 To minimize the distance between the users’ computer and the

websites’ server, a CDN stores a cached version of its content in

multiple geographical locations (points of presence or PoPs). Each PoP

contains several caching servers responsible for content delivery to

visitors within its proximity.

1.15 The global CDN market is forecasted to grow by $48.48 bn during

2021-2025, progressing at a CAGR of almost 30% during the forecast

period

. According to the Cisco Annual report (2018-2023),

video

comprises more than 50% of the overall data consumed over the

internet, which is expected to increase up to 80% by 2025. The

demand for various online video formats, such as on-demand video

https://www.marketsandmarkets.com/Market-Reports/content-delivery-networks-cdn-market-657.html

https://www.cisco.com/executive-perspectives/annual-internet-report/white-paper-c11-741490.html

streaming, live video streaming, cloud TV, and over-the-top (OTT), has

been continuously increasing over the past few years. Therefore, the

rising consumption of web-based, high-definition videos is the major

factor contributing to the increase in the adoption of CDN. In addition,

the explosion in the use of social networking sites is also one of the

major reasons for the increase in videos, photos, animations, and text

over the internet. Activities such as transferring, sharing, and posting

rich media files, by the content providers as well as individuals have

increased the burden on the existing networks requiring the addition

of CDN’s for smooth operations.

III. Internet Exchange Point (IXP)

1.16 IXP is a technical facility designed to route the traffic quickly and cost-

effectively between different network members by enabling

interconnection. They are essentially large local area networks that are

built with interconnected Ethernet switches. IXPs allow ISPs and

CDNs to interconnect their networks locally. This leads to a flatter

internet, improves international bandwidth utilization, and reduces

the cost and latency of interconnections. IXPs can be grouped into not-

for-profit (e.g., industry associations, academic institutions,

Government agencies) and for-profit organizations. IXP operators,

while still providing public, neutral peering services, may also provide

commercial value-added services (VAS), such as security, access to

cloud services, transport services, synchronization, caching, etc.

1.17 The traffic exchange between two networks connecting at an IXP is

facilitated by an exterior gateway protocol called Border Gateway

Protocol (BGP), which makes routing decisions based on network

rules, hop counts, and other characteristics configured by network

administrators. This saves money on international bandwidth for the

ISPs and improves connectivity for their customers by reducing

latency. International bandwidth utilization and latency are two

crucial factors that affect the end-user experience, when digital

platforms and services are used.

Figure 1.3: DC, CDN and IXP elements of an internet ecosystem

1.18 Commercially, the internet consists of a hierarchy of global, regional,

national, and local providers. Data Centres hosting CDNs are

connected to each other and the internet cloud via IXPs. To enable the

access to the content of a parent CDN or website hosted on an

international DC, global IXPs interconnect with the local IXPs to pass

the traffic to the Indian DCs and thereby to the child CDNs, as shown

in Figure 1.3. ISPs provide the last mile connectivity to users for

accessing the services. A CDN pays ISPs, carriers, and network

operators for hosting its servers in their Data Centres.

1.19 Alongside the operational, interconnection, and bandwidth costs, the

number of hops required by a network to reach the destination server

on which the content is hosted to process the user request is also

critically important. This indicates that there is a necessity for the

expansion of the three key digital elements: International DCs, CDNs,

and IXPs in India for the advancement of the digital economy.

USA

Software

Services

Parent CDN 1

Software

Services

Parent CDN 2

International

Data Center 1

International

Data Center 2

INDIA

Software

Services

Child CDN 1

Software

Services

Child CDN 2

Indian

Data Center 1

Indian

Data Center 2

User 1

User 2

User 3

User 4

ISP

B. Need for the present consultation

1.20 Out of the notable key drivers for boosting the data economy of India,

as shown in Figure 1.1, the Authority (TRAI) has already addressed

some of the issues through its following recommendations:

1) Recommendations on Privacy, Security, and Ownership of the

Data in the Telecom Sector dated 16

July 2018

2) Recommendations on Cloud Services dated 16

August 2017

and 14

September 2020

1.21 However, not much work has been done in respect of regulatory

framework for Data Centres, Content Delivery Networks, and

Interconnect exchanges in India. National Digital Communications

Policy (NDCP-2018) seeks to unlock the transformative power of digital

communications networks to achieve the goal of digital empowerment

and improved well-being of the people of India. The missions envisaged

in the policy are as follows:

1) Connect India: Creating robust digital communications

infrastructure to promote ‘Broadband for All’ as a tool for socio-

economic development.

2) Propel India: To harness the power of emerging digital

technologies, including 5G, AI, IoT, Cloud, and Big Data to enable

the provision of future-ready products and services; and to catalyze

the fourth industrial revolution (Industry 4.0) by promoting

Investments, Innovation and IPR generation.

3) Secure India: To secure the interests of citizens and safeguard the

digital sovereignty of India with a focus on ensuring individual

autonomy and choice, data ownership, privacy, and security, while

recognizing data as a crucial economic resource.

1.22 Under the Propel India mission, various strategies have been laid out

in the Policy. Strategy no 2.2 mentioned under the Propel India

mission relates to ‘Ensuring a holistic and harmonized approach for

harnessing Emerging Technologies’. Under this strategy, provision

number 2.2(f) envisages that:

2.2 (f) Establishing India as a global hub for cloud computing, content

hosting and delivery, and data communication systems and services.

1.1 Evolving enabling regulatory frameworks and incentives for

promoting the establishment of International Data Centres, Content

Delivery Networks, and Independent Interconnect exchanges in India.

1.2 Enabling a light-touch regulation for the proliferation of cloud-

based systems.

1.3 Facilitating Cloud Service Providers to establish captive fiber

networks.

1.23 The government has proposed to formulate a scheme to incentivize

investments to set up hyper-scale Data Centres in India and boost the

capacity of the existing Data Centre ecosystem. MeitY, in November

2020, had released the draft Data Centre policy, which proposed to

designate Data Centres as infrastructure and group Data Centres

under the essential services category, among other measures. The

draft document proposes a policy, including various

structural/regulatory interventions, investment promotion in this

sector, and seeks to strengthen the "Atmanirbhar Bharat” initiative by

identifying possible opportunities for manufacturing Data Centre

equipment in the country. The draft policy document discusses issues

at a macro level and it may be followed by a detailed implementation

scheme. Keeping in mind the above-mentioned NDCP provisions and

need for pronouncing concrete action points in making India a global

Data Centre hub, the Authority has taken up this initiative on suo

moto basis to issue a consultation paper on ‘Regulatory frameworks

for promoting data economy through establishment of Data Centres,

Content Delivery Networks and interconnect exchanges in India’.

1.24 Through the present Consultation Paper (CP), the Authority intends to

seek the inputs of stakeholders on promoting the establishment of (i)

Data Centres, (ii) Content Delivery Networks, and the (iii) Internet

Exchange Points in the country. The CP has been structured into five

chapters. Chapter 1 introduces the background of the subject and sets

the context for present consultation. Chapters 2, 3, and 4 discuss the

issues in the establishment of Data Centres, Content Delivery

Networks, and Internet Exchange Points, respectively. Chapter 5

deliberates on issues related to ‘Data Privacy, Security and Ownership’

with reference to the past recommendations of TRAI of July 2018, as

well as the Personal Data Protection Bill (PDP) of 2019. Chapter 6

summarizes the various issues for consultation.

CHAPTER 2

DATA CENTRES

2.1 Data Centres play a crucial role in the digital economy. Everything that

happens online is housed in a Data Centre. These Data Centres have

become a top priority for businesses across the globe to meet their IT

infrastructure requirements. With this shift, Data Centres have moved

beyond being just an additional storage facility. It offers scalability,

security, efficiency, and state-of-the-art technology that are

increasingly demanded by companies and organizations. Also, Data

Centres offer a lot, from safety and reliability to energy efficiency and

cost reduction.

2.2 The Data Centre infrastructure and services business is a very large

emerging business that will boost the digital economy worldwide.

These Data Centres are a unique combination of property, energy, and

technology. Data Centres have been one of the sectors that are least

affected globally and in India due to COVID-19 pandemic, indicating

their crucial role in supporting continued business activity. This Data

Centre sector is witnessing significant growth in the country and will

soon become one of the economic growth engines of India and will

generate large-scale investments and jobs. Data Centres (DC) along

with Internet Exchange Points (IXPs) and Content Delivery Networks

(CDN) together form an important part of digital communication

infrastructure and services. National Digital Communications Policy

(NDCP)-2018 emphasizes digital infrastructure and services as key

enablers and critical determinants of a country’s growth and well-

being. It seeks to unlock the transformative power of digital

communications networks to achieve the goal of digital empowerment

and improved well-being of the people of India. The government of

India is also becoming increasingly reliant on Data Centres for the

Government-to-Citizen (G2C) delivery platforms, such as the National

e-Governance Plan (NeGP), e-visa, and National CSR Data portal, to

name a few. However, factors like high upfront costs, higher power

tariffs, maintenance-related issues, security, and high real estate costs

are increasingly impacting the growth of Data Centres. Also, there are

known impediments to its growth such as lack of status as

infrastructure, complex clearance processes, time-consuming

approvals, lack of published standards, absence of specialized building

norms for building the Data Centres, submarine cable network

connectivity limited to few states, and high cost of capital and

operational expenditure, etc. These elements are shown in Figure 2.1

and are discussed in the following paras:

Figure 2.1: Various elements for promoting Data Centres and

parks

Promoting

Data Centers & data

parks

Regulatory/ Policy/

structural intervention

Investment:

Fiscal and non-

fiscal incentives

Ease of doing

business

Standardization

in development

of data centers

Data center

building norms

Making data

center related

equipment and

products in

India

Security

Connectivity/

Backhaul

international

Access to power

and Water

Disaster

recovery

Centre-State

coordination

Capacity

building

Preparing for

future –

edge/AI-

enabled data

centers

2.3 Data Centres have evolved significantly in recent years. In the past,

they were highly controlled physical infrastructures, but the adoption

of the cloud has changed that model. When enterprises migrate their

data and workloads to cloud Data Centres, they reside in physical

infrastructures that are best-in-class on-premises Data Centres. As

the data markets continue to move toward on-demand services, the

infrastructure has shifted from on-premises servers to virtualized

infrastructure that supports workloads across both the physical

infrastructure and cloud environments. Initially, only large companies

had their own server farms for storing data, but with the increase in

web-based applications, a hybrid cloud-based storage industry with

third-party storage solutions have come up. India is currently home to

80+ third-party DCs and is witnessing investments in around 15

projects annually, with a growing presence of both local and

international players

2.4 In general, Data Centres provide facilities necessary to enable reliable,

uninterrupted storage, processing, and transmission of data. The

facilities include all kinds of IT equipment, including servers, storage

systems to run applications, network equipment like switches, routers,

and firewalls, as well as the cabling for connectivity purposes. A Data

Centre also contains adequate infrastructure in the building area,

such as power distribution and supplementary power systems, racks,

electrical switching, ventilation, and cooling systems. The basic

building blocks of a Data Centre are represented in Figure 2.2.

NASSCOM Report: India The Next Data Centre Hub  Feb 2021

Figure 2.2: Basic building blocks of a Data Centre

(Source: NASSCOM Cloud)

2.5 The core components of a Data Centre design include routers,

switches, firewalls, storage systems, servers, and application delivery

controllers. These components store and manage business-critical

data and applications. Together, they provide:

a. Network infrastructure – This connects servers (physical and

virtualized), Data Centre services, storage, and external

connectivity to end-user locations.

b. Storage infrastructure – Data is the fuel of the modern Data

Centre. Storage systems are used to hold this valuable commodity.

c. Computing resourcesؘ – Applications are the engines of a Data

Centre. Servers provide processing, memory, local storage, and

network connectivity that drive applications.

Data Centre — Models

2.6 Various types of DC models are in existence depending upon the

ownership and management of the facilities. A specific model depends

on whether facilities are owned by one or many organizations, how

they fit into the topology of other Data Centres, what technologies they

use for computing, storage, and their energy efficiency. The extent of

DC usage generally differs based on size and business operation.

Broadly DC investments in India can be categorized into ‘Captive’ and

‘Outsourced’ Data Centres. Captive models are Data Centres

specifically designed to meet the needs of a business or enterprise,

which are not shared with other organizations. On the other hand, the

outsourced models are developed and operated by third-party service

providers, providing shared services of data management to various

organizations. These can be classified as – Colocation Services, Hosting

Services, and Hybrid Services. Thus, the DCs can be owned and

operated through different models deliberated as under:

A. Captive Data Centre - Large enterprises own and operate their own

data storage facilities, which are known as captive Data Centres

where the data of a single organization is stored and processed. The

facility is owned, operated, and maintained by the company whose

data is hosted. This DC is also implemented as the Landlord

investment model, in which the investor provides basic facilities

such as space and/or power. Tenants set up their own servers,

facilities, and staff as per their requirements.

Captive DCs have advantages like control over the infrastructure,

security, but are disadvantageous in terms of higher CapEx and

OpEx and limited scalability. Investments in captive DCs by private

sector enterprises in India have been declining primarily on

account of shift of the business to the cloud platforms, even though

it’s use is growing for Governments and public enterprises. On

average, there are new investments in at least 60 captive DC

projects annually in India

; where demand is primarily driven by

the public sector and educational institutions. While it is largely

restricted to expansion and up-gradation of the existing facilities

for the private sector.

NASSCOM Report  India The Next Data Centre Hub, February 2021

B. Outsourced Data Centre - These DCs have advantages in form

and of scalability, reduced CapEx, improved physical security but

have disadvantages in form of hidden costs and less control over

the infrastructure.

i. Colocation Data Centre: The organizations buy large spaces

and construct the basic Data Centre structure and then lease

out space to customers for setting up their own IT equipment.

These equipment needs to be maintained by the customers, with

the host maintaining the facility. The host also provides

additional facilities like engineering services, infrastructure

facilities, network services, power, and backup. Tenants pay

rent and set up their own servers. Major end-users of colocation

services in India include cloud service providers, Banking,

financial services and insurance (BFSI), entertainment sector,

content delivery network providers and e-commerce

organizations.

ii. Hosting Data Centre: These Data Centres have servers and

related IT equipment that can be leased by customers from the

host of a large storage facility. Customers are responsible for the

maintenance and operation of these servers, including their

organization and security. The majority of the outsourced DC

developers/operators, such as NTT Global Data Centres

(Netmagic) and CtrlS offer hosting services in India. Also, global

cloud service providers such as AWS, Microsoft, Google, IBM,

and Oracle offer cloud hosting services for Indian customers

through their physical cloud regions in India. On average,

hosting services contribute to 50% of the total revenues of the

local outsourced DC service providers, while colocation and

hybrid services together account for the remaining 50% of the

revenue.

iii. Hybrid Data Centre: It is a combination of colocation as well as

hosting Data Centre. Many larger enterprises continue to rely

on on-site Data Centre facilities, particularly for legacy

equipment and applications, and some enterprises will combine

cloud with hosting and colocation services, particularly those

with a relatively small IT staff. In a Hybrid model enterprise,

customers procure infrastructure and host in a colocation

facility, while the Data Centre service provider manages the day-

to-day operations. In India, the market is still in the nascent

stage, with only a few DC operators (such as NTT (Netmagic

Solutions) and CtrlS) are able to provide advanced hybrid

services. Currently, around 20% of the customers opt for hybrid

services. Going forward, this percentage is expected to grow with

the increase in the establishment of colocation centres.

These investment models are devised by investors with varying risk

exposure. Companies who are conservative about Data Centres may

opt for the captive model, while the companies with considerable risk

appetite may opt for co-location and hosting models. As per the

current market dynamics, demand for co-location models is on the rise

in the country.

Benefits of Data Centres on the Economy

2.7 Data Centre (DC) industry has made significant inroads in India. Both

Foreign and Indian players have either already launched Data Centres

in India or have announced significant DC investments in major cities.

India is one of the most capacity-hungry Data Centre markets in the

world and holds immense potential to become a Data Centre hub in

the Asia-Pacific (APAC) region due to its inherent strengths. Being

amongst the fastest-growing major economies of the world, the country

also has a rapidly expanding data consumer base. This is further

emphasized by the presence of he trained and skilled workforce.

Increasing domestic and international demand from sectors such as

banking, financial services, telecommunications, technology, and

infrastructure is providing further boost to this sector. With the

growing reliance on internet services and advanced technologies for

data management, there is already a good demand for high-quality

DCs.

2.8 By financing capital-intensive projects and Data Centre investments,

global and multinational companies such as Amazon Web Services,

Microsoft, Google, Equinix, etc. have provided significant economic

and employment benefits worldwide. Initial capital investment and the

ongoing operational expenditure creates and sustains jobs across the

wider economy.

2.9 The thriving Data Centre industry has spilled over benefits to several

sectors and industries in form of digitization, which has been a great

focus of the Government of India. Data Centres help in creating

localized low-cost data storage and processing services which in turn

helps the digital start-up ecosystem to get cost benefits. A notable

advantage that localized Data Centres provide is the reduction of

latency in data access. According to companies that have recently

shifted Data Centres to India, there is a 10% latency reduction in

shifting from a centre in Singapore

and a 30% reduction in shifting

from a centre in the U.S. Further, if we compare the cost of manpower,

real estate, and bandwidth, India is at least 60% cheaper than the U.S.

or Singapore

. Thus, storing data locally will reduce network latency.

Combined with the impending deployment of 5G, it will further enable

low latency and high-speed services in the Indian market.

2.10 DCs being critical hubs for both technological and economic reasons

are core for digital infrastructure at a regional, national, and global

level. They provide a substantial economic impact to the regions in

which they are located through direct, indirect, and induced effects.

2.10.1 The direct effect is the economic impact directly from a

Data Centre construction and operation. Directly supported jobs

include positions in management, IT and system technicians, electrical

and mechanical maintenance, water management, repair, and

hardware operations, etc.

https://www.yotta.com/how-will-data-localization-impact-the-data-center-market-in-india/

ibid

2.10.2 The indirect effect includes the economic impact through

suppliers of goods and services. The Data Centre creation leads to

demand for local raw materials. The indirectly supported jobs include

positions in security, catering, cleaning and in the construction, and

supply industries across the economy.

2.10.3 Induced effect refers to the economic impact that occurs

when employees at the Data Centre and their supplier industries spend

their wages throughout the economy. The induced jobs are primarily

service-related jobs in industries such as retail trade, transport,

accommodation, restaurants, housing, and finance.

2.11 As mentioned earlier in the direct economic effect, Data Centres

generate an enormous amount of employment, because they are part

of a unique logistics chain consisting of all kinds of companies, from

internet exchanges, hosting, and cloud providers, to consulting firms

and fiber optic providers. The Uptime Institute has forecasted that

Data Centre-related jobs will grow globally from about 2.0 million in

2019 to nearly 2.3 million in 2025. This estimate covers more than

230 specialist job roles for different types and sizes of Data Centres,

with varying criticality requirements, right from design to operation

Thus, Data Centres not only provide jobs and create an additional

source of income but also strengthen and empower local communities

to meet the demands of the modern economy.

2.12 Creation of large campuses/parks for DC purposes leads to allied

industries being located closely forming geographic clusters for

resource and utility sharing. Forming of DC clusters will likely lead to

investments and growth of industries providing solutions for Data

Centres such as cooling, uninterrupted power, and high-speed

internet connectivity. The establishment of large Data Centres in Tier-

2, Tier-3 cities are likely to have the add-on benefits of encouraging

ISPs to roll out robust Optical Fiber Cable networks for increased

broadband connectivity.

https://uptimeinstitute.com/global-data-centre-staffing-forecast-2021-2025

2.13 The growth of the DC industry leads to knowledge creation and

innovation, with major cloud storage providers such as Google

extensively training their employees. The suppliers working on the

construction and operation of Data Centres also acquire knowledge of

the domain, which can contribute to the growth of the industry within

India. It also allows these suppliers and employees to export their

services to neighbouring countries/locations for DC establishments,

that are still in the nascent stages in much of South Asia. This effect

has been seen in many countries of Europe where Data Centres were

established in Ireland and Belgium.

Effect of Key Data Centre on the Economy – Case of Google in

Europe

2.14 To keep all of Google's products and services up and running around

the clock, the global tech giant owns and operates Data Centres all

over the world. The majority of Google’s expenditure (nearly 70%) has

gone towards constructing four new Data Centres in Europe. In total,

since 2007, Google has spent EUR 2.3 billion in Europe, i.e., on

average EUR 200 million per year

. On top of the construction

expenditure, Google has also spent EUR 0.9 billion on operations of

these facilities, i.e., on average almost EUR 90 million per year. Results

show that, when considering the direct and indirect economic effects,

Google’s investments in the four Data Centres and fiber networks have

supported an overall economic impact of EUR 5.4 billion in GDP

cumulatively over the period 2007-2017, varying between a yearly

impact of EUR 0.2 and 1 billion. Broken down as direct, indirect, and

induced effects of EUR 1.4, 2.2, and 1.7 billion, respectively.

2.15 Similarly, a larger Data Centre network would imply a bigger economic

contribution to the Indian economy. Future growth in user demand for

services like cloud, AI, machine learning, and platform services implies

that investments in Data Centres will continue to increase over time

as in the past. Besides Google, top cloud vendors like AWS, Microsoft,

https://www.copenhageneconomics.com/copenhagen-economics-2018-european-data-centres.pdf

IBM, and Oracle continue to expand their base with the opening of

cloud regions in the APAC region and a strong physical presence in

China, Singapore, Australia, and India

. Five years after opening a

Data Centre in Mumbai, Google Cloud announced opening a Data

Centre in Delhi soon

. In April 2020, Google also announced its

planning for a $400m submarine cable that will link India and Italy in

2022. Thus, it is reasonable to expect that Google will continue to

expand its investments in Europe and APAC countries like India, and

consequently, Google’s economic impact would eventually increase

across the globe.

International – policy, initiatives for Data Centre industry

2.16 Globally Data Centre investments have grown significantly in the past

years, led by key players like Google, Facebook, AWS, Alibaba, and

Microsoft. Growth of the digital economy and initiatives for smart cities

continue to boost Data Centre investments in many countries. The

governments around the globe have been successful in attracting these

players to establish Data Centres in their countries. Some of the

nations, which have huge Data Centre markets running successfully

and wherein the major steps were taken by their respective

governments and the incentives provided to the Data Centre players

are discussed below:

2.17 United States – States of the U.S. are competing to attract Data

Centres by offering financial incentives, often by waiving sales or

property taxes on the expensive equipment they use. Many states

provided sales tax exemption and property tax breaks in some form to

enhance the international Data Centre market as follows

a. Alabama exempts Data Centres from states and local sales and

property taxes by a law that offers up to 30 years of tax breaks for

https://www.prnewswire.com/asia-pacific-data-centre-market-outlook-2021-2026.html

https://cloud.google.com/about/locations#asia-pacific

Source: Associated Press research of laws and interviews with economic-development officials in all 50

states

Data Centres investing $400 million and creating at least 20 jobs

with an average annual compensation of $40,000.

b. Arizona provided a sales tax exemption for Data Centres that can

last up to 10-20 years.

c. In Florida, Data Centres fall under the Florida Enterprise Zone

incentives program, which has a qualified target industry tax refund

incentive. Under the scheme, companies that create high-wage jobs

in the state are eligible for tax reimbursements on their corporate

incomes, sales, intangible personal property, and insurance

premiums.

d. Georgia offers a sales tax exemption for equipment in Data Centres

investing at least $15 million annually, and Atlanta ranks among

the leading markets for Data Centres.

e. Colorado provides general job-based tax breaks for Data Centres. H

f. Hawaii offers job creation incentives to Data Centres; however, the

dollar value of incentives is confidential.

g. In Wyoming, a law offers Data Centres that invest at least $5 million

a sales tax exemption on computer equipment. Data Centres that

invest at least $50 million also can get a sales tax break on power

supplies and cooling equipment.

2.18 United Kingdom – The main reasons behind the UK, especially

London being the hotspot for Data Centres are connectivity, a huge

demanding customer base, regulatory and legislative stability. Another

reason is also the availability of skills where the UK has expertise in

sector investments, finance, funding, innovative design, engineering,

and construction.

a. Connectivity: The UK has unparalleled global fiber connections

both in terms of size and reach. The intercontinental fiber reach of

London covers global to local needs, and its major internet

exchanges provide unparalleled access between multiple continents

and Europe.

b. Investment Security: The UK’s safe structured environment,

ownership rights, EoDB, and ROI (return on investment) potentials

attract FDI (foreign direct investment). London, described as the

“ultimate place to de-risk”, is important considering that Data

Centres are among the most expensive real-estate investments in

the world.

2.19 Singapore: Singapore is the most sought-after APAC Data Centre

market and has become a primary hub for cloud services within the

region due to its favourable conditions like robust infrastructure,

access to fiber, talented local workforce, and great set of community

partners. Its telecom sector is the most advanced globally, boasting of

first-class connectivity and admirable network infrastructure.

According to the Singapore Economic Development Board, Singapore

is currently home to approximately 50% of Southeast Asia’s Data

Centre capacity. It has continued to improve in indices and has made

substantial improvements in ease of acquiring and registering

property. It now takes less than six days in Singapore to register a

property for building a Data Centre. Similarly, the country’s legal

framework is strong and substantially well placed to protect its

investors against any capital risks. The Government initiated a Next

Generation Broadband Network (NGBN) plan in 2015 for a state-wide

fiber-based network. NGBN is to increase broadband connectivity,

thereby boosting domestic data consumption as well, which in turn

increased the demand for Data Centres. Its strong network

infrastructure, large content distribution network, diverse connectivity

to major APAC markets, pro-business environment, and political

stability are some other factors that favour Singapore’s preference by

Data Centre players. Its low-tax environment has also made it an

attractive location for large corporations. Zero GST tax rate for

international services and exports has attracted many foreign

investors. Growth among the small- and mid-size businesses, in turn,

increased the demand for public cloud services such as Software as a

Service (SaaS) and Infrastructure as a Service (IaaS). The Government

incentive to boost the DC market is

2.19.1 An approved company under the Pioneer Certificate

Incentive (PCI) or Development and Expansion Incentive (DEI) is eligible

for a corporate tax exemption or a concessionary tax rate of 5% or 10%,

respectively, on income derived from qualifying activities.

2.19.2 Singapore’s Data Centre parks also provide power-related

infrastructural facilities like on-site power plants, dual power feeds,

and redundant sources of network path diversity.

2.20 Singapore established multi-activity zones in the 1960s and

specialized SEZs (e.g., petroleum refinery activities) in the 1970s. In

the 2000s, its SEZ policy shifted to creating knowledge-intensive

clusters through the establishment of innovation-driven SEZs focused

on R&D and other high value-added activities. In 2018, the Singapore

Cooperation Enterprise, a Singaporean Government agency, signed a

tripartite agreement to develop a single electronic window solution to

facilitate trade and increase trade efficiencies for the special economic

zone in Nkok, Gabon. The other two parties to the agreement were the

Gabon Special Economic Zone—an international public-private

partnership comprising the Government of Gabon, Olam International

(Singapore), and the African Finance Corporation—and the Singapore-

based global trade facilitation platform provider vCargo Cloud.

2.21 Nongsa Digital Park (NDP), located in the northeast of Batam, has been

upgraded from a technological park to an SEZ. 25 Hectare of the park

has been allocated to develop the Data Centres in the first phase, with

plans for expansion in the future. This decision has signified NDP as

the ‘Digital Bridge’ between Singapore and Indonesia to grow the digital

economy that was identified as a joint growth sector between the two

countries during RISING 50 leaders’ retreat in Singapore. The Park

hopes to become a hub for Data Centres, the Data Centre market

www.edb.gov.sg

https://unctad.org/system/files/official-document/WIR2019_CH4.pdf

growth is expected to intensify in the region, driving demand for "edge

Data Centres" located closer to the end-users so they can benefit from

lower latency, higher security, and greater control of their data.

2.22 Malaysia: Malaysia is one of the preferred destinations for shared

services and Data Centres in the APAC region due to various initiatives

it has undertaken. The Malaysian DC market is broadly marked by

expansion, efficiency, and consolidation. Ample land, good

infrastructure, educated workforce, and political stability are the

advantages. Due to the presence of many global network providers, it

has good international network connectivity. Multimedia Super

Corridor or MSC Malaysia is a Special Economic Zone initiative for the

global IT industry and is designed to be the R&D centre for IT

industries. MSC Malaysia status is given to both local and foreign

companies that develop or use multimedia technologies to produce and

enhance their products and services as well as for product

development. The current ecosystem, under which the Government

functions, seems to be driving Malaysia’s ability to attract Data Centre

investments. The incentives are as follows

I. Freedom to source funds globally for investments.

II. Globally competitive telecommunication tariffs.

III. Income tax exemption (for 5 years and extendable by additional 5

years) on statutory income (or value-added income) derived from

services provided about core income-generating activities for MSC.

IV. Unrestrained employment of local and foreign knowledge workers.

Malaysia has consistently been ranked as one of the most business-

friendly countries in the Ease of Doing Business index. For

example, starting a business in Malaysia takes only three days. The

country favours DC business investment because of an assured

availability of land. Malaysia has the second-fastest process for

registering property in Asia. Besides, the country also generates

surplus electricity that ensures that an energy-intensive industry

taxsummaries.pwc.com

like Data Centres is assured of a constant supply of electricity.

Electricity and energy costs are minimum in Malaysia among the

South-East Asian countries. Moreover, it has access to renewable

power from hydroelectric dams which is appealing for companies

with environmental mandates.

2.23 China: China leads the world in internet consumption, and the DC

market has benefited from the factors of rapid economic growth

coupled with the quick adoption of IT and digital services by the

Government. Traditional industries are encouraged by policies to

embrace digital transformation and ultimately has driven the data

market growth, with which China has become the second-largest Data

Centre market worldwide—behind the USA. Chinese Government has

designated Data Centres as a nationally strategic investment sector

since 2017, as part of a policy to encourage further investments in

advanced technologies like cloud computing, AI, and Big Data, which

is now allowing more Government-supported Data Centre

deployments. The regional Chinese Governments are also promoting a

Data Centre sector as a means of advancing regional economic

development. For example, Hubei Province is aiming to create a Data

Centre cluster in China as North Virginia is doing in the USA. Several

cooperation projects are signed between the Hubei Government and

ZTE Corp. The Hubei Government has set up efforts in a phase-wise

manner to provide infrastructure and encourage investment to help

ZTE finish the Data Centre project in 2020 and achieve long-term

goals. China’s regulator Ministry of Industry and Information

Technology (MIIT) has formulated a separate license called Internet

Data Centre (IDC) license in 2015. Operators require an IDC license to

build or lease Data Centre services. Investors establishing a Data

Centre in China must review a variety of considerations, ranging from

the local climate to infrastructure quality and tax incentives. Local

authorities in lower-tier cities are generally more open to establishing

new centres and often provide tax and land incentives. Data Centres

within China’s tech parks also enjoy more favourable Government

policies and better amenities.

2.24 Hong Kong: Hong Kong has emerged as the key regional Data Centre

location because of its low tax rate, well-established legal system,

extensive business network, reliable energy supply, reliable network

connectivity, blooming start-ups, and IP protection. The Government

support for a Data Centre includes land supply by industrial estates,

availability of greenfield sites for sale, land earmarked specifically for

Data Centres, facilitation units and thematic portal, waiver/fee

exemption for using parts of existing industrial buildings, and tailor-

made lease modifications of industrial lots for Data Centre use.

Demand drivers for Data Centres in India

2.25 Presently, with the Digital India initiative, the Government is pushing

for the growth of the digital economy through supporting Data Centre

development. The Government of India recognizes the importance of

digital infrastructure and utilizes public and private clouds to deliver

solutions to Indian citizens. Increased penetration of the internet

(including in rural areas) and the rapid emergence of e-commerce are

the main factors for the continued growth of the Data Centre market

in the country. Also, many IT and software companies are now

migrating to cloud-based business operations that are contributing to

the Data Centre co-location and hosting services in India.

2.26 Major workforce was compelled to go remote due to the pandemic,

which has led to an increasing number of companies investing in IT

and cloud services. This rising digitization has given a stimulus to the

demand for Data Centres in the past few years. The need for scaling

up the data processing and storage requirements has been

underscored by the increased data consumption during the lockdown.

A CBRE report

forecasts technology, fintech,

pharmaceuticals/healthcare, education, and media and content to be

http://cbre.vo.llnwd.net/India_Major%20Report_Data%20Centres_The%20Next%20Charged%20Up%20Wave

the key drivers of the Data Centre segment. On account of more users

coming into the fold of technology, technical convergence, the

proliferation of Industry 4.0, the upward trajectory will sustain the

Data Centre segment in the country. Digital inclusion will play a

pivotal role in attracting investment in Data Centres and dispersing

Data Centres to Tier-2 or Toer 3 cities and creating skilled jobs.

I. Data Explosion

2.27 India has witnessed a digital thrust since the enhanced focus by the

Government on the Digital India flagship program to improve online

infrastructure and increase digital literacy and penetration, with

several initiatives leading to an unprecedented digital explosion.

Digital adoption has become critical for personal and business needs;

moreover, this digitization push accelerated during COVID-19, with

data-usage-per-subscriber rising at an all-time high of 12GB per

month in the quarter ending September 2020

, amidst increased

work-from-home, online education, OTT consumption, online gaming,

and casual internet use during the lockdown. With the cheapest data

tariffs in the world, affordable smartphones, the data usage would

effortlessly increase from 12GB/user/month currently to

25GB/user/month by 2025

. To support these overlaying volumes of

data explosion, Data Centre storage space growth is inevitable.

2.28 Indian Data Centre market investments are expected to grow at a

CAGR of 5% (~2X of the global market) to reach $4.6 billion per annum

by 2025

. The Data Centre market is witnessing a continuous uptrend

owing to growing internet penetration, increased adoption of cloud,

rising use of big data analytics and IoT, increased thrust on data

localization, and other data economy factors. Below is a peek into the

factors that will continue to drive Data Centre investments in India:

TRAI Performance Indicator Report

ANAROCK Navigating the India Data Centre Lifecycle Report

NASSCOM Report: India The Next Data Centre Hub  Feb 2021

2.28.1 Internet penetration: Being the second largest internet

market, India has an internet user base of over 750 million subscribers

by the end of December 2020

, which is expected to reach one billion

by 2025. Digital adoption has increased data traffic and pushed the

occupancy rate of colocation Data Centres, with several investors

planning to expand their capacities across major locations.

2.28.2 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. This shift has pushed increased investments

in hyper-scale Data Centres with the global DC market investments

expected to reach ~$200 billion per annum by 2025, and India is

expected to account for 2.3% of these total investments.

2.28.3 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.

India is expected to be a frontrunner in the Internet of Things (IoT)

adoption in Asia-Pacific requiring huge Data Centre space.

2.28.4 Data Economy factors - India is set to become a thriving

data economy in the APAC region with growing digital services. Indians

are the largest audience of social media and OTT platforms. OTT

subscribers are 30 million as of July 2020

, and this number is likely

to grow with an increased smartphone and internet penetration.

Mobile points of sale transactions are expected to rise from US$ 16 Bn

in 2020 to US$ 44 Bn in 2024 (28% CAGR)

. Also, digital commerce

usage is expected to rise from US$ 57 Bn in 2020 to US$ 94 Bn in

2024 (13% CAGR)

2.29 The NDCP–2018 has emphasized accelerating Industry 4.0 to develop

a market for IoT/ M2M connectivity services in sectors including

Agriculture, Smart Cities, Intelligent Transport Networks, etc. The

TRAI Performance Indicator Report

https://www.ibef.org/blogs/india-s-ott-market

statista.com

Government of India has also announced many M2M or IoT mega

projects, which have the potential to impact socio-economic life. Some

of them are:

I. Development of 100 Smart Cities project and rejuvenating 500

others by the Ministry of Urban Development.

II. The Ministry of Power has taken up 14 Smart grid pilots with an

average customer base of around 20,000 each.

III. The Ministry of Road Transport has mandated that all commercial

vehicles of more than 22 seating capacity be enabled with GPS,

emergency calls, etc.

Thus, M2M will continue to see strong growth with technological,

political, and economic factors coming together. Also, with the

enhancement in M2M communications, the amount of data will

increase tremendously, thereby stimulating the growth of the Data

Centre industry.

2.30 During the pandemic, the DC sector have played a critical role in

keeping the country online, which made service providers to fast track

their planned expansions. The investments in capacity expansion by

operators worldwide picked up since Q3 2020 owing to the surge in

demand in the DC market. Data Centres will also become one of the

most preferred forms of alternative real estate asset, with the focus

shifting to large hyperscale developments. The widening e-commerce

network in India will boost the DC segment, as it increasingly needs

help in managing its growing database. Passing policies such as the

National E-commerce Policy, NDCP-2018, Personal Data Protection

Bill, and the Policy framework on Data Centre by the Government will

accelerate demand.

II. 5G rollout

2.31 The Data Centre continued to remain an essential aspect of the

Telecom and IT industry. With the increasing data storage demands of

the telecom sector, Data Centres are becoming a more strategic asset

for telecom operators. Data Centres that were used primarily to

support internal functions, are today used to deliver end-user

applications, including content and video. The investments made by

the telecom providers in their Data Centre offerings are thus allowing

them to leverage their assets to build another segment of business to

earn revenue. As networks ramp up their support for 5G and IoT, the

DC providers are focusing on the edge and the increasing need to

locate more capacity close to the end-users, while TSPs are re-

evaluating the role of their Data Centres.

2.32 Introduction of 5G in India will bring forward more content in the

marketplace, and thereby generate demand for more storage. 5G

technology will transform the industry by revamping its existing

processes and infrastructure. Small cell technology will be used

heavily to roll out 5G coverage. Moreover, 5G connectivity will

introduce the idea of ‘many to one’ methodology where the user's

endpoint device will need to communicate with many towers or

antennas of the small cells, at the same time, thereby requiring more

Data Centres. Data Centres will need to be close enough to these cells

to maintain 5G’s low latency performance and meet service-level

agreements. Data Centres that have been set up for 4G will have the

capacity for handling 5G data; however, they will have to change their

infrastructure to cater to 5G’s frequencies. Micro Data Centres might

even be deployed at the base of cell towers, allowing limited data

processing with even faster response times for critical applications.

2.33 The infrastructure of 5G wireless networks will be based on Software-

defined networking (SDN), which provides communication

arrangements between cloud applications and services and a user’s

mobile terminal. Network Functions Virtualization (NFV) is another

major driver of change in the telco Data Centre. NFV often planned in

conjunction with SDN transformation will give TSPs the ability to use

network resources more efficiently. The future of Data Centres in the

upcoming 5G SDN era will have a major impact on the telco Data

Centre networking domain, including the various implementation

scenarios and approaches of new challenges. As TSPs transform their

Data Centres to support SDN and NFV, demand escalates for a set of

Data Centres especially operating for telecom needs.

2.34 Telecom Data Centres: A telecom Data Centre is a facility owned and

operated by a Telecommunications or a Service Provider company.

These Data Centres generally require very high connectivity and are

mainly responsible for driving content delivery, mobile services, and

cloud services. Telecom providers may run the Data Centre within a

Data Centre similar to a Colocation Data Centre. As India is turning to

be a favorite market for the cloud ecosystem (Software-as-a-Service,

Platform-as-a-Service, and Infrastructure-as-a-Service), telecom

companies are keen to get a place in the lucrative Data Centre market,

partner with global players looking to offer value-added services, and

rollout 5G services. For example, Nextra by Airtel has a nationwide

portfolio of around 10 large Data Centres and more than 120 edge Data

Centres, providing customers with co-location services, cloud

infrastructure, managed hosting, data backup, disaster recovery, and

remote infrastructure management. Airtel Nextra will invest Rs 5,000

cr to expand Data Centre business plans to build seven hyper-scale

Data Centres, which will triple its capacities and help India become a

regional hub for Data Centres. As per news reports even Reliance Jio

Infocomm Ltd plans to build a data centre in Uttar Pradesh at an

investment of around $950 million

. This is driving a change to

telecom Data Centre demands for network operators.

III. Data Localization

2.35 Data localization laws are gaining prominence, such as GDPR in

Europe and Cybersecurity Law in China, owing to their rapid digital

development. With many organizations going through a technological

shift via Data Centre decommissioning and migration to the cloud, the

need to secure data privacy has become more urgent in the context of

https://www.livemint.com/industry/telecom/jio-plans-near-1-billion-data-centre-in-uttar-pradesh-

11614039904599.html

organizations, considering the emerging threat scenarios and

implications of a data breach. A Gartner release informs that 80% of

enterprises are expected to migrate away from on-premises Data

Centres to the cloud by 2025. However, the proposed Data Protection

Bill may empower the Government to exempt such companies, which

only process the personal data of foreign nationals who are not present

in India. This move may incentivize these companies to ramp up their

Data Centre capacity in the country. Storing data locally will reduce

network latency and improve speed. With this, some of the latest

providers with resource ownership will be able to build massive

capacities of Data Centres at much higher scalability and quality but

at much-reduced costs.

Data explosion + Data localization = India −> the new Data Hub

in Asia

IV. India- The new Data Centre hub

2.36 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. India currently

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 localization. Service

providers like NTT (Netmagic), ST Telemedia, CtrlS, Yotta

Infrastructure Solutions, RackBank are investing in DC development

to support the unprecedented demand that will arise through data

localization policy. India is a more viable and economic place to build

and operate large-scale Data Centres. Data explosion along with the

Government's decision of data localization will surely make India a

Global Data Centre Hub.

2.37 India holds an enormous potential to become the ‘next destination’ for

Data Centres propelled by the policy initiatives, increasing customer

base, and corporate requirements for data storage. Its relative position

in the Asia-Pacific region also means that neighboring countries may

look to India as a key provider of infrastructure to the region like

Singapore. The increasing demand for cloud services induces global

internet companies such as Amazon, Apple, Facebook, and Google to

amplify global Data Centre capacity growth. This may very well provide

an opportunity for the cloud and IT companies to invest in the APAC

region, especially India to develop the capacity.

India − policy, initiatives for Data Centre industry

2.38 Despite the wide demand and progress of the Data Centres, in reality,

the establishment of a Data Centre has many hurdles from a selection

of location, acquiring permissions, building and operational costs,

infrastructure, and availability of resources, security, data

management, etc., to handle the storage facilities.

2.39 The Data Centre establishment requires tremendous investment at the

preliminary stage due to costly real estate, power infrastructure, water

requirement and improving wide area network connectivity. Acquiring

land, obtaining permits, and ensuring an uninterrupted power supply

are major requirements for establishment of Data Centres. Land

requirements depend upon the tier, i.e., space capacity (refer to

Annexure I for Data Centre tiers) of the Data Centre. According to the

CBRE report

, the land required for captive Data Centres is at least

20,000–40,000 sq. ft., and that for third-party Data Centres is at least

100,000–200,000 sq. ft. Similarly, the investment in the construction

of a Data Centre would depend on its tier. The investments needed to

construct a Tier 4 Data Centre would, on average, be INR 24,000–

25,000 per sq. ft. and for a Tier 3 centre, the cost would be INR 16,000–

18,000 per sq. ft. Based on the geographies of the location there are

differentiations in the construction costs, thereby affecting the site

selection process.

https://www.realtynmore.com/India-Is-India-the-next-frontier-for-the-data-centre-industry-June-2018.pdf

2.40 Many Data Centres have been set up in India, but the focus of Data

Centre players have been on Tier-1 cities like Mumbai, Pune, Chennai,

Delhi for various reasons like the presence of robust connectivity,

uninterrupted power supply, excellent local market, availability of

skilled manpower, etc. The Tier-2, Tier-3 cities, and the rural areas

lack infrastructure, power, and fiber connectivity. The taxes levied on

the real estate make it difficult to buy large parcels of land for a Data

Centre. This leads to increased costs deterring players from entering

this segment. The real estate players can shift their focus to Tier-2

cities, which could prove to be more reliable, offering affordable real

estate options and lower labour costs. Tier-2 cities can also be a

hotspot for hosting disaster recovery sites for the main Data Centres.

Considering the potential of such cities, the only areas of improvement

are transport connectivity, internet connectivity, and the power supply

in these regions. Table 2.1 gives an outlook of several Data Centres in

major cities in India. The area map shows that there is a clear lack of

opportunities for Data Centres expansion in the north, northeast, and

central regions, though there is a substantial internet penetration and

digital services explosion in those regions. As of September 2021, there

are 172 colocation Data Centres from 26 areas in India

https://www.datacentremap.com/india/

Location

No. of DCs

Delhi-NCR

Bengaluru

Chennai

Pune

Mumbai

Ahmedabad

Kolkata

Hyderabad

Other cities

Figure 2.3: Data Centres area map

(Source: datacentermap.com/India/)

Table 2.1: Number of Data

Centres operating in India as

of September 2021

2.41 Annually, the Indian market is witnessing investments in a few Data

Centre projects from DC service providers. Maharashtra continues to

dominate with an investment share of over 50% in the market. While

Mumbai and Chennai remain the foremost choices, the other metro

cities of Hyderabad, NCR and Bangalore are also of interest given the

huge catchment of urban population and large enterprises. Even Tier

2 and Tier 3 locations offer significant cost advantages and have the

potential to overtake Tier-1 cities, especially because of the low labour

costs, manpower requirement of the industry, and economically valued

real estate available in those regions. The favorable policy offered by

some of these states have also played a part. Table 2.2 summarizes

fiscal and non-fiscal incentives offered by some of the states. Whilst

the data requirements of Tier-2 cities are on the rise because of a

decentralized workforce, there will be an increased demand for rapidly

deployable smaller colocation Data Centres built closer to smaller

cities. Building Data Centres in new Tier-2 cities where internet use is

booming is also a strategic business move, as it would help in easing

congestion and speed up internet services, creating increased

opportunities for edge DCs in the country.

Table: 2.2 Data Centre policies of various states

no.

State and DC

Policy

Key Provisions

Maharashtra

(IT/ITES

Policy – 2015)

a. DCs will be covered under Essential Services and Maintenance (ESMA)

Act

b. DCs are eligible for the below fiscal incentives that are provided for

IT/ITES units:

c. 100% stamp duty exemption to new IT/ITeS units

d. Electricity duty exemptions for 10 years

e. Electricity tariff – power supply at industrial rates

f. Property tax is levied at par with residential rates

g. Registered IT/ITES units shall be exempt from octroi/Local Body Tax

(LBT)/entry tax/escort tax or any other cess

h. Allowing setting-up of IT/ITES units in any zone

http://di.maharashtra.gov.in/IT_ITES_Policy_2015_final_English.pdf

Telangana

(Telangana

Data Centre

Policy – 2016)

Fiscal Incentives:

1) Incentives for expansion of IT/ITeS shall be applicable for Data Centre firms

a. Allotment of Govt. land based on eligibility criteria

b. IT is classified as industrial units for levying industrial power tariff

category

c. Green initiative: promote energy efficient equipment usage

d. 100% reimbursement of stamp duty, transfer duty and registration fee

e. Reimburse the cost of filing patents/copy rights to companies having

R&D units in Telangana

2) Establish dual power grid networks, renewable energy under open access

system, provide power at the cost of generation

3) Up to 50% rebate on building fees

4) Land shall be provided at a subsidized cost

Promoting Startups/SMEs:

5) Additional preference to Startups/SMEs for procurement of DC services by

the Government

6) 25% subsidy on lease rentals for 3 years

7) Specific R&D grants

8) Patent filing costs will be reimbursed up to INR 2 lakhs

Non-Fiscal Incentives:

9) DC Firms are classified under ‘Essential Services’

10) Exemption from power cuts, exemption from inspections under factories

act; wages act; Shops and Commercial Establishment Act, etc.

Gujarat

(Establishment

Data Centre –

2017)

All the incentives under IT/ITeS policy (2016) for promoting IT/ITES parks and

units are applicable for DCs also

a. Allotment of Govt. lands to the IT/ITeS Industry

b. Capital subsidy @ 25% of CapEx in buildings and infrastructure,

excluding the cost of land.

c. 100% reimbursement of stamp duty/registration fee/conversion fee

d. Power tariff subsidy at the rate of Re. 1 per unit for 5 years

e. 100% reimbursement for electricity duty paid for 5 years

f. Lease rental subsidy for eligible IT/ITeS units, at the scale of 50 sq.ft.

per employee, for 5 years

g. Interest subsidy @ 5% for micro and @7% for SME enterprises for 5

years

h. Reimburse tax paid under Section-13 of Gujarat VAT Act

i. 100% reimbursement of Central Sales Tax (CST)

j. VAT/CST/GST reimbursement for a period of 8 years

k. Patent assistance at the rate of 50% reimbursement

Odisha

(Odisha State

Data Centre

Policy – 2020)

Incentives in the ICT Policy for IT/ITES industries shall be applicable for DC

firms

Fiscal Incentives:

1) Allotment of govt. land

2) Building fees subsidy: up to 50% reimbursement

3) Electricity subsidy – industrial tariff is applicable, electricity duty and

inspection fee exemption for 5 years

4) Internet bandwidth subsidy: 50% reimbursement of internet

bandwidth/leased line charges per year per unit for 5 years

5) 75% Reimbursement of patent filing costs for R&D IT units

Non-Fiscal Incentives:

6) DC industries/units are classified as ‘Essential Services’ under ESMA act

and as ‘Public Utility’ services

7) Exempt from provisions of factories act; Shops and Commercial

Establishment Act; labor act, etc.

https://it.telangana.gov.in/telangana-data-centre-policy-2016/

http://vibrantgujarat.com/writereaddata/images/pdf/project-profiles/Data-Centre.pdf

https://startupodisha.gov.in/wp-content/uploads/2021/07/AIA-3.pdf

Uttar

Pradesh

(Uttar Pradesh

Data Centre

Policy – 2021)

Fiscal Incentives:

1) Interest subsidy up to INR 50 crore per park

2) Capital subsidy of 7% per DC unit

3) 25%, 50% land subsidies in specified regions

4) 100% stamp duty exemption for purchase/lease of land

5) 100% electricity duty exemptions for 10 years

6) Dual grid lines power supply and exemption from

wheeling/transmission charges

Non-Fiscal Incentives:

7) DC industries are classified under ESMA act

8) 24x7 water supply, special provisions in building norms

9) Open access system to purchase power, deemed distribution license,

deemed franchisee status, 24x7 power supply, etc.

10) Exempt from inspections under factories, wages acts, etc.

11) Non disturbance provision, preference in public procurement.

West Bengal

(West Bengal

Data Centre

Policy – 2021)

Fiscal Incentives:

1) 100% exemption of stamp duty and registration fees

2) Electricity duty waiver for 5 years

Non-Fiscal Incentives:

1) Dual power grid networks, ‘industrial status’ to electricity supplied to DCs,

power and internet facilities to Edge DCs

2) 24x7 uninterrupted power supply and internet connectivity

3) 24x7 water supply

4) Single-window approvals and permits for companies willing to establish

captive firms

5) Special provisions in building norms

6) RoW provisions as per ‘West Bengal Broadband Policy 2020’ for laying OFC

to and from DCs

Attracting investments through fiscal and Non-Fiscal

incentives, including Ease of doing business

2.42 As per the World Bank, Doing Business Report 2020

, India is ranked

63 among 190 countries in doing business. Business Regulations

affecting 12 areas of a business are covered in this report, which

ranges from starting a business, dealing with construction permits,

getting electricity, registering property, getting credit, protecting

minority investors, paying taxes, trading across borders, enforcing

contracts, resolving insolvency, employing workers, and contracting

with the Government.

2.43 In the TRPC Data Centre Security Index (DCSI) 2020 report

, India

ranked 14

among 18 APAC countries, which gives a composite

http://invest.up.gov.in/wp-content/uploads/2021/02/Data-Centre-Policy-english.pdf

https://www.eqmagpro.com/2021/09/West_Bengal_Data_Centre_Policy_2021.pdf

https://www.doingbusiness.org/en/data/exploreeconomies/india

The TRPC Data Centre Security Index 2020 Report: https://trpc.biz/the-trpc-data-centre-security-index-2020/

statistical measure of the different risks that can impact Data Centres’

activities. It provides a snapshot of exposure of Data Centres to

elements that can threaten their integrity, disrupt their activities, and

jeopardise their reputation when they operate in a given country. The

indicators are grouped under six major types of risk – Infrastructure

Risk, Energy Risk, Natural Risk, Business Risk, Political Risk, and

Legal Risk – providing a holistic assessment of an economy’s risk

profile. Small countries like Malaysia, Thailand, and Indonesia are

ahead of India in these ranking indices.

2.44 The National Digital Communications Policy, 2018, envisages

establishing India as a global hub for cloud computing, content

hosting and delivery, and data communication systems and services

2.45 The draft National Data Centre Policy 2020, released by MeitY on 3

November 2020 aims at creating a favourable climate for investments

in the Data Centre Sector, both domestic investments and Foreign

Direct Investments, and incentivizing the growth of a robust and

sustainable Data Centre sector in the country. The policy aims to

promote R&D for manufacturing and development of Data Centre

related products and services for domestic and global markets. In

addition to promoting domestic manufacturing, including non-IT as

well as IT components, to increase domestic value addition and reduce

dependence on imported equipment for Data Centres.

2.46 The various policy and regulatory enablers are essential to promote

the Data Centre industry and strengthen India’s positioning in the

global Data Centre market. At the same time, minimum regulation and

maximum facilitation policy are critical to incentivizing Data Centres

in the country. For encouraging foreign investment in Data Centres, it

is important to have a robust and easy-to-comply with licensing and

regulatory framework in place. EoDB is more important than

incentives, and at the same time, this is essential for building

https://dot.gov.in/sites/default/files/EnglishPolicy-NDCP.pdf

https://www.meity.gov.in/writereaddata/files/Draft%20Data%20Centre%20Policy%20-%2003112020_v5.5.pdf

confidence with other countries to have their data stored in India.

When looking at the worldwide Data Centre distribution, ease of doing

business is one of the primary factors for a company to choose a

specific region or country to expand its market. Hence, the bottlenecks

in ease of doing business (EoDB) need to be addressed, and suitable

incentivizing opportunities need to be created by early framing of

desirable and attractive policies of investment in this sector.

2.47 The four critical aspects in Data Centre are Land, Power, Telecom and

IT Element/Networks and Ease of Doing business. A new Data Centre

requires close to 30 approvals/permissions

from different central

and state Governments’ departments before a Data Centre can start

operations. For instance, Annexure II shows the large number of

clearances required to build a Data Centre even in a Tier 1 city like

Mumbai, Delhi-NCR, Bengaluru, Chennai, etc. Specified timelines for

clearance should exist to prevent delays. The land acquisition process

faces bottlenecks of multiple clearance/compliance, several

restrictions based on building codes, industrial zones, etc. Approvals

and land acquisitions continue to challenge the Data Centre project

propositions, leading many international cloud providers to look back

on their capacity expansion plans in India. Promoting ease of doing

business in itself is one of the most important non-fiscal benefits that

a government can offer to Data Centre players. Accordingly, MeitY’s

draft policy on Data Centres discusses the issue of simplifying

clearances through a single window, time-bound clearance system by

State Government/Union Territories. It also mentions publishing a list

of approvals/clearances required with the defined timelines for

obtaining the same.

2.48 The National Single Window System (NSWS) that has been

conceptualized and announced by the Department for promotion of

Industry and Internal Trade (DPIIT), will enable

investors/entrepreneurs/businesses to identify and obtain all

https://community.nasscom.in/sites/default/files/report/25264-nasscom-recommendations-data-centre-policy.pdf

NASSCOM: Recommendations for Data Centre Policy

clearances needed to start a new business operation in India through

a single online portal. This platform provides the investors with

information on pre-operations approvals required to commence a

business. Currently, the portal has more than 560 approvals/licenses

from across 28+ central ministries/departments and

approvals/licenses from across 14 States. The ministry-wise

approvals, which are onboarded, are identified as most critical, critical,

and non-critical. Invest India, under the guidance of DPIIT, is

managing the Maadhyam (NSWS) project and is involved in onboarding

various ministries and states on the portal. In addition, the NSWS will

systematically integrate with existing State Single Window Systems as

well. From the portal, it can be seen that 45 approvals of the

Department of Telecom and 19 approvals of the Ministry of Information

and Broadcasting have been identified and are being integrated on the

portal. Accordingly, there is a possibility that all the

permissions/clearances required by Centre/States/UTs are listed and

given through this portal.

2.49 Apart from EoDB, Table 2.2 summarizes various other non-fiscal

incentives that some of the Indian States are offering. The same are

listed below:

a. DC industries are classified under ESMA act

b. 24x7 water supply, special provisions in building norms

c. Open access system to purchase power, deemed distribution

license, deemed franchisee status, 24x7 power supply, etc.

d. Exempt from inspections under factories, wages acts, etc.

e. Preference in public procurement

f. Power and internet facilities to edge DCs

g. Single-window approvals and permits for companies willing to

establish captive firms

h. Special provisions in building norms

i. RoW provisions for laying OFC to and from DCs

j. Exempt from provisions of factories act; shops and commercial

establishment act; labor act, etc.

k. Waiving of import restrictions and duties on essential Data Centre

operational equipment.

Fiscal Incentives and Exemptions

2.50 Establishing large Data Centres in India would require a lot of

investment. Data Centre costs mainly consist of capital expenditure

and operational expenditure:

a. Capital Expenditures (CapEx) are one-time constructional costs,

land costs, investment towards infrastructure setup required to

build the Data Centre, wages for construction workers, buying and

installing the equipment required for processing and storage,

cooling solution, power ancillaries, etc., as part of greenfield rollout.

b. Operational Expenditures (OpEx) involve recurring expenditure

towards the continued operation of the Data Centre, including the

cost of broadband connectivity, cost of power for equipment

operation, as well as for cooling, repairs, and annual expenditures

like wages for employees.

2.51 In North America, it is observed that building costs in California’s

Silicon Valley and New Jersey remain high at $9.8/W. The market

experts express that U.S. investment and growth would become

focused on lower-priced markets such as North Virginia ($8.4/W),

Texas ($7.7/W), and Arizona ($7.6/W)

. In India, as well, the intra

country differences in cost of building and maintaining a Data Centre

would vary widely across cities and states, which in turn would be

instrumental in directing investment. The construction cost for an

average DC in India is calculated at $6.0/W. Chennai ($4.9/W) and

Mumbai ($5.0/W) boast lower building costs than most of the

developed countries, however, the cost escalates multiple times for

other parts of the country (shown in figure 2.3 below). It, therefore,

https://www.turnerandtownsend.com/en/perspectives/data-centre-cost-index-2020/

The cost model includes equipment, construction labour, materials, etc., and does not include any client direct

costs, land purchase costs, utility works, groundworks, site works, active IT equipment, fibre cabling to support office

fit outs or professional services fees.

becomes imperative to incentivize the DC players through various

fiscal incentives.

Figure 2.3: Global comparison of Data Centre Construction

market

(Source: Data Centre cost index 2020 | Turner and Townsend)

2.52 Data Centres incur one-time and recurring taxes that have a

significant impact on long-term costs for any Data Centre. The capital-

intensive nature of a Data Centre attracts relatively high sales taxes

and property taxes. Moreover, electricity tariff, stamp duty charges,

import duties on equipment sourced from outside India, and multi-

jurisdiction tax implications further impact Data Centre costing.

Friendly tax jurisdictions play a big factor in choosing a place for

establishing a Data Centre and complex tax jurisdictions do just the

opposite. Tax incentives for building infrastructure for large Data

Centres and cloud services within the country should be allowed to

encourage data localization.

2.53 In the US, several state Governments offer low property and sales tax

rates on power infrastructure, equipment, and electricity to attract

Data Centres, subject to certain investment and employment

4.3

4.4

4.9

5.5

6.2

6.6

7.6

7.7

8.4

9.8

0 1 2 3 4 5 6 7 8 9 10

Beijing

Shanghai

Chennai

Mumbai

Seoul

Warsaw

Johannesberg

Arizona

Texas

North Virginia

Silicon Valley

Cost in USD per Watt ($/W)

thresholds. Many countries in one or other way are providing

incentives/tax benefits to promote Data Centre sector. Similarly, some

states in India like Maharashtra, Telangana, Gujarat, and Andhra

Pradesh have formulated their own state DC policies and are already

providing considerable incentives in their state-level policies. For

instance, the Maharashtra Government announced the GST refund for

a maximum period of 10 years for the companies that participate in

the development of integrated facilities. Similarly, the Andhra Pradesh

Government announced a 50% reimbursement of SGST on the

purchase of raw materials and equipment for three years from the date

of approval of the project. Likewise interested players may be

supported in the form of tax rebates wherever applicable. A country-

wide data-centre-specific tax and duty incentive may be adopted to

encourage investors to operate here.

2.54 Table 2.2 also summarizes various fiscal incentives that some of the

Indian States are offering. These are listed below:

1. Power tariff subsidy at the rate of Re. “x” per unit for “y” years

2. “x” % reimbursement for electricity duty paid for “y” years

3. Electricity tariff – power supply at industrial rates

4. Exemption from wheeling/transmission charges

5. Establish dual power grid networks, renewable energy under open

access system, provide power at the cost of generation

6. Registered IT/ITES units shall be exempt from octroi/Local Body

Tax (LBT)/entry tax/escort tax or any other cess

7. Allowing setting-up of IT/ITES units in any zone

8. Allotment of Govt. land based on eligibility criteria

9. Land provided at a subsidized cost OR “x”% land subsidies in

specified regions

10. Property tax is levied at par with residential rates

11. Up to “x”% rebate on the building fees

12. Lease rental subsidy for eligible IT/ITES units, at the scale of “x”

sq. ft. per employee, for “y” years

13. Capital subsidy @ “x”% of CapEx in buildings and

infrastructure, excluding the cost of land or capital subsidy of “x”%

per DC unit

14. Interest subsidy up to INR “XX” crore per park or interest

subsidy @ “x”% for Micro and @“y”% for SME enterprises for “z”

years

15. “x”% reimbursement of stamp duty, conversion fee, transfer

duty and registration fee

16. VAT/CST/GST reimbursement for a period of “x” years

17. Patent assistance at the rate of “x”% reimbursement

18. Internet bandwidth subsidy: “x”% reimbursement of internet

bandwidth/leased line charges per year per unit for “y” years

In view of the aforesaid, the Authority would like to know the views of

the stakeholders on the following questions.

Q.1: What are the growth prospects for Data Centres in India? What are

the economic/financial/infrastructure/other challenges being

faced for setting up a Data Centre business in the country?

Q.2: What measures are required for accelerating growth of Data

Centres in India?

Q.3: How Data Centre operators and global players can be incentivized

for attracting potential investments in India?

Q.4: What initiatives, as compared to that of other Asia Pacific

countries, are required to be undertaken in India for facilitating

ease of doing business (EoDB) and promoting Data Centres?

Q.5: What specific incentive measures should be implemented by the

Central and/or the State Governments to expand the Data Centre

market to meet the growth demand of Tier-2 and Tier-3 cities and

least focused regions? Is there a need of special incentives for

establishment of Data Centres and disaster recovery sites in Tier-2

and Tier-3 cities in India? Do justify your answer with detailed

comments.

Data Centre Parks

2.55 Data Centre parks are specialized secure Data Zone, strategically

located with the most conducive non-IT and IT infrastructure, and

regulatory environment for housing a mix of small scale/large scale

clusters of Data Centres to serve the high needs of compute, storage,

networking, and provision of a wide range of data-related services

To encourage expansion, a solid strategy for Data Centre parks is

required. The Indian Government intends to encourage the private

sector to build Data Centre parks in major metropolitan cities,

preferably semi urban areas. Data Centre parks are needed to provide

capacity for hyperscale investments in India. Furthermore, to increase

the country's technological comprehensiveness, a focus on building

Disaster Recovery (DR) Data Centre infrastructure, edge Data Centres

in Tier-2 and Tier-3 cities needs to be prioritized. The Government has

been promoting the establishment of Data Centres even before the

COVID-19 outbreak and as a fallout of it, various state administrations

across the country have established their own technology parks. They

in-turn, invite Data Centre operators and charge a fee to lease the

space with electricity and other basic amenities. The Uttar Pradesh

Government plans to develop a Data Centre park which will be set up

near Greater NOIDA. Another entity in this space has signed an MoU

with the Government of Tamil Nadu to set up a Data Centre Park in

Chennai. Similarly, the Andhra Pradesh government has accorded

clearance to set up an Integrated Data Centre Park, Integrated IT and

Business Park, and Recreation Centre in Visakhapatnam.

Q.6: Will creation of Data Centre Parks/Data Centre Special Economic

Zones provide the necessary ecosystem for promoting setting up

of more Data Centres in India? What challenges are

anticipated/observed in setting up of new Data Parks/zones?

https://www.meity.gov.in/writereaddata/files/Draft%20Data%20Centre%20Policy%20-%2003112020_v5.5.pdf

What facilities/additional incentives should be provided at these

parks/zones? Do give justification.

Data Centre – Standardization

2.56 The maintenance of minimum standards for Data Centres are essential

for operation and for establishing trust with end-users by ensuring a

basis for QoS requirements. These standards become even more

significant to maintain DC for third-party storage centres. There are

multiple standards that Data Centres across the world comply with for

both infrastructure and QoS. Presently, there are no guidelines for

minimum or specific design requirements and standards that are

required for ensuring data integrity, data safety, etc., which is crucial

for DCs. This section looks at enabling feasible regulations and

standards for Data Centres operating in India.

I. Standards and Certificates

2.57 The most common standards are ISO 27000, PCI DSS, HIPAA, TIA 942,

or AICPA SOC. These international standards have been developed,

updated as necessary, and tested for many years by experts from

different industries and geographies. They have proven to be an

effective way to ensure data protection. The standards were developed

with the help of manufacturers, end-users, consultants, and

architects, according to IEEE. The standards largely specify the

telecommunications standards for Data Centres and other similar

facilities by standardizing cabling specifications and layout.

2.58 The ANSI/TIA-942 standards also specify design elements such as the

designated spaces to be maintained, the cabinets required for

equipment, floor layouts, and site selection processes. TIA-942 Data

Centre Standards describe the requirements for the Data Centre

infrastructure in a thorough, quantifiable manner under four levels

(called tiers) of Data Centres, which are specified in Annexure I. Akin

to ISO, TIA does not itself provide any certification services and nor

does it empanel any auditors to do so. Independent auditors can be

used to certify these standards many of which are already doing so

domestically. The usual re-certification period for Data Centres is 3

years.

2.59 Quality of service standards are also specified by the Uptime Institute,

which classifies Data Centres into tiers based on uptime percentage in

a year (Annexure I). They define QoS based on the time that a Data

Centre is unable to provide services to its customers by allowing them

to access the data stored at the centre. There are a set of other

associated standards that are recognized in India that Data Centres

can comply with. These include ISO 9001 standards on quality

management, ISO 14001 standards on environmental performance

enhancement and OHSAS 18001 standards on occupational health

and safety management. Certification for these standards can be

obtained from several private organizations that independently audit

and certify compliance.

2.60 Major IT/telecom/networking products being used across Data Centre

markets are primarily based on global standards. Harmonization of

these standards to work across the Data Centre markets is critical.

India being a large and open market for DC launch, it may therefore

be necessary that minimum standards for Data Centre operations

should exist considering the local needs. Countries like Germany and

Mexico have defined their independent DC standards and tiers, which

also provide tier certifications. It can be argued that in India too,

independent DC standards can be adopted, which will specify the

minimum quality and safety requirement/provisions to minimize

chances of any disruption. Thus, there can be a case for

standardization and certification in form of the Indian national

standards. Besides, there is a need for a testing and certification

framework for hardware equipment as well as the software used in

Data Centre facilities. Additional steps can be taken to form a body

that can coordinate for training, certification, and standards. The

Government can consider adopting the discussed global standards for

certifying Data Centre operations to clear any ambiguities in the form

of impact on the ease of doing business. This will make it easier to

confer benefits, tax incentives, exemptions, and security requirements

upon Data Centres.

2.61 A list of certifications from both national and international bodies can

be spelt out for the operation of a Data Centres in India. Independent

Energy and Security auditors can also monitor Data Centre

operations.

II. Data Centre Building norms

2.62 Data Centre buildings are unique in many aspects: they require less

parking space and have a higher roof height of 5m and above (as they

need to stack large generators and large diesel tanks). The

Telecommunications Industry Association (TIA), a trade association of

USA accredited by ANSI (American National Standards Institute) and

BICSI (Building Industry Consulting Service International), specifies

the requirement of DC standards and design. In general, core sites

have buildings for the installation of indoor rack line-ups as defined

by TIA, BICSI, and other data-centre-centric standards. In India, the

National Building Code of India (NBC 2016) does not recognize ‘Data

Centre’ as a separate category. In absence of separate building norms,

DCs have to follow commercial office building norms. This

unnecessarily raises costs as various requirements based on

personnel presence that are relevant to other commercial buildings

may not be relevant to Data Centres.

2.63 Many countries are either following the above DC standards or have

defined their own independent DC standards (like Germany and

Mexico). India too can adopt independent DC standards, which will

specify the minimum quality and safety requirement/provisions to

minimize chances of any disruption. A standard Data Centre building

approval guideline across the country for all the municipal

corporations can be helpful for Data Centre companies to build their

pan-India plans without many variations and get the approvals of

regional authorities within stipulated timelines.

2.64 Realizing that Data Centres should be a separate category under

National Building Code, draft policy of MeitY on Data Centres states

“Data Centre buildings require different norms as compared to other

offices/commercial buildings and therefore, there is a need for the

creation of a separate category code for Data Centres in the National

Building Code of India (NBC 2016).” MeitY’s policy further mentions

that “As an interim measure, MeitY shall collaborate with authorized

Central Government bodies for drafting broad guidelines to be issued for

Data Centre buildings, facilitating specialized construction and safety

approvals”.

Q.7: What should be the draft broad guidelines to be issued for Data

Centre buildings, so as to facilitate specialized construction and

safety approvals?

Q.8: Is there a need to develop India-specific building standards for

construction of Data Centres operating in India? If yes, which

body should be entrusted with the task? Do provide detailed

justification in this regard.

Q.9: Till India-specific standards are announced, what standards

should be followed as an interim measure?

Q.10: Should there be a standard-based certification framework for the

Data Centres? If yes, what body should be entrusted with the

task?

Q.11: Should incentives to Data Centres be linked to the certification

framework?

Making Data Centre related equipment and products in India

2.65 MeitY’s policy intended to promote local manufacturing by

encouraging the use of indigenous hardware (IT as well as non-IT

equipment) and software products used in the Data Centres, thereby

reducing the overall import burden of the country. Moreover, it aims

to strengthen the testing and certification framework for the Data

Centre ecosystem, including for the IT and non-IT equipment and

software products pertaining to Data Centres operations. One of the

objectives of the policy includes strengthening the testing and

certification framework for the Data Centre ecosystem, including for

the IT and non-IT equipment and software products pertaining to Data

Centre’s operations, incentivizing global equipment manufacturers to

set up manufacturing units of IT/non-IT components in India, catering

not only to local demands but also for export purposes.

2.66 The Authority previously submitted recommendations on “Promoting

Local Telecom Equipment Manufacturing” in August 2018 that would

enable the Indian telecom equipment manufacturing sector to

transition from an import-dependent sector to a global hub of

indigenous manufacturing. The objective of the recommendations was

to help achieve Net Zero telecom imports by 2022 in the country and

to have a strategic interest in the domestic manufacturing of telecom

equipment.

2.67 The Authority is separately working on further recommendations that

can be proposed to the Government for boosting local ICT equipment

manufacturing, and therefore, this aspect has not been covered under

this consultation paper.

Disaster Recovery (DR)

2.68 A disaster recovery (DR) site is a facility that any organization can use

to recover and restore its infrastructure and operations when its

primary Data Centre becomes unavailable. Most of the data-based

companies carefully plan and decide about what kind of DR site they

require, its location, and a balance of costs against any risks. Since

operational disruption is a risk for the operatives, the DR site should

always be chosen taking into consideration the weather patterns,

seismic risk profile, capability of the ground to withstand the

foundations, and other natural phenomenon.

2.69 The two fundamental DR site options are: internal and external. A Data

Centre company itself sets up and maintains an internal site, while an

external site is maintained by an outside provider. Companies with

large information requirements and aggressive recovery time objectives

are more likely to use an internal DR site. The internal site is typically

a secondary DC and allows a company to recover and resume

operations following a disaster at the primary DC. But this secondary

physical DR site involves investments in additional DC space,

connectivity, and servers. This leads to additional OpEx pertaining to

power, cooling, site maintenance, and manpower requirements.

2.70 External DR sites are cost-effective where an outside provider owns

and operates an external DR site. External site options are hot, warm,

and cold sites:

a. At a hot site, an organization has access to a fully functional DC

with hardware and software, personnel, and customer data, and is

ready to operate in the event of a disaster.

b. A warm site is an equipped DC but does not have customer data.

Additional equipment is installed to introduce customer data when

a disaster occurs.

c. A cold site has the infrastructure to support IT systems and data,

but no technology until an organization activates DR plans and

installs the equipment.

2.71 There can be various disaster scenarios, as shown in Figure 2.4 for

which the companies and organizations should be prepared

beforehand. The outages can range from a simple application failure

to the disaster of the whole Data Centre. Data Centre operators in the

northern part of India are running into new challenges posed by the

impact of earthquakes and frequent seismic activity. It is worth noting

that seismic activity is a concern for anyone building a new DC in

northern and northeast regions. Disaster Management is one of the

top priorities for all organizations to lay specific emphasis while

choosing building designs, location, and standards for a Data Centre.

Disaster mitigation plans should include provisions to address

earthquakes, floods, tsunamis, or any other

natural/technological/man-made disasters for the setting up of Data

Centres.

Figure 2.4: Types of Disasters

2.72 While setting up a new DC, the site should be as protected and made

resilient as possible, and secondly, the Data Centres require sufficient

server capacity to ensure a high level of operational performance and

allow to scale up or scale-out, depending on the requirement.

Considering these factors, external DR sites for setting up hot sites

that are fully functional DCs and are ready in the event of a disaster

can be given thought as a feasible and low-cost option for expanding

DCs in non-crowded regions in the country. The hot sites for disaster

recovery provide virtual machine snapshots of physical or virtual

servers from the primary Data Centre and also functions as a fully

operational independent Data Centre.

2.73 As inferred from Table 2.1, the vast majority of Data Centres are

currently located in Tier 1 metropolitan areas however, the shrinking

of the land bank and the increasing pressure on the power supply is

making Tier-1 cities a difficult proposition to build and maintain Data

Centres. The internet, on the contrary, has opened the world to Tier 2

and Tier 3 city dwellers. Better networks and affordable tariffs have

made them devour the online world. This has prompted a rise of new

locations for disaster recovery and edge Data Centres in Tier 2 and 3

cities where data consumption is growing. To ignite growth engines in

India, it is needed to consider locating the external DR sites for Data

Centres largely in Tier-2 and Tier-3 cities, while comprehending

Natural disasters

(Hurricanes,

earthquakes, floods, etc.)

Technological

(Chemical releases,

power outages, etc.)

Man-made disasters

(Cybercrime, human error,

terror attacks, etc.)

terror attacks,| etc.)

demographic advantages. There appears to be a tremendous promise

in Tier-2 and Tier-3 areas depending on factors such as low land costs

and labour expenses, and manpower requirements, amongst other

things. Hosting Data Centres and DR sites in Tier-2 and Tier-3 cities

meet the demands of disaster management and a possible way for

expansion of Data Centre market in low priority states of India coupled

with deeper penetration of optical fibre and internet in unserved and

underserved areas. Accordingly, Authority has already sought the

views of stakeholders on required incentives for promoting

establishment of Data Centres and disaster recovery setup in Tier -2

and Tier-3 sites in India in Question 5 above.

Disaster Recovery standards

2.74 ISO 22301 covers the continuity of business as a whole, considering

any type of incident as a potential disruption source (e.g., pandemic

disease, economic crisis, natural disaster, etc.), and using plans,

policies, and procedures to prevent, react, and recover from

disruptions caused by them. These plans, policies, and procedures can

be classified into two main types: those to continue operations if the

business is affected by a disruption event and those to recover the

information and communication infrastructure if the ICT is disrupted.

2.75 ISO 27031 is a tool to implement the technical part of ISO 22301,

providing detailed guidance on how to deal with the continuity of ICT

elements to ensure that the organization’s processes will deliver the

expected results to its clients. ISO Standard 27031 is focused on the

information and communications technology (ICT) requirements for

business continuity and disaster preparedness. ISO 27031 includes

both crucial data security and enterprise operations of an organization

or business.

2.76 Since Data Centre players already provide disaster recovery site

planning depending on the type of data handles, uptime required,

customer insistence and technical standards, the Authority has not

specifically dealt with the aspect in this consultation paper. However,

stakeholders may bring out any specific issue in this regard if they so

desire.

Q.12: Are there any specific aspects of the disaster recovery standard

in respect of Data Centres that needs to be addressed? If so, then

provide complete details with justification.

Data Centre Security

2.77 Data Centre facilities hold confidential information or proprietary

information and hence must be both physically and digitally secure.

Compliance and security are top priorities to guarantee that data is

protected in a Data Centre. Everything from networks and power

generators to the physical infrastructure should be designed and

installed, keeping the Data Centre security standards in mind.

2.78 Physical security of a Data Centre comprises various kinds of built-in

safety and security features to protect the premises and thereby the

equipment that stores critical data for multi-tenant applications. The

most optimal and strategic way to secure a Data Centre is to manage

it in terms of layers (Figure 2.5). Layers provide a structured pattern

of physical protection, thus making it easy to analyse a failure.

2.79 Figure 2.5: Four layers of Data Centre physical security

2.80 The security measures can be categorized into four layers:

First layer of protection (Perimeter security): The first layer of

Data Centre security is to discourage, detect, and delay any

unauthorized entry of personnel at the perimeter. This can be

achieved through a high-resolution video surveillance system,

motion-activated security lighting, fiber-optic cable, etc.

Second layer of protection (Facility controls): In case of any

breach in the perimeter monitoring, the second layer of defense

restricts access. It is an access control system using card swipes or

biometrics.

Third layer of protection (Computer room controls): The third

layer of physical security further restricts access through diverse

verification methods, including monitoring all restricted areas,

deploying entry restrictions such as turnstile, providing VCA,

providing biometric access control devices to verify finger and thumb

prints, irises, or vascular pattern, and using radio frequency

identification.

Fourth layer of protection (Cabinet controls): The first three layers

ensure entry of only authorized personnel. However, further security

to restrict access includes cabinet locking mechanisms. This layer

addresses the fear of an “insider threat,” such as a malicious

employee. After implementing the first three layers well, cabinets

housing the racks inside the computer room also need to be protected

to avoid any costly data breach.

2.81 For the safety and security of the premises, factors ranging from

location selection to authenticated access of the personnel into the

Data Centre should be considered, monitored, and audited vigorously.

To prevent any physical attacks, the following need to be considered:

a. likelihood of natural disasters such as earthquakes, risk of flooding,

proximity to high-risk industries in the area, etc. Some of these

risks could be mitigated by barriers or redundancies in the physical

design of Data Centre.

b. availability of network carrier, power, water, and transport systems.

c. an access control system with an anti-tailgating/anti-pass-back

facility to permit only one person to enter at a time.

d. a single-entry point into the facility.

2.82 Software security involves techniques to prevent unauthorized access

to the data stored on the servers.

2.83 The standards that make up the ISO/IEC-27000 series are a set of

standards created and managed by the International Organization for

Standardization (ISO) and the International

Electronic Commission (IEC). ISO/IEC-27000 “provides an overview of

information security management systems” and first published in

2009, was updated in 2012, 2014, 2016, and 2018.

2.84 The 27000 series are aimed at establishing good practices in relation

to the implementation, maintenance, and management of the

Information Security Management System (SGSI) or by its name in

Information Security Management System (ISMS). These guidelines

aim to establish best practices in relation to different aspects related

to information security management, with a strong focus on

continuous improvement and risk mitigation. ISO 27000 is comprised

of six parts outlining the requirements for certification, guidelines for

achieving the requirements, and guidelines for accrediting

organizations. The standard provides many useful recommendations

for companies seeking certification as well as those merely interested

in improving their security.

2.85 In view of concerns over national security, the government has

mandated that Internet service providers (ISPs) must purchase

equipment approved by it. As part of the aforementioned security

concerns, DoT in this regard had also amended its License Agreements

in March 2021 and National Cyber Security Coordinator (NCSC) has

been appointed as the nodal agency by the government for all ISPs to

https://www.iso.org/standard/73906.html

provide information as and when sought. NCSC has also been tasked

to notify a list of trusted procurement sources along with the

equipment that does not pose any threat to India’s national security.

Data Centre Audit

2.86 Internal audits at Data Centres check the implemented systems and

processes. An external audit is used to check the commitment of

internal audits. Audits should check for any vulnerabilities in the Data

Centre facilities that are provided to ensure security. As an outcome of

the audit checks, any facility requiring extra protection should receive

additional security. There are also standards that Data Centres need

to meet. Some of the standards are ISO 27001, ISO 20000-1, or SOC

1 Type 2, SOC 2 Type 2, and SOC 3. Also, it is important to conduct a

risk assessment study in compliance with standards and implement

appropriate security controls to ensure the overall security of a Data

Centre. A security audit and certification boost the confidence of

entities in a Data Centre for hosting their data there. Such a

framework can help in making India a favorable destination for hosting

International Data Centres.

Q.13: Whether trusted source procurement should be mandated for Data

Centre equipment? Whether Data Centres should be mandated to

have security certifications based on third-party Audits? Which

body should be entrusted with the task? Should security

certifications be linked to incentives? If so, please give details

with justifications.

Fibre Connectivity

2.87 High-quality fiber connectivity is a must requirement for Data Centre

operations as they run critical applications that need 24x7

uninterrupted connectivity to store and distribute the data. That is

why DCs are generally constructed in areas with dense fiber networks

that can connect them to reliable and high bandwidth internet access

components. Good network connectivity is playing key criteria in

deciding the site for a DC construction in India, and thereby majority

of the Data Centres are concentrated in Tier-1 cities like Mumbai,

Chennai, and Hyderabad.

2.88 As newer Data Centres are constructed, and the utilization of optical

fiber cable grows, more capital expenditures on the creation of new

fiber infrastructure will be required. The development of proper

connectivity could thus enhance the establishment of Data Centres.

As the average broadband speed in India is very low and uneven across

cities, this affects the performance (QoS) of the Data Centres. Lack of

access to quality broadband and capacity restrictions of the fiber and

cable is the critical challenge faced by many clouds and DC service

players.

2.89 The Data Centre provider needs to offer seamless and scalable fibre

connectivity between the infrastructure of enterprises and between the

two or more Data Centre buildings. In India, the state of intercity and

intracity fibre networks are far from what exists in other developed

countries. Data Centre providers or Cloud Service Providers or CDN

providers presently are forced to procure generic network connectivity

services from local TSPs. This is problematic because traditional

networks operated by TSPs are principally designed for voice or public

data services, such as IP services. They are not suitable for many new

services, which require very high bandwidth availability and low

latency for extremely high amounts of data. Achieving these outcomes

using TSP services is especially difficult given India’s vast geography

and relatively limited existing technology infrastructure and

broadband connectivity speeds. The Authority in its

recommendations

on “Delivering Broadband Quickly: What do we

need to do?” in 2015, has issued a list of action points to facilitate a

‘Host in India’ campaign in the spirit of ‘Make in India’:

a. “The Government needs to encourage local and foreign companies to

build ‘Data Centre Parks’ on the lines of industrial parks, SEZs, etc.,

https://trai.gov.in/sites/default/files/Broadband%3D17.04.2015.pdf

by providing them land, infrastructure and uninterrupted power

supply at affordable rates.”

b. “Presently, telecom companies are subject to license fee on Data

Centres, but non-telecom companies are not. The anomaly needs to

be addressed at the earliest.”

c. “Adequate policy initiatives for attracting global content hosting

should be formulated. The global data hosting, which does not

pertain to India, should be kept beyond the purview of Indian laws.”

Recently, TRAI in its Recommendations on “Roadmap to Promote

Broadband Connectivity and Enhanced Broadband speed” dated 31

August 2021 has recommended for action/ measures for creation of

robust Digital Communications infrastructure creation as stated below:

a. Creation of National RoW Portal to overcome the issues of RoW

permissions for telecom infrastructure as well as for other essential

utility services.

b. Incentivize establishment of common ducts and posts, to be shared

on non-discriminatory basis with service providers and

infrastructure providers.

c. Establish a central entity, ‘Common Ducts and Posts Development

Agency (CDPDA)’ for planning and development of common ducts and

posts infrastructure across the country, on non-exclusive basis.

d. Mandates co-deployment of common ducts during the construction of

any roadway, railway, water pipelines, and gas pipelines receiving

public funding.

e. To facilitate the sharing of passive infrastructure such as ducts,

optical fibers, posts, etc., all the passive infrastructure available in

the country should be mapped by each service provider and

infrastructure provider using Geographic Information System (GIS).

The Telecom Engineering Centre (TEC) should notify the standards

for this purpose.

f. Establishment of e-marketplace(s) on common GIS platform to

facilitate leasing and trading of passive infrastructure.

Access to Dark Fibres

2.90 Dark Fiber is an existing optical fiber line that is not in use currently

and can be used to create a privately operated optical fiber network.

The need for greater network connectivity and faster performance puts

demand pressure on existing telecom infrastructure, thus increasing

the value of unutilized dark fiber as an alternative option for Data

Centres. Over the past year, dark fiber has become a hot commodity,

as cloud computing platforms seek more network capacity to deliver

data across their massive Data Centre campuses. Globally, several

companies have targeted this opportunity by deploying new dark fiber

routes to connect major Data Centre hubs.

2.91 Indian Data Centres may use dark fiber to overcome degraded network

performance. Though expensive, these avoid latency, provide greater

bandwidth, stability, and security. However, a dark fiber network is

considered telecom infrastructure and can only be accessed through a

licensed partner. In India dark fiber can be acquired through IP-I

registration, and the license holder, i.e., the Telecom Service Provider

has the authority over dark fiber for sale or lease or share to the

interested agency based on agreements. Consequently, companies who

want to operate Data Centres should undergo commercial agreements

with TSPs, even if the services they provide are of non-telecom

connectivity. Moreover, services provided by TSPs are significantly

expensive, which substantially increases Data Centre costs. Attracting

investments and promoting competition in this segment is, therefore,

a challenge. The entities like Data Centres providers can be allowed to

construct, operate, and efficiently manage their own captive optical

fiber networks.

International connectivity

2.92 Some of the biggest enterprise Data Centre developers—Google,

Facebook, Microsoft, and Amazon—now are also major investors in

new submarine cables. The amount of capacity deployed by these

providers has outpaced internet backbone operators in recent years.

These Data Centres/content providers accounted for less than 10% of

cable capacity prior to 2012, but their share of total capacity surged

to 66% in 2020

. Submarine cables connect the digital economy

across the world. If Data Centres are the heart of the digital economy,

then submarine cables are the arteries of modern connectivity. These

cables terminate in the country through cable landing stations (CLS).

Access to submarine CLS is an essential input for services requiring

international connectivity. As of December 2020, there are 17 under-

sea cables landing in 15 cable landing stations in 5 cities across

India

. Mumbai and Chennai have the maximum concentration of

such landing points. The cables connect Mumbai and Chennai to

various strategic cities in South and Southeast Asia, the Middle East,

Africa, and Europe. Given the higher cost of pulling the cable inland,

these two cities remain the favourites for most operators to locate their

initial Data Centres. Hence, Mumbai and Chennai, which have a fair

share of existing and upcoming landing stations, will be the preferred

locations for future supply also. The non-availability of submarine

cables and fiber networks for international connections is the main

drawback for the companies not establishing DCs in the north, central,

and northeast regions.

Q.14: What regulatory or other limitations are the Data Centre

companies facing with regards to the availability of captive fiber

optic cable connectivity, and how is it impacting the Data Centre

deployment in the hinterland? How can the rolling out of captive

high-quality fiber networks be incentivized, specifically for

providing connectivity to the upcoming Data Centres/data parks?

Do justify.

Q.15: What are the necessary measures required for providing

alternative fiber access (like dark fiber) to the Data Centre

https://blog.telegeography.com/2021-submarine-cable-map

https://www.submarinenetworks.com/stations/asia/india

operators? Whether captive use of dark fiber for DCs should be

allowed? If so, please justify.

Q.16: What are the challenges faced while accessing international

connectivity through cable landing stations? What measures,

including incentive provisions, be taken for improving the reliable

connectivity to CLS?

Access to Power and water

2.93 The most important and often overlooked criteria when selecting a DC

facility or colocation provider when evaluating DCs is power. Data

Centre market demand and supply is often measured in terms of

electricity absorption and consumption, respectively, specifically in

Kilowatts (kW) and Megawatts (MW). The growing importance of power

is remaking the business of leasing DC space, with megawatts

(indicating IT power load) replacing square feet as the primary

benchmark for real estate deals.

2.94 India’s Data Centre capacity is expected to grow from 375 MW in H1

2020 to 1,078 MW by 2025

, presenting a USD 4.9 billion investment

opportunity (refer figure 2.6 below). Mumbai is expected to garner a

significant share of this impending opportunity owing to its existing

Data Centre infrastructure, followed by Chennai and Hyderabad.

India’s sustainable growth is being challenged by the increased energy

consumption of DCs, and with the IT activities, the energy challenges

are bound to increase.

Figure 2.6: Distribution of USD 4.9 bn Greenfield investments by

2025

https://www.jll.co.in/content/dam/jll-com/documents/pdf/research/apac/india/jll-re-imagine-data-centres-

running-india-s-digital-economy-h1-2020.pdf

(Source: JLL Research)

2.95 Despite making remarkable progress in electricity distribution over the

years, India still faces challenges in meeting its growing power

demand. In FY 2020-21, the country's energy supply deficit stood at

1,441 MU.

The reliable supply remains low in the country with

unstable grid connectivity in many parts. Rural areas in many

northern and eastern states typically receive less than 20 hours of grid

supply.

The average daily supply in urban areas (22 hours) is longer

by a couple of hours than in rural areas (20 hours), with an overall

average of 20.6 hours of power supply from the grid per day due to

which Mumbai is a preferred location for most of the DC vendors, with

the presence of multiple Power Generation companies offering services.

The power issues must be expeditiously sorted out to skyrocket the

DC expansion in all the cities.

2.96 Power expenses: The power supply alone, with approx. 50%-60% of

the total operating cost creates the largest cost heads for a DC

business. 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 CAGR of 9.4% during the forecast period 2019–

https://powermin.gov.in/en/content/power-sector-glance-all-india

https://www.ceew.in/publications/state-electricity-access-india

Mumbai

Chennai

Hyderabad

Delhi NCR

Pune

Bengaluru

2.6

0.9

0.6

0.4

0.3

0.1

2025

. Further, the integration of renewable energy into the power

grid is fundamental for improving the sustainability of Data Centres

but causes significant challenges for grid management that will

possibly increase the operational costs in near future.

Provisioning of Power tariffs and subsidies

2.97 Considering the power deficiency situation that exists in various parts

of the country, the establishment of dual power grid networks to

ensure uninterrupted quality supply of electricity to the Data Centre

is required. Additional power generation capabilities through captive

power sources such as solar and wind farms should be installed to

supplement power sourcing.

2.98 In India, the majority of Data Centres are in Maharashtra, Karnataka,

Tamil Nadu, Telangana, Uttar Pradesh, and New Delhi. The State

Governments have already laid down power tariffs and subsidies, and

this has become instrumental for DC’s growth. Table 2.2 lists some of

the initiatives taken by State Governments in respect of power

availability and tariffs for incentivizing the DC players.

2.99 Given the significant consumption of fuel by backup power sources

such as generator sets, fuel subsidies to the eligible players will

improve the Data Centre foundation in rural and Tier-2 cities and

divert the concentration of Data Centres in already crowded Tier-1

cities. Certain Data Centre companies have shown an interest in

funding research on renewable-energy-based solutions for Data

Centres. For example, companies like Netmagic are experimenting with

renewable energy for bundling or part-powering their units. 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.

https://www.researchandmarkets.com/reports/4866498/indian-datacenter-power-and-cooling-

market?utm_source=dynamic&utm_medium=GNOM&utm_code=zs68sm&utm_campaign=1345565+-

+India+Datacenter+Power+and+Cooling+Market+Outlook+2019-2025+-

+Growing+Demand+for+IaaS%2c+SaaS%2c+and+PaaS+Among+Organizations&utm_exec=joca220gnomd

Promoting Green Data Centres

2.100 In Europe, there is the climate-Neutral Data Centre pact, which has

the goal of making Data Centres climate-neutral by 2030 as part of the

European Green Deal, a law that aims to make all the European Union

Climate-neutral by 2050. Green Data Centres are the modern-day

Data Centres that can keep emissions low. For India, it plays a more

important role, since India suffers due to the energy and water crisis.

Most big Data Centres could slash their greenhouse gas emissions by

switching to efficient, off-the-shelf equipment, and improved energy

management. The green Data Centres need to be brought to a strong

place in the country. Tulip Telecom, a green, energy-efficient, and

cloud-ready Data Centre that was built by IBM in just nine months, is

a clear example that this is not a hindrance with green technology in

place.

2.101 The push towards Green Data Centres has been a combination of

incentives provided for Data Centres that use energy-efficient

mechanisms, certification for voluntary standards that give businesses

a better selling point, and environmental requirements mandated by

the Governments. There is a fine balance maintained in most countries

across the three approaches to ensure that Data Centres become

environmentally efficient without greatly increasing the burden of

compliance and diminishing the ease of doing business.

2.102 The incentive-based program has been successful in several countries

in reducing energy usage and developing renewable energy solutions

for powering the Data Centre industry. In US, companies get a tax

break of nearly $2 per square foot for buildings that save at least 50%

of the heating and cooling energy of a system, or a building that meets

standards specified by the Government

. Additionally, the US

administration has extended 30% tax incentives for facilities

researching in or using certain renewable energy sources. The UK

provides a variety of rebates on the purchase of equipment for the

https://www.energy.gov/eere/buildings/tax-incentives-energy-efficiency-upgrades-commercial-buildings

usage of renewable energy in Data Centres. The Malaysian

Government

is also providing tax exemptions of up to 100% on

capital expenditure for companies that undertake Green Data Centre

projects.

2.103 There should be a Government initiative to promote green technology-

enabled DCs. The DC players interested in setting up Green Data

Centres can be given supplementary benefits like easy approvals and

permits, ease of restrictions in availing existing renewable energy

resources, buying renewable energy through open access, or investing

in renewable energy power plants. Several criteria can be used to

incentivize energy savings and green energy at Data Centres. These

include cooling optimization by the creation of Data Centres in

naturally cooled regions, using or investing in research on renewable

energy resources for Data Centres, and Data Centres designed on

green computing principles that use natural cooling and natural light

in addition to having low energy requirements processes. The naturally

cooled regions in India which remain vastly unexplored for Data Centre

ventures are the best-suited alternatives for greenfield rollout owing to

their low CapEx and OpEx and relatively lesser land cost, cheap

labour, low water-based cooling requirements, and abundance of

opportunities for investment in renewable energy power plants for

powering Data Centres.

2.104 There are certifications for green Data Centres that can be obtained

from several agencies that are used around the world. The LEED

(Leadership in Energy and Environmental Design) certification is an

important certificate for green buildings that are used in multiple

countries and was developed by the US Green Building Council. In

India, the Indian Green Building Council (IGBC), a part of the

Confederation of Indian Industry (CII) gives certification to companies

wishing to obtain a LEED certificate. In addition to this, the IGBC also

has a Green Data Centre certification, which looks specifically at Data

https://taxsummaries.pwc.com/malaysia/corporate/tax-credits-and-incentives

Centres and uses multiple criteria for adjudging efficiency. These

certifications can be used as a criterion for providing tax breaks and

are important for Data Centres to attract business as well.

2.105 Renewable Energy Certificates (RECs): Renewable energy

certificates (RECs) are tradable commodities that are purchased in

voluntary markets and then retired/redeemed once that electricity is

consumed. For every unit of electricity generated from renewable

sources, a unique REC is created. RECs tend to be purchased in units

of a 1-megawatt hour (MWh). Thus, a Data Centre using 10,000 MWh

(10 gigawatt-hours) of electricity in a year would need to purchase

10,000 RECs to match that usage. The Renewable Energy Certificate

Registry of India is managing all policies between solar power

companies and industries in India where consumption is very

maximum, such as factories, manufacturing plants, etc. To promote

green Data Centres the DC investors can be allowed to buy power from

large generating/distributing companies (DISCOMs) having RECs

directly without any restrictions.

2.106 Reliable access to Water: An enormous volume of water is required

to cool high-density servers and data racks, which is making water

management a growing priority for Data Centre operators. A 15-

megawatt Data Centre can use up to 360,000 gallons of water a day,

and as the scale increases Data Centre, operators have to depend

heavily on water supply

. Due to the huge computing power in Data

Centres containing hundreds of thousands of servers, in many

designs, all the heat from those servers should be managed through

cooling towers. The water serves to cool the air as it enters the Data

Centre. In the process, however, some of the water evaporates and is

lost. Thus, there is a need for a reliable, continuous source of water

for these systems to be effective. This is the reason a Data Centre

construction is feasible only when an adequate water supply is

available nearby.

https://www.datacentreknowledge.com/archives/2012/08/14/data-centre-water-use-moves-to-centre-stage

Q.17: Is the extant situation of power supply sufficient to meet the

present and futuristic requirements for Data Centres in India?

What are the major challenges faced by Data Centre Industry in

establishment of Data Centres in naturally cooled regions of

India? What are the impediments in and suggested non-

conventional measures for ensuring continuous availability of

power to companies interested in establishing Data Centres in the

country? What incentivization policy measures can be offered to

meet electricity requirements for Data Centres?

Q.18: Should certification for green Data Centres be introduced in

India? What should be the requirement, and which body may look

after the work of deciding norms and issuing certificates?

Q.19: Are there any challenges/restrictions imposed by the

States/DISCOMs to buy renewable energy? Please elaborate.

Please suggest measures to incentivize green Data Centres in

India?

Q.20: What supportive mechanisms can be provided to Data Centre

backup power generators?

Q.21: Availability of Water is essential for cooling of Data Centres, how

the requirement can be met for continuous availability of water

to the Data Centres? Are there any alternate solutions? Please

elaborate.

Other miscellaneous challenges

I. Capacity building

2.107 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

standardization. The limited availability of expertise and efficiency

opportunities in the country makes it imperative to involve expert

consultants in design, especially during the early project initiation

adding to the investment requirements significantly. There are new

kinds of demands being placed around resource controls, facilities

management, and Data Centre optimization. To compete with the new

demands of the market, the Data Centre industry is investing in new

talent, which will also create new positions and evolve others.

2.108 The critically essential Data Centre skills that require pan-India

emphasis and promotion in this sector, beyond a university degree are:

a. Cloud Skills

b. Cyber and Data Security Skills

c. Data Centre Infrastructure Management (DCIM)

d. Data Analytics

e. Network LAN/WAN and Cable Design Skills

2.109 The skillset 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. Introduction of vocational-

vendor neutral certification courses in the field of Computing System,

Data Centre Infrastructure Management, Certified Network

Associate/Network professional will give due impetus to the much-

required capacity-building initiatives in the field of DCs in the country.

As fostering the required technical skills for Data Centre operations is

necessary, suitable investments are required in training and skill

development so that India can move faster on embracing these new-

age technologies. For this, subsidizing the education for specialized

cloud/data operations and training and certifications of Data Centre

professionals may be considered. New curriculum development and

training of the faculty may also be a focus area. To develop the

country’s data hub in Guizhou

, the Chinese Government encourages

tertiary institutions to offer courses in big data. Likewise, the tech

https://www.datacentredynamics.com/en/news/chinas-new-big-data-hub/

companies may be encouraged to skill the students, conduct

workshops, and upskill the existing workforce in India. All of this will

translate to increased career opportunities and growth within the Data

Centre space of the country.

Q.22: Whether the existing capacity building framework for vocational

or other forms of training sufficient to upskill the young and

skilled workforce in India for sustenance of Data Centre

operations? What dovetailing measures for academia and industry

are suggested to improve the existing capacity building

framework, and align it with the emerging technologies to upskill

the workforce in India?

II. Centre-State coordination

2.110 The draft National Data Centre Policy 2020, released by MeitY is a

welcome step. This policy framework shall be followed by a detailed

scheme with an implementation guideline document detailing

incentives to be provided to the DC sector by the Central and State

Governments. However, the industry representatives in response to

the aforesaid draft policy are of the view that policies should be jointly

framed with states, as there is a lack of cooperation in certain states

and many departments don’t coordinate with each other. Most Data

Centres favouring states already have economic development

processes in place that offer tax incentives, investment assistance,

loan guarantees, and other forms of business assistance designed to

attract business development. But with the huge investments that

Data Centres can represent, the playing field has changed. This calls

for a greater thrust on Centre-State coordination favouring the

implementation of uniform tax abatement code, analogous labour

laws, and a common framework to facilitate ease of doing business.

Q.23: Is non-uniformity in state policies affecting the pan-India growth

and promotion of Data Centre industry? Is there a need for

promulgation of a unified Data Centre policy in India, which acts

as an overarching framework for setting Data Centres across

India? What institutional mechanisms can be put in place to

ensure smooth coordination between Centre and States for

facilitating DC business? Do support your answers with detailed

justification.

Q.24: What practical issues merit consideration under Centre-State

coordination to implement measures for pan-India single-window

clearance for Data Centres?

III. Edge Data and AI-enabled Data Centre

2.111 Edge Data Centres are smaller facilities located near the populations

they serve that provide cloud computing resources and cached content

to end users. They are typically linked to a larger central Data Centre

or a network of Data Centres. Edge computing enables organizations

to reduce latency and improve the customer experience by processing

data and services as close to the end-user as possible. End users and

devices expect anywhere, anytime access to the applications, services,

and data stored in today’s Data Centres, and latency is no longer

acceptable. As a result, organizations in a variety of industries are

establishing edge Data Centres as a high-performance and cost-

effective way to provide content and functionality to customers. Edge

Data Centres are deployed in support of several uses, including 5G

networks, Internet of Things rollouts, and content delivery networks.

2.112 Artificial intelligence (AI) is a proven way for Data Centre operators to

maximize uptime, optimize energy consumption, detect potential risks

quickly, and defend against cyber-attacks. AI can be applied to

mechanical and electrical equipment in Data Centres to enable

actionable insights and automation, saving the operator money. AI’s

biggest benefit for Data Centres is the considerable reduction in energy

consumption. Google, with its AI-interest acquisition of DeepMind in

2014, has incorporated a machine-learning algorithm to manage Data

Centre equipment that resulted in 15% reduced energy overhead and

40% reduced cooling energy. The Google stats of reduced energy

consumption discussed above also imply saving worth millions of

dollars. This means that be it on a small or large scale, AI-based Data

Centre systems and solutions are imperative to become energy

efficient.

2.113 Data Centres require a high level of electrical reliability, and

uninterrupted power availability continues to be a significant concern

for Data Centre managers. Power quality issues can cause equipment

failure, downtime, data corruption, and are obstacles for DC

operations. It is frequently the case that Data Centre managers tend

to overprovision power to avoid downtime. This leads to unnecessary

wastage of power and space. As India plans the expansion of Data

Centres, such wastages need to be eliminated. To optimize the cost of

operation, it is significant to create an efficient Data Centre

Infrastructure Management System (DCIM) to correctly assess the

requirements of the concerned Data Centres. DCIM not only

streamlines the costs but also ensures sustainability by reducing its

carbon footprint. However, creating and maintaining a robust DCIM

might pose cost concerns, especially in a country like India, which still

does not possess the necessary framework for technical and designing

expertise as compared to the developed countries of the world.

2.114 Given that new technological developments will keep happening in the

DC space, policy measures must be put in place to promote the

adoption of future technologies for Data Centres.

Q.25: Is there a need for Data Centre Infrastructure Management

System (DCIM) for Data Centres in India? What policy measures

can be put in place to incentivize Data Centre players to adopt

the futuristic technologies? Elaborate with justification.

IV. Data digitization and monetization

2.115 Digitization is quite simply the creation of a computerized

representation of a printed analog. Data Digitization is the process by

which physical or manual records such as text, images, video, and

audio are converted into digital forms. There are many methods of

digitizing, but the main focus rests primarily on texts and images, as

these are the main objects in the digitization process. In this context,

some of the fundamental things like scanning and image capture,

necessary hardware, and software selection are crucial for the process

of digitization.

2.116 Digitization of records has been a priority for Government of India as

digitized data offers the long-term preservation of documents, orderly

archiving of documents, easy and customized access to information,

and easy information dissemination through images, text, CD-ROMs,

internet, intranets, and extranets. Digitized data offers the possibility

of monetization by introducing the discovery, capture, storage,

analysis, dissemination, and use of that data. Converting physical

records into the digital form will not only facilitate easy access of

Government records and services but will also enable easy access and

data analysis for informed decision making. Data digitization would

further help data principals in data sharing to gain beneficial terms or

conditions from businesses, information bartering, selling data

outright (via consent managers or independently), etc.

2.117 Digitize India Platform (DIP)

is an initiative of the Government of

India under the Digital India Programme to provide digitization

services for scanned document images or physical documents for any

organization. The aim is to digitize and make usable all the existing

content in different formats and media, languages, digitize, and create

data extracts for document management, IT applications, and records

management. DIP provides an innovative solution by combining

machine intelligence and a cost-effective crowdsourcing model. It

features a secure and automated platform for processing and

extracting relevant data from document images in a format that is

usable for meta-data tagging, IT application processing, and analysis.

https://digitizeindia.gov.in/about-dip

If one organization already has the scanned documents/images, DIP

can help them to extract the relevant data from the same and provide

the data extracts in a usable format. DIP provides an innovative

solution for all these challenges by combining Machine inputs with

human intelligence to deliver logically verified data. If one organization

is still using the paper-based document, DIP can convert them into

images and digitize them. The process of data digitization under DIP is

depicted in Figure 2.7

Figure 2.7: DIP

2.118 The DIP platform provides a facility to digitize various kinds of physical

records through crowdsourcing (www.digitizeindia.gov.in). The

platform uses an innovative algorithm, which ensures the accuracy of

the digitized document at a significantly reduced cost. It also improves

the quality of record-keeping and reduces the real estate required for

maintaining large record rooms for legacy records. The DIP initiatives,

taken in 2015, is helping the State Governments, which are the

custodian of huge volumes of legacy data in forming land records, land

registry, birth and death records, exam results at school and university

levels, service records of government employees, etc. However, there

are still many physical records that need to be digitized. For ensuring

that the digitization of all records is completed in a time-bound manner

some institutional mechanism needs to be put in place.

Q.26: What institutional mechanism needs to be put in place to ensure

digitization of hard document within a defined timeframe?

Q.27: Would there be any security/privacy issues associated with data

monetization? What further measures can be taken to boost data

monetization in the country?

CHAPTER 3

CONTENT DELIVERY NETWORKS

3.1 A Content Delivery/Distribution Network (CDN) is a geographically

distributed network of proxy servers and their Data Centres at various

points of presence (PoP), working together to deliver pages and other

web content to a user based on the geographic location of the user.

The distributed servers are called cache or edge servers, which store a

cached version of the content in Data Centres operated by IXPs and

Internet Service Providers (ISPs). Content delivery networks accelerate

the delivery of diverse content, especially video delivery, to the user.

3.2 The major factors driving the growth of the CDN market include the

rising need for effective solutions to enable live and uninterrupted

content delivery over a high-speed data network, increasing demand

for enhanced QoE (Quality of Experience) and QoS (Quality of

Service), the proliferation of video and rich media content over

websites, increasing demand for enhanced video content, latency-

free online gaming experience, increasing internet penetration and

adoption of mobile devices leading to rising opportunities for mobile

CDN.

3.3 CDNs have been used to improve the video streaming experience to

end-users while at the same time limiting the need for Content

Providers (CP) to own infrastructure. By massively deploying servers

in strategic locations, CDN providers assign users to a close-by server,

thus reducing hop count and avoiding potential congestion

occurrences while ensuring scalability and reliability. Shortening the

physical distance between a user and the webserver is the main job of

CDN, resulting in faster load times, increased server uptime, reduced

bandwidth usage, improved security, and better website performance.

3.4 Figure 3.1 displays the value chain for video content distribution. On

the one hand, the Content Owner sells its content to online Content

Providers (CP). On the other hand, ISPs sell plain connectivity to end-

users, and CPs sell them access to OTT content. Finally, CDNs are

placed between CPs and ISPs as a technology enabler.

Figure 3.1: Value Chain for delivery of content

3.5 CDN topology distinguishes between the two types of servers: origin

server at the source location ensuring the efficient intra-CDN

distribution of content, and cache servers for handling end-user to

server communications.

3.5.1 Origin server: An origin server is a web server that handles all

the internet traffic, processes incoming requests from end-users, and

responds to them. An origin server takes on all the responsibility of

serving up the content for an internet property such as a website or

video. The physical distance between the origin server and the user

adds latency to the connection during the data transmission.

3.5.2 Edge/Cache server: A CDN edge or cache server is a computer

that exists at the logical extreme or edge of a network, i.e., closer to

the user. The primary purpose is to store content as close as possible

to a requesting user device, thereby reducing latency and improving

page load times. CDN edge servers store cache content in the strategic

locations or PoPs to off-load one or more origin servers; they also keep

a track of changes at the origin server. Content delivery across the

globe with and without CDN is presented in Figure 3.2 for a better

overview. It can be seen that content transfer directly from the origin

Nicolas Herbaut, Daniel Negru, Yiping Chen, Pantelis Frangoudis, Adlen Ksentini, "Content delivery networks as a virtual network

function: A win-win ISP-CDN collaboration." 2016 IEEE Global Communications Conference

server to the end user adds more latency due to large distances,

whereas latency is reduced using cache servers at various PoPs near

the end user. CDN providers employ complex software to match

incoming requests for content to the ‘best’ server for meeting each end-

user request.

Figure 3.2: Using cache servers to speed up content delivery

Types of CDN providers

3.6 CDNs could be private or public networks. There are essentially two

basic setups in distributing the content by CDN: A Peer/Private model

and a Peer-to-Peer (P2P) model.

a. Peer-to-Peer (P2P) provider: A P2P CDN provider leverage users for

the distribution of content. When an end user visits a website that has

been cached by this CDN, their browser’s HTTP requests will be

redirected to the edge server closest to them and the site will load faster

to the user. A P2P CDN works by creating a mesh network (refer to

Figure 3.3 (b) consisting of users who are watching the same content

and coordinating these users so that they share video data segments

with each other instead of everyone always fetching the segments from

an edge server. Due to fewer hardware and resource requirements,

many CDN providers tend to offer P2P services free of cost.

Figure 3.3: System architecture for CDN, P2P CDN and Peer CDN

b. Private/Peer provider: The peering/private CDN model is the more

traditional and preferred approach by CDN companies maintaining a

network of servers across a wide geographic area. These server nodes

in a router-based peer CDN are closely coordinated by the centralized

knowledge, as shown in Figure 3.3 (c). Each server will have copies of

the data saved, and whenever a user requests for data, it will download

the data from the edge servers that are physically closest to them,

reducing the loading time and preventing request timeouts. Compared

to the conventional CDN approach, a peer CDN provider employs

network resources much closer to users, and this model can serve as

much as 80% of the content requests by peer nodes.

Edge CDN and Virtual CDN (vCDN)

3.7 Currently, most CDN servers are located at PoPs in the IXP/ISPs or

distributed Data Centres, enabling content to be cached and replicated

close to end-users. However, in the face of growing demand, the

current distribution of these servers becomes too centralized and

impairs CDN and gaming providers in ensuring a high quality of

experience (QoE) to the end-users. For an optimal experience in

advanced applications, servers would need to be within a few hundred

miles of each end-user. There are two key trends emerging: edge CDN

and virtual CDN (vCDN).

3.8 By deploying servers at the edge of the network, CDN providers can

assign users to a close-by server, reducing hop count and avoiding

potential congestion occurrences, while ensuring scalability and

reliability. The use of Edge CDNs and vCDNs will further help in

reducing issues of peering points congestion, inefficient routing

protocols, network unreliability, and the inefficiencies of existing

communication protocols and thereby aiding faster delivery of content

to users.

Figure 3.4: Edge CDN & vCDN

Both edge CDN and vCDN are set to change the landscape of content

delivery, providing new opportunities for Telcos to play a more

significant role in the CDN ecosystem and take advantage of new

monetization opportunities.

Why the demand for CDNs is growing?

Edge CDN

Edge CDN has greater distribution of CDN

servers.

Most CDN functions resides at IXPs today, but

these functions are increasingly moving to edge

sites in the mobile network.

Edge CDN are at an on-premises site, e.g., a

university campus or an airport, where there is

high demand for streaming in a localized area.

For Edge CDNs, most deployments will be at

core nodes in the mobile network (inner edge),

or in the RAN (outer edge).

Virtualized CDN (vCDN)

vCDN is a virtualized CDN software application

that run CDN workloads on proprietary,

baremetal, virtualized, or container-based

infrastructure, or on telco mobile edge

computing platforms.

Previously, CDN software platforms were tightly

coupled with the underlying hardware making

them inflexible, vCDN enables flexibility to run

CDN functions on shared servers to address

spikes in demand.

 vCDN enables content caching even more

locally than current CDN distribution.

vCDN may reside at CDN PoPs at IXPs, as well as

at network or on-premises edge sites.

3.9 The growing demand for low-latency, seamless, and easily integrated

content delivery across the internet has created opportunities for an

increasing number of CDN providers. The shift to mobile content and

multi-platform viewing has created a tremendous market opportunity

for new CDN companies and considerable product and business

innovation among the companies. The increased dependencies on ICT

infrastructure post-pandemic for requirements of work, education,

and entertainment are further pushing the demand. The following

sections explain various benefits of CDNs that are contributing to their

increased demand.

3.10 CDNs provide numerous benefits for users and also for the

network infrastructure. Some of the benefits of using a CDN are:

A. Improved page load speed and website performance

B. Ability to handle high traffic loads and sudden peaks

C. Localized coverage and improved availability

D. Reduced bandwidth consumption

E. Load balance between multiple servers or locations, causing

decreased load times and latency

F. Secure encryption and counters denial-of-service (DDoS) attacks

3.11 Faster Web hosting: CDNs’ primary customers are website or platform

owners, allowing for quick transfer of information that is required for

loading various internet content. Enterprise companies require a CDN

to give fast web performance to their end customers. In the recent past

CDNs have gained significant popularity delivering traffic for the

majority of sites such as Amazon, Facebook, Netflix, etc. CDN

envisages widespread application in non-video domains as well

(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.

This leads to positive user experiences expressed as:

High content loading speed = Positive User

Experience

As more and more companies are making a noticeable shift from

traditional web hosting, CDNs are handling a majority of the load. By

storing the static content on edge servers, CDNs can handle traffic

spikes with scalability. This is another reason behind prominent or

popular web hosting companies increasingly using CDNs.

3.12 Increased Video consumption: With the rise of smartphones

availability and usage, video consumption is growing at a much faster

rate. Presently, video accounts for about two-thirds of downstream

peak period traffic with ever-increasing trends. Figure 3.5 depicts

mobile traffic growth in terms of video and non-video consumption in

Petabytes (PB) per year according to GSMA & ABI research report

The non-video traffic includes file sharing, web/data, VoIP, and

gaming applications. As mobile video content has much higher bit

rates than other mobile content types, video is expected to generate

the majority of the mobile traffic growth through 2022.

Figure 3.5: The GSMA & ABI research mobile data traffic forecast

3.13 The COVID-19 pandemic has further led to increased media

consumption due to billions of people seeking in-home entertainment.

https://www.mobiliseglobal.com/wi-fi-offload-in-numbers/

As per the ABI data research forecasts, mobile data traffic is

anticipated to grow at a CAGR of 28.9% to surpass 1307 exabytes on

annual basis in 2025 wherein, 4G and 5G mobile subscribers will

represent 91% of total data traffic generated in 2025.Given that video

is currently the most requested content format on the internet, its

delivery requires new technologies and faces new challenges. 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 utilization of video data. Owing

to the rise of high-bandwidth content and data-hungry smartphones

in less than 10 years, CDN demand has skyrocketed. The increase in

demand for uninterrupted video and website content is expected to

continue to reflect the growth of the CDN market.

3.14 Impact of the COVID-19 pandemic: The pandemic has accelerated

India’s digital reset, which has seeped into almost every aspect of life.

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 ed-tech platforms are partnering with CDNs to allow

students unhindered access to quality education and have empowered

them to continue their academic journey despite being at home.

3.15 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 and

expanded the scope of the video landscape. The Indian OTT market is

likely to outperform the global market and may be ranked among the

top 10 by 2022. There are currently about 40 OTT providers in India,

which distribute streaming media over the internet. According to

KPMG Media and Entertainment Report 2019

, there will be 580

million OTT consumers by FY24 spending 30+ minutes on online

platforms every day, making India the second–biggest market after the

US. CDN providers are set in motion to deliver faster speeds and better

quality. At present most of the OTT companies have their own

infrastructure and leverage upon CDN services to maximize speeds.

During COVID-19 lockdown, all OTT platforms and new websites have

seen 2x-3x times growth on average, and CDNs have ensured an

uninterrupted user experience.

3.16 Uptake of E-commerce business and Financial services: E-

commerce, banking, and financial companies make use of CDNs to

improve their site performance and make their products or services

available online. According to Computer World, CDN provides 100%

uptime of e-commerce sites, and this leads to improved global website

performance. With continuous uptime, companies can retain existing

customers, leverage new customers with their enhanced services, and

explore new markets, to maximize their business outcomes. E-

commerce companies setting up their stores in the cloud are looking

forward to partnering with the Indian edge providers (PoPs).

Businesses in the field of banking, financial services, and insurance

(BFSI) can use a CDN not only to improve application performance but

also to secure their infrastructure.

3.17 Reducing Bandwidth costs: One of the most obvious cost benefits to

companies using CDNs is the lower bandwidth costs. CDNs that offer

access to key PoPs optimize the bandwidth efficiency across multiple

servers and improve the delivery of rich media content, providing

noticeable performance benefits to end users. This offloads the

bandwidth strain on the origin server, and the bandwidth costs go

down as efficiency improves. Therefore, installing CDN servers will

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https://assets.kpmg/content/dam/kpmg/in/pdf/2019/08/india-media-entertainment-report-2019.pdf

reduce the international bandwidth requirement by ISPs, improve their

network performance and efficient bandwidth usage.

3.18 Other cost benefits: Content provider companies currently using

CDNs gain additional operational benefits on being able to focus better

on developing meaningful content to offer to customers. Whether the

company is in the gaming or IPTV industries or provides rich media

content on the web, it certainly benefits from using a CDN in its

network strategy. A provider can concentrate on the content and let

the CDN focus on getting it to the customers quickly and efficiently. A

CDN provides seamless scalability, allowing companies to gain the cost

benefits of economies of scale as they grow.

Establishing CDN servers in the networks decreases the server load on

interconnects, peering points (public and private peers), and

backbones, freeing up the overall capacity and decreasing delivery

costs. Essentially, the content is spread out across several servers, as

opposed to offloading them onto one large server, reducing the network

traffic loads and leading to efficient traffic management, especially

during surges.

Why India needs to focus on CDNs?

3.19 As discussed in the preceding section, there are several driving factors,

which are fueling the CDN demand in India. With the second-largest

user base and continuously growing internet users, the service

providers are compelled to build and install content servers in their

networks. The internet user’s growth and penetration rate in India is

shown in Figures 3.6 and 3.7. Various mobile operators and ISPs have

launched CDN initiatives during the last few years.

3.20 The change in consumer behavior has led to more business-to-

business data transactions in the field of finance, advertising,

healthcare, and agriculture in the country, compelling the need for

CDNs to boost Indian businesses and digital efficiencies. Many

industry verticals, including the advertising industry, media and

entertainment, gaming, education and healthcare, online music

retailers and consumer electronics, etc., are adopting content

networks.

3.21 In recent times, India’s broadband infrastructure has significantly

improved, leading to enhanced broadband connectivity and adoption.

Moreover, the growing proliferation of high-speed internet and

affordability of related services is expected to accelerate the

consumption of internet content. Additionally, the implementation of

NDCP-2018 policy unleashes multiple opportunities for TSPs, ISPs,

infrastructure providers, manufacturers, innovators, and startups.

The viability and success of the proposed Digital Communications

Infrastructure will also depend on its users getting enabled to access

uninterrupted content and applications at the time, place, and

medium of their choice. Better availability of broadband increased

speeds, and lower prices are factors that are fueling the growth of CDN

platforms from the demand side.

3.22 India is witnessing an increased demand for online streaming of video

content. Today, consumers are making a shift from conventional and

cable-based video subscriptions to OTT Internet-based delivery

platforms. Numerous players have emerged in the OTT market space,

directly resulting in increased Internet traffic. Buffering is seen as a

major reason for user dissatisfaction and low experience levels,

causing more OTT and VOD-based CDN services.

Figure 3.6: Internet users’ growth in India

Figure 3.7: Internet Penetration Rate in India

Rollout of 5G and new futuristic technologies

3.23 5G, the next generation of mobile connectivity, promises significant

speed increases, ultra-low latencies, and immense capacity to handle

Internet of Things (IoT) devices. 5G encompasses multiple

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technologies, increases network performance improving flexibility and

scalability. It also brings new capabilities, such as network slicing,

which allows the creation of multiple virtual networks on the same

infrastructure, each securely isolated and with different performance

characteristics.

3.24 The main drivers of CDN in the 5G era will be the digitization of

everyday processes. The use cases in 5G, including autonomous

vehicles, Industry 4.0, video surveillance, cloud-based gaming, and

telemedicine, etc., will require very low latency delivery of content at

the edge. As 5G network rolls out, migration of storage from end-user

devices to 5G edge locations and the public cloud, where storage and

processing are cheaper is expected. One of the most significant drivers

will be the increased use of video data (more cameras everywhere) and

the improved resolution of image sensors. The increased use of video

data, the improved resolution of image sensors, underlying

virtualization of the infrastructure, and the move towards cloud-native

architectures will bring more and more focus on CDNs.

3.25 Further widespread use of AI/ML will necessitate CDNs at the edge for

large volume data processing for sensors, logs, image data in AI

training, and quick delivery of automated decisions. CDNs will also

impact the way compute and software architecture caters to the need

of new 5G use cases.

3.26 The Indian CDN market was valued at $435.2 million in the

year 2018 and is expected to be valued at $2846.8 million by 2027

(refer figure 3.8 below). Looking at Indian CDN market statistics and

forecast, it is seen that Asia-Pacific dominated the global market in

2020 and accounted for a revenue share of over 39%. The regional

market will expand further at the fastest CAGR from 2021 to 2028, as

it is characterized by the presence of emerging economies, such as

India and China, and is also one of the fastest-growing consumer

markets. Moreover, the growing population has resulted in an

increased demand for technological advancements in networking

infrastructure to fulfill the needs of online media consumption.

Various initiatives by the regional governments, such as Digital India,

have enabled fast and secure management of data delivery, owing to

which the usage of CDN solutions is expected to increase.

Figure 3.8: CDN Market in India

International experience related to CDNs

3.27 The Global CDN market size is expected to grow from USD 14.4 billion

in 2020 to USD 27.9 billion in 2025, at a Compound Annual Growth

Rate (CAGR) of 14.1% during the forecast period

. As the CDN services

are picking up, global practices and regulatory frameworks, etc., are

also evolving, the same has been discussed in the following sections.

Table 3.1 below mentions of global practices in CDN regulation of few

countries.

Table 3.1: Global practices: regulatory framework for CDN

service providers

No.

Country

Authority/Regulator/Regulatory

Framework Status

If yes, licensing or registration

regime

China

The National Communications

Commission/Regulated

Internet Content Provider Registration

is required for CDN Services

https://www.marketsandmarkets.com/Market-Reports/content-delivery-networks-cdn-market-657.html

https://nhglobalpartners.com/what-is-icp-license-how-to-get-one/

435.2

2846.8

500

1000

1500

2000

2500

3000

2019 2027

CDN Market in India (in $ million)

Germany

BNA (Bundesnetzagentur)/ Lightly

Regulated

CDN services are considered as

critical Infrastructure services, and

therefore comes under the purview of

German BSI Act

whereby the CDN

Service Provider has to perform third-

party audit.

Norway

Norwegian Post and Telecom

Authority/Not Regulated

Registration with the Norwegian Post

and Telecom Authority is not required

for content service providers and

CDNs

Brazil

ANATEL (The National

Telecommunications

Agency)/Regulated

License of Multimedia

Communications Services is required

from the Local Regulator

Australia

Australian Communications and

Media Authority/Lightly Regulated

CDN service providers are

subjected to certain regulatory

obligations under the

Telecommunications Act but do

not require to be licensed

South

Korea

Korea Communications

Commission/Not Regulated

CDN has not been recognized as a

licensable service, rather it is the

underlying transmission services

(Internet/Video Connect) which is

regulated, i.e., CDN itself is not

subject to any telecom licence

requirement.

Kenya

The Communications

Authority of Kenya/

Regulated

Content Service Provider license

is structured in the Unified

Licensing Framework (ULF)

developed by the Authority

European Union (EU)

https://www.akamai.com/legal/compliance

https://www.nkom.no/english/duty-to-register

https://www.dlapiperintelligence.com/za.co.heliosdesign.dla.lotw.telecoms/handbook.pdf?country-

1=BR.

[1]

https://thelawreviews.co.uk/title/the-technology-media-and-telecommunications-review/australia

http://opennetkorea.org/en/wp/kcc-guidelines-on-net-neutrality-and-internet-traffic-

management?ckattempt=1

https://www.ca.go.ke/industry/telecommunication/licensing-procedure/

3.28 European CDN market stood at $ 3.6 billion in 2019 and is projected

to grow at a CAGR of over 29% to reach $ 16.79 billion by 2025

. This

rapid expansion is owing to the increasing number of smart devices,

growing internet penetration, rising adoption of CDN by various

enterprises and SMEs, and increasing demand for SMAC (Social,

Mobile, Analytics and Cloud) technologies along with growing traction

of AR and VR applications across gaming, media and entertainment,

and other sectors. Based on the solution, the European Union market

can be categorized into Media Delivery, Web Performance

Optimization, and Cloud Security. Among these, the media delivery

segment dominates the market. This is attributed to the growing digital

media-supported devices, increasing internet penetration, and surging

adoption of OTT applications, which has fueled the adoption of content

delivery networks for seamless media delivery over the internet.

3.29 Regulation of Content and Application providers: The EU regulator

BEREC (Body of European Regulators for Electronic Communications)

has defined Content Application Providers (CAPs) first in its net-

neutrality guidelines. BEREC’s Open Internet Regulation

establishes

rights in relation to the open internet for ‘end-users’ and the rights are

available to both individual consumers and businesses using internet

access services. CAPs are covered and protected by the Regulation as

they use an internet access service to provide content or applications

to other end-users. This Open Internet Regulation covers the provision

of internet access services, and some defined specialized services,

however, the interconnection services provided by the CDN companies

and large content providers (e.g., YouTube, Netflix), who operate their

own CDNs are excluded from the scope of the Regulation.

China

3.30 Asia-Pacific countries, especially China, Singapore, South Korea,

Japan, etc., have contributed hugely to the expansion of CDN, and the

https://www.globenewswire.com/Europe-16-79-Billion-CDN-Market-Competition-Forecast-2025.html

https://berec.europa.eu/eng/open_internet/scope/

market is expected to reach $2.5 billion by 2026 at a CAGR of 19.8%

during the forecast period 2021-2026

. The market is expected to

grow at an even higher rate than present due to the ever-increasing

consumption of content in emerging economies such as India, China,

Japan, Hong Kong, and Singapore. All major CDN vendors have their

Data Centres installed in APAC to cater to this demand.

3.31 Internet Content Provider (ICP) licence: China being ranked the first in

the internet consumption globally, has several mandated licenses for

the internet and telecom sector. Foreign website owners must obtain

an Internet Content Provider (ICP) licence

from the Chinese Ministry

of Industry and Information Technology (MIIT). An ICP license is issued

to China-based websites and allows licensees to legally operate, host

websites on servers in mainland China. Without an ICP license, sites

hosted on a Chinese server will not load on browsers located anywhere

in the country. Having an ICP license also allows to access a Chinese

content delivery network.

CDNs – Issues to be addressed

3.32 This section deliberates on the issues and challenges faced by the

existing CDN players in the country, the collaboration between CDN-

ISPs, previous policy, and regulatory initiatives relevant to CDN

providers, and the need for regulatory intervention in the CDN market.

i. CDN – ISP interconnect and collaboration

3.33 CDNs form a layer in the internet ecosystem, where the content

owners such as media companies and e-commerce vendors pay CDN

operators to deliver their content to their end-users. In turn, a CDN

pays ISPs, carriers, and network operators for hosting its servers in

their Data Centres. The large deployment of the CDN-based solution

has induced blurred borders on the content delivery market and

TSPs/ISPs sometimes build their own distribution network.

https://www.industryarc.com/Report/18783/apac-content-delivery-network-market

https://nhglobalpartners.com/what-is-icp-license-how-to-get-one/

Deployment of a distributed Network Function Virtualization (NFV)

platform at the edge of the Internet Service Provider’s network where a

virtual Content Delivery Network (vCDN) can cater to the needs of end-

user, is a model that is prominently emerging. The emerging technical

architecture of edge CDNs and vCDNs suggests a global trend where

Telco CDNs are likely to grow faster in the coming years than

traditional CDN, as shown in Figure 3.9.

Figure 3.9: Expected growth of different types of CDN players in

the USA

3.34 CDN-ISP collaboration is a win-win situation where the CDN players

make use of servers, storage capacities, space, power, and network site

locations to host their cache servers, whereas ISPs, in turn, are

benefitted from reduced bandwidth costs, security from DDoS attacks,

and enhanced QoS to their customers. Many new models are proposed

by IEEE and other prominent research academia for CDN players to

collaborate with ISPs over a Virtualized Infrastructure, fairly balancing

the revenue stream created. It is expected that vCDN is set to change

the landscape of content delivery, providing new opportunities for ISPs

to play a more significant role in the CDN ecosystem. For these models

https://www.grandviewresearch.com/industry-analysis/content-delivery-networks-cnd-market

to flourish and contribute to the Indian digital economy, some issues

need to be addressed.

3.35 Revenue share between CDN-ISPs: The relationship between CDN

players and ISPs is that of a mutual facilitator. While CDN providers

help ISPs in terms of helping them save bandwidth cost and in

enhancing the user experience, ISPs provide the access without which

CDNs cannot deliver the content. While the CDN providers are

investing in the server hardware, the ISP is also arranging space,

power, and bandwidth for fetching cache content, etc. Thus, both the

players invest in their own systems and in process they help each other

improve their commercial viability. The market for the interconnection

of CDNs and ISPs is at a nascent stage. 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. Such a market may

require regulatory interventions.

3.36 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. For any Digital Communication network to function

smoothly, it is imperative to have a regulatory framework for

interconnection between various players which is fair and just and

gives equal opportunities to each player. Further, Large ISP players,

who are also in the CDN space, can create exclusive tie-ups with large

content providers like OTT platform companies excluding other players

from direct access on equal terms.

3.37 Net-neutrality issue: If the access to CDNs is not on equal terms, the

issue of net-neutrality may arise whereby customers of preferred

players may be provided with better quality CDN services. While the

ISPs are subjected to net-neutrality-specific license terms and

conditions, a formal mechanism to enforce the same on CDN players

does not exist. It can be argued that for compliance with net-neutrality

principle, a proper regulatory framework for Content delivery networks

may be required. In its recommendations of 28

November 2017,

though the Authority has recommended that the CDNs should not be

included within the scope of any restrictions on non-discriminatory

treatment, which are designed specifically to cover the providers of

Internet Access Services, at the same time Authority has also said that

there is a need for more transparency relating to the arrangements

between TSPs and CDNs. Knowledge of such arrangements would be

useful for gaining a proper understanding of the factors affecting the

flow of traffic on the Internet, the potential for anti-competitive

practices, and monitoring violations of the non-discrimination

requirements by TSPs. The Authority may frame appropriate

regulations to specify the disclosure and transparency requirements

in this regard.

3.38 In a study paper published by the Competition Commission of India

on ‘Market study on the Telecom Sector in India - Key Findings and

Observations’ dated 22

January 2021, it has been deliberated that

Internet companies often utilize Content Delivery Networks (CDNs), to

facilitate faster delivery of their content to users. In turn, CDNs have

agreements with ISPs or TSPs to host servers on their network. CDNs

reduce congestion in the last mile, lower transit costs, and improve

overall network utilization. With data traffic set to grow and a limited

number of players controlling a significant proportion of internet

traffic, chances are there for anti-competitive agreements between

CDNs, ISPs/TSPs, and internet companies. Since commercial

arrangements between internet companies, CDNs, and ISPs/TSPs are

not disclosed, monitoring of such arrangements and traffic patterns

would help in ensuring net-neutrality principles and fair competition.

However, for monitoring any such interconnect agreement, some

regulatory framework will be required.

3.39 DNS filtering, Content blocking and Security: The Domain Name

System (DNS) is a naming database in which internet domain

names/URLs are located and translated into IP addresses so that

browsers can load the internet resources/websites/ requested URLs.

DNS directs the websites’ traffic to the CDN servers instead of directly

to the origin servers hosting the website. When user computer wants

to find the IP address associated with a domain name, it first makes

its request to a recursive DNS server or recursive resolver that is usually

operated by an ISP or other third-party provider, and it asks the exact

DNS servers to resolve the name of a site with its IP address. The

servers that actually have the needed information are called

authoritative DNS servers. The Unified License Agreement for ISP

services does not specify whether the recursive/authoritative DNS

servers are to be setup/maintained by Licenses or not. Currently,

some of the ISPs have setup their own DNS and many of the ISP

Licensees are using other DNS server including public DNS servers

like Google, Cloudflare etc., in their network for their users. The

security of DNS system used by ISPs for delivering services, also affects

the overall cyber safety of the end users.

3.40 DNS based content filtering and URL blocking allows or blocks access

to the website´s or URLs as per the Government orders under Section

69A of the IT Act. URL blocking is implemented effectively in DNS

system 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. In absence of any regulatory and security framework, it has

been observed that few CDN providers are hosting their contents co-

locating them with ISP gateways through direct peering or at Private

IXPs. This arrangement results into bottleneck in effective blocking of

contents under the direction of Hon’ble courts or under provision of IT

Act and there is possibility of by-pass of Lawful Interception system

also. Further, a CDN essentially acts as a DDoS protection and

mitigation platform with edge servers distributing the load equally

across the entire capacity of the network, which is encouraging the

ISPs to install CDN servers and provide content services. But there are

numerous problems such as selecting server locations and the hidden

troubles of security while investing for a CDN establishment. This

discussion makes it is pertinent to regulate the security practices and

content blocking directives followed by the CDN players for which they

are equally responsible.

3.41 Non- Level playing field between telco CDNs, and other CDN

players: While Telco CDNs are subjected to various license-conditions

imposed responsibilities like lawful interception, content blocking,

etc., other CDN players are not. It can be argued that they can always

operate CDN services under a different company. But, with evolving

technology, where the same server space is partitioned to give telecom

service under a license and also to offer vCDNs, it will not be easy for

Telco CDNs to hive off their assets into a separate company. This

causes an issue of a level playing field.

3.42 In view of all the above discussions, it can be argued that for

facilitating the growth of CDN services in India, a regulatory framework

is required. Therefore, the Authority seeks the view of the stakeholders

on the following issues:

Q.28: What long term policy measures are required to facilitate growth

of CDN industry in India?

Q.29: Whether the absence of regulatory framework for CDNs is affecting

the growth of CDN in India and creating a non-level-playing field

between CDN players and telecom service providers?

Q.30: If answer to either of the above question is yes, is there a need to

regulate the CDN industry? What type of Governance structure

should be prescribed? Do elucidate your views with justification.

Q.31: In case a registration/licensing framework is to be prescribed,

what should be the terms and conditions for such framework?

Other Challenges for CDN establishment

3.43 Like Data Centres, CDNs also face multiple technical and economic

challenges due to infrastructure issues. Indian players have been

slower to integrate with CDNs compared to many developed countries.

100

One of the major challenges for a service provider or network operator

to launch a CDN is the initial investment for the basic infrastructure.

The basic infrastructure includes the streaming web servers with the

content, the proxies, and the caching servers in addition to the

network management software. Consequently, high-bandwidth costs

for data transmission are also the major consideration for most CDN

providers.

3.44 The costs of maintaining servers (including energy to power and cool

the servers) and maintenance staff costs are also significant.

Implementing and maintaining CDN servers and equipment is

therefore challenging for many small- to medium-sized internet

providers who have limited resources. A favorable regulatory

environment can help in attracting huge investments required to set

up a large number of CDN servers in India and in eliminating various

other roadblocks for CDN service providers.

3.45 Broadly CDN has two types of costs. First, the CDN servers’ costs that

include the storage capacity, aggregating hardware, estate, and energy

costs. Second, the cost of peering and IP-transit

3.46 Costs of Peering and IP transit: Both peering and IP transit are key

technical and monetary cost components in operating a CDN network.

a. Peering: It is an arrangement between two ISPs or stakeholders to let

the traffic destined to each of them pass through to reach its required

destinations (end-users). Peering can be either public or private, and

it allows for packet exchange on a horizontal level (without crossing

from a higher to a lower-tier ISP or vice versa).

b. IP Transit: CDN transit fees are paid to transit networks to get the

content from the origin servers of the Content Providers for making it

available to the end-users. This cost is a function of the volume of data

exchanged. The transit cost per unit of data volume can be low if the

CDN owns the transit network; otherwise, these costs can be

considerable. These transit costs can differ Content Provider wise, as

they may have different origin servers to fetch data, and, therefore, the

101

path between the origin server and the corresponding ISP may differ.

However, when the data is taken from the edge servers, the cost is

significantly lower.

3.47 The cost of peering or IP transit is substantial and can be a barrier to

the launch or success of a CDN. These costs depend on the volume

(e.g., committed, consumed, etc.) of multimedia data traffic transferred

or exchanged. Pricing for CDN services and charging the customers is

governed by bandwidth costs, traffic distribution, content size, etc.,

along with the expenses incurred for peering or transit.

3.48 Apart from the above costs for CDN players, there are cost constraints

involved for ISPs also to connect to CDNs or IXs. High costs of National

long-distance (NLD) charges and high costs incurred in Domestic

Leased Circuits (DLC (P2P)) link charges are also a major constraint

for ISPs to connect to CDNs or IXs at the Data Centre. Stakeholders

are requested to provide their response to the following question:

Q.32: What are the challenges in terms of cost for growth of CDN? What

are the suggestions for offsetting such costs to CDN providers?

3.49 Connectivity issues: There are certain challenges in setting up CDN

servers close to the users, including real-estate costs, the need for a

large and uninterrupted power supply, and bandwidth considerations.

In remote and rural parts of India, wireless connectivity is more

popular than fixed-line connectivity. Dependence on wireless networks

to transmit data puts a constraint on handling large data loads (video

content, live-media, on-demand data, etc.) To add to this, some rural

parts still have either no mobile coverage or are still being served

through 2G/3G networks

3.50 In contrast, developed countries like the USA, UK, and China, have a

high penetration of fixed broadband connectivity, and a majority of

their data and CDN services are carried on high-speed fixed networks

in the last mile. The last mile plays an important role in the CDN value

chain and can stream content efficiently only when internet access

102

networks are fully developed and have good speed of internet access in

all parts of the country. Thus, it may be argued that because of poor

broadband penetration in rural areas, CDNs are not getting

established there. The recent recommendations submitted to the

Government by the Authority on “Roadmap to Promote Broadband

Connectivity and Enhanced Broadband speed” dated 31

August

2021 focuses on incentivizing investment in the last mile linkage for

fixed-line broadband. Apart from other measures, the Authority has

also recommended a pilot direct benefit transfer scheme in rural areas

for proliferation of fixed-line broadband connectivity. Faster

implementation of these recommendations will ensure higher

investments in fixed broadband infrastructure creation, which in turn

will help in the further development of the CDN networks in the

country. However, the Authority would like to understand from the

stakeholders that what other measures can be taken for establishing

CDNs in smaller cities.

3.51 Location constraints: The performance of CDNs depends on the

geographical location of edge servers and PoP locations. Until and

unless the users are served through CDN servers operating near them,

the user experience will only marginally improve. Most of the PoPs are

located in major cities like Chennai, Mumbai, Bangalore, Delhi, etc.,

due to power availability and enabling ecosystem for server

establishment. To be viable to support CDN services, the 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.

3.52 As has been discussed in different chapters of this consultation paper,

the Digital communication infrastructure ecosystem comprises

various stakeholders, including CDN service providers, Data Centre

operators, and Interconnect Exchange providers. These players can

flourish and grow together well if the ecosystem for their presence

exists in different parts of the countries. Currently, the ecosystem is

flourishing mostly in Tier1 cities, these players must grow in different

103

States and smaller cities so that the digital economy gets boosted there

also. Considering this, the Authority would like to know the

views/suggestions of the stakeholders on how to overcome the location

constraints and facilitate the expansion of CDNs in various Tier-2

cities.

Q.33: Do you think CDN growth is impacted due to location constraints?

What are the relevant measures required to be taken to mitigate

these constraints and facilitate expansion of ecosystem of Digital

communication infrastructure and services comprising various

stakeholders, including CDN service providers, Data Centre

operators, and Interconnect Exchange providers expansion in

various Tier-2 cities?

3.53 Currently most CDN, IXP (those catering sizable traffic), and Data

Centres are situated mainly in metro cities like Mumbai, Delhi, and

Chennai. Regional ISP (Category "B" and "C") can connect their

network with CDN and IXP, only by hosting their Border Gateway

Router in Data Centre or IXP premises located in these metro cities.

The investment required for bandwidth connectivity from their regional

point of presence to metro cities precludes most ISPs to peer directly

at these locations. For providing the benefits of CDNs for subscribers

of smaller ISPs, it is imperative that the connectivity between the ISPs

operating on a regional basis and CDNs is promoted. Stakeholders are

requested to provide their response to the following question:

Q.34: What measures can be taken for improving infrastructure for

connectivity between CDNs and ISPs, especially those operating

on a regional basis?

Need for Incentivization

3.54 As deliberated in the challenges section, the initial costs associated

with establishing a CDN are quite high, while it takes time to get the

returns on investment. Private investments are required to set up a

large number of CDN servers in India. Suitable fiscal incentives

104

through policies can support the companies during initial investment.

Stakeholders are requested to provide their response to the following

questions:

Q.35: Is there a need to incentivize the CDN industry to redirect private

investments into the sector? What incentives are suggested to

promote the development of the CDN industry in India?

Q.36: How can TSPs/ISPs be incentivized to provide CDN services?

Please elucidate your views.

3.55 Apart from the issues discussed in above sections, the Authority would

like to know, if there are any other relevant issues/suggestions from

the stakeholders.

Q.37: Are there any other issues that are hampering the development of

CDN Industry in India? If there are suggestions for the growth of

CDNs in India, the same may be brought out with complete details.

105

CHAPTER 4

INTERCONNECT EXCHANGES

4.1 Internet Exchange Points (IXPs) are the physical internet traffic

exchange nodes, wherein ISPs and other Autonomous Systems (AS)

exchange traffic between themselves. IXPs are regarded as a key

component of modern internet infrastructure and contribute to global

network resilience and efficiency. By keeping domestic internet traffic

local, IXPs help reduce transit costs, reduce latency in the network

and provide a better user experience. This is even more relevant when

complementary services such as CDNs exist within the country. In the

absence of an IXP, the Internet Service Providers (ISPs) should either

directly interconnect with each other or exchange their local traffic

through an IXP abroad. In addition, in the absence of a national IXP,

the ISPs would need to connect with international ISPs for accessing

the global Internet cloud.

4.2 Internet Exchange Points (IXPs) have the physical infrastructure to

allow two or more ISPs, CDNs, or Enterprises to transfer data between

their respective networks. IXPs facilitate the transmission of data

between end-users of two different provision networks. Members

connected to IXPs can rent out ports, which are the physical gateways

to the exchange of information. Ports may have varying speeds, which

influence the rents paid for them. TRAI has previously defined an IXP

A network infrastructure operated by a neutral, not-for-profit entity, with

the purpose to facilitate the exchange of Internet traffic between Internet

Service Providers (ISPs). The number of ISPs connected to an IXP is

required to be a minimum of three. There must be a transparent open,

and non-discriminatory policy for any ISP to join the IXP.

Figure 4.1 depicts a data transfer through an IXP

https://trai.gov.in/sites/default/files/9.pdf

106

Figure 4.1: Local data transfer through an IXP

4.3 For a developing country like India, which has the second-largest

population globally but has low wireline Internet penetration, Internet

exchanges are essential. As more and more users demand fast,

reliable, and consistent Internet connections at homes for fulfilling

their entertainment, work, and educational needs accessed over

multiple devices, delivering high-quality connectivity is necessary for

which Internet Exchanges are required.

4.4 IP transit and Peering: IP transit is when one entity pays another for

the right to transit its upstream network. In this arrangement, one

entity has a higher status than the other in the hierarchy, so there is

no longer a peering relationship from an internet standpoint because

both parties do not benefit equally from the exchange. When

enterprises or smaller ISPs connect to a bigger ISP to reach the entire

internet, it is known as IP transit. Whereas IP peering is a mutual

107

exchange of data between two ISPs, and the amount of data exchanged

is typically close to equal. The respective ISPs do not charge for this

arrangement as both parties benefit equally – this type of data

exchange is known as settlement-free. IXPs provide the necessary

infrastructure to allow ‘peering’ between members connected to it.

Internet exchange points thus facilitate public peering between

multiple stakeholders. Connected via ports, peers are usually ISPs but

can also include CDNs and Data Centres among other service

providers, who have rented ports on the IXP. The costs associated with

operating IXPs are usually shared between the participating

infrastructure and network providers. IXPs facilitate public peering

arrangements between multiple stakeholders, permitting exchange of

internet traffic for free. Some large networks, with greater market

share, may charge smaller networks for peering services. Public

peering via IXPs continues to grow in terms of traffic carried and the

number of ports required at IXPs. As the amount of data exchanged

between two stakeholders increases, they may think of private peering.

These stages have been shown in Figure 4.2.

Figure 4.2: A Peering Life Cycle model

(Source: blog.equinix.com)

Demand drivers for IXPs

I. Effect of Internet Ecosystem

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4.5 Rapid digitization and increased user base: In the last few years,

rapid digitization in the country is leading to increased domestic IP

traffic. Under Digital India Initiatives, a massive countrywide

infrastructure has been evolving, and large-scale digitization is taking

place to enable easy, reliable access over the internet to the citizens.

The internet users base in India is about 800 million by the end of FY

2020

, and according to the new Cisco Annual Internet Report

, India

will have over 907 million internet users by 2023, accounting for 64%

of the total population.

4.6 Growing domestic IP traffic: The role of Internet Exchange became

prominent during the pandemic as most of India's workforce and

students worked from home and data traffic and use of the internet

increased heavily. The domestic IP traffic has surged tremendously;

there was a significant increase in traffic in categories like gaming,

OTT streaming services, ed-tech, and Cloud services, among others.

One of the Internet exchanges in India has mentioned that during the

lockdown, OTT traffic surged 198.68 percent, hosting traffic (storage

space and access for websites) went up by 62.78 percent, ISP traffic

increased by 54.38 percent, among others.

4.7 Applications requiring reduced latency and enhanced broadband

speeds: The demand for video streaming, gaming, virtual reality, etc.,

warrants high broadband speeds and low latencies. The transmission

of data over long distances to foreign IXPs often leads to a significant

increase in latency. The data would have to travel upstream to the IXP

and then again downstream to the end-user. The long transmission

path causing increased latency affects services relying on low latency

connections. With the creation of a local IXP, the transmission path

reduces and leads to reduced latency. Experiences have shown that

for ISPs, local links offer up to 10 times faster transmission speeds, as

the data makes fewer hops to reach its destination. The working paper

of the United Nations ESCAP (Economic and Social Commission for

TRAI Telecom Subscription data as of 31

December 2020

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109

Asia and Pacific), highlighted a statistically significant and positive

relationship between the number of IXPs and fixed-broadband

performance parameters like speed and latency

. For every 1%

increase in the number of IXPs per 10 million inhabitants, the

download speed (Kbps) of fixed broadband is expected to increase by

about 0.8%. In addition, the preliminary findings emphasized a

significant and negative correlation between the number of IXPs and

latency that for every 1% increase in the number of IXPs per 10 million

inhabitants, the latency (delay in milliseconds) of broadband is

expected to decrease by about 0.4%. As the latency decreases it

ultimately increases the upload and download speeds.

II. Technical benefits

4.8 Network benefits: The network operators using IXPs will have more

autonomy and control over their own resources, including routing and

traffic management because it decreases a network’s dependency on

third-party networks. IXPs play an important role in providing better

networking capabilities and strong network connections. As

technology advances the QoS expectations, performance, scalability,

control and rising speed of the internet exchanges, the requirement of

new IXPs will arise. A secondary effect of IXPs is that they improve

competition, which is often a key policy objective of liberalized telecom

markets and policymakers.

4.9 Improved resilience: IXP improves the stability and continuity of

internet access by redirecting the Internet traffic when there are

connectivity issues. In the context of service interruptions, IXP

improves a country and region’s overall resiliency that can occur

outside their area. When an upstream service provider experiences an

outage, the stability and continuity of local traffic can be maintained

because the IXP can provide additional flexibility in redirecting

internet traffic when these connectivity problems occur. Big

Enterprises also connect to IXPs because of these direct network

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latency

110

advantages. This partnership between enterprises and IXP operators

is mutually beneficial and amplifies the need for IXP establishment.

4.10 National Security: As the data remains local, interception by foreign

agencies over the internet is avoided and hence security is improved.

Once IXPs achieve critical mass, they become the centre of a vibrant

Internet ecosystem in the country, involving most of the ISPs, content

providers, business, academics, and Government users through

better, faster accessible services.

III. Economic Benefits

4.11 Reduced costs and savings of Foreign Exchange: The flow of data

to upstream foreign internet service providers requires payment to the

IXP located abroad, losing foreign exchange for every transmission that

is made, as for both, i.e., sending the ISP as well as receiving the

domestic ISP have to pay their upstream foreign service providers. A

local IXP can aggregate requirements of Indian ISPs and exchange

international traffic at lower negotiated rates saving foreign exchange.

4.12 Promotes local economy: IXPs build up confidence in providers by

attracting key internet infrastructure providers for hosting the content

locally. Local IXPs improve the existing digital infrastructure

connectivity and have the potential to become a hub for local and

international operators. As more people come online, the demand for

hosting internet services locally rises, which necessitates the presence

of local IXPs.

4.13 Lower bandwidth utilization costs: Networks that need to lease

connections from licensed TSP to reach an IXP faces a local bandwidth

cost, especially in a developing country

. Creating local IXPs enables

efficient bandwidth utilization for routing of the domestic traffic. More

choices become available to ISPs for sending upstream traffic to the

rest of the internet contributing to a more competitive wholesale

transit market. Further, the IXPs have the potential of lowering the

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111

operating costs for local ISPs, while increasing the traffic, which leads

to optimization of revenues of ISPs.

4.14 Positive spinoff of increasing Data Centres: IXPs and content

providers often share space in Data Centres and facilitate access of

content to local users. Moving content closer to business and

customers is getting reflected in the growth of content networks and

regional Data Centres. As the deployment of Data Centres is increasing

and networks are shifting towards more and more local traffic, overall

traffic on IXPs is increasing, thereby Internet exchanges are becoming

an attractive customer to carrier-neutral Data Centre operators. As the

number of Data Centres increases, the IXP market will also grow.

4.15 Content peering: The majority of the content consumed by end-users

is available presently by peering with the big content providers (like

Google, Facebook, etc.). At an IXP, CDNs connect with each other

where local internet traffic is exchanged and routed locally. Content

providers and CDN operators globally are pushing service providers to

connect to IXPs for faster content movement. With huge content

consumption and evolving markets, more CDN providers would

connect to IXPs and this, in turn, will increase demand for a greater

number of private IXPs in near future. There is a need for Data

Centres, ISPs, CDN operators, content creators, and even consumers

to come together to overcome challenges like connectivity, resiliency,

and security, adopt new IX models and enforce new IXPs to improve

the landscape of internet peering and interconnect.

4.16 New business opportunities: IXPs can be instrumental in developing

the local internet ecosystem, by attracting a range of local and

international operators. Enterprises also join IXPs as part of their

digital transformation strategies. Moreover, IXPs play a major role in

digital innovations like AI, Cloud, Blockchain, Big Data, etc., by

increasing operational efficiency, aiding in migration to business-

critical applications and services, and triggering more business

opportunities. The increasing importance of cloud infrastructure and

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application services across the corporate world is driving the

enterprise toward the internet exchanges, looking for lower latency.

International Experience

4.17 Globally, a number of approaches and implementation methods are

being realized to boost the IXP establishment and traffic exchange

operations. Many independent IXPs have been set up for ISP peering,

for the purpose of routing the local IP traffic within the country. The

international best practices of a few successful case studies have been

discussed in this section based on the information from the IXP

websites, case studies that serve to demonstrate the benefits of

expanding the IXPs, and what policy or recommendations the

countries have implemented for supporting private IXPs.

a. Singapore: Singapore Internet Exchange (SGIX), 2010

4.18 To promote Singapore as a major information hub for the region, the

Singapore Internet Exchange (SGIX), a not-for-profit exchange, was

established in 2010 as a neutral Internet exchange to enhance the

environment for local and international network traffic

. SGIX

(Singapore Internet Exchange) is one of the largest not-for-profit

Internet exchanges (IXs) in the region. Launched in 2010 as an

initiative under the Singapore government’s Intelligent Nation 2015

(iN2015) master plan. Offering an efficient central point of traffic

exchange for ISPs, the SGIX has catalyzed the growth of Singapore’s

information industry by encouraging content hosting and related

developments such as the establishment of Data Centres. The new IXP

arrangements enabled customers of the ISPs to access local content

from other ISPs even during cable outages, which occur on the

international network. Using a local exchange like SGIX also helped

cut connectivity costs and improved the resiliency of their networks. It

https://www.internetsociety.org/resources/doc/2021/effective-ixp-strategies-for-the-asia-pacific/

https://www.sgix.sg/

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also reduced the latency their customers experienced when accessing

local content.

4.19 Singapore’s regulatory environment encourages all network operators,

including those with significant market power (SMP), to interconnect

on agreed terms. SGIX enjoys participation from a full range of brand-

name peers, including operators from global and domestic network

providers, social media, and video streaming companies, as well as

cloud infrastructure providers, CDNs, online gaming companies,

educational institutions, and research organizations. SGIX does not

see these other operators as competitors. Its mandate is to promote

Internet peering in Singapore and to complement other exchanges in

the ecosystem. Practicing full transparency both operationally and

financially it assists potential members to evaluate the exchange fairly

against the alternatives.

4.20 In a recent study, the cost of routing the local traffic through SGIX was

estimated to be almost 95% cheaper than using international transit

service, local latency is reduced and an aggregate of over 500 Gbps of

data is transferred domestically among SGIX members as of May 2021.

Moreover, each domestically exchanged transaction frees up an equal

amount of international bandwidth, thereby improving connection

speeds and reducing latency over Singapore’s international links as

well.

b. London: UK – London Internet Exchange (LINX), 1994

4.21 London Internet Exchange (LINX) is one of the world’s largest and

oldest internet exchanges. LINX was founded in 1994 by a group of

ISPs and educational networks and is a founder member of Euro-IX, a

Europe-wide alliance of Internet Exchanges. It is currently one of the

largest neutral IXPs in Europe in terms of average throughput.

Initially, LINX membership was restricted to operators of traditional

ISPs. In 2000, this restriction was relaxed and today a wide variety of

networks peer at LINX exchanges, including Google, Akamai, Yahoo,

and the BBC. The LINX network consists of Ethernet switching

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platforms installed across various United Kingdom locations

. As of

March 2021

, LINX facilities have about 1700 connected member

ports with more than 950 member ASNs, interconnecting high traffic

volumes. The products and services at LINX are designed to reflect the

changing network and interconnectivity requirements, to help

members expand and grow their own networks.

4.22 The LINX exchanges have been established on an open, neutral,

settlement-free peering facilities model, working for the interests of its

members. This not-for-profit model is widely adopted in the developing

world as it builds trust and infrastructure and fits well with capacity-

building programs. LINX observes significant expansion demand, port

orders, and increasing peak traffic volumes throughout the year. Built

on a robust network infrastructure the LINX successfully meets its

objectives of increasing network capacity, geographical and port

expansion demands, and development of offered products. LINX aims

to meet member needs better, service more interconnection products

and deliver a continued digital transformation.

4.23 LINX Products and Services are focused on developing new products

for LINX members such as Public Peering Network traffic exchange

over a shared network; Private Interconnect Member point-to-point

connections; LINX connection with partners via vLAN; Access Points

connections with Data Centres; Private vLAN allowing members to

connect to other members from LINX.

c. Equinix: United States, US-IX, 1996

4.24 A great deal of global traffic traditionally passes through the United

States. Traffic from Europe joins traffic from the U.S. on the West

Coast, where a series of landing stations feed traffic to Asia. The

Atlantic submarine cable systems are home to the most advanced and

densely served subsea links on the planet. While Europe has double

http://www.linx.net

https://www.linx.net/wp-content/uploads/2021/07/LINX-Annual-Report-2020.pdf

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the number of exchanges than any other region, the United States has

more exchanges than any single economy.

4.25 United States is the home of the earliest Internet exchanges. PAIX, the

Palo Alto Internet exchange, was the first commercial, carrier-neutral

exchange point in the United States. Launched in 1996, it was owned

and operated by Digital Equipment Corporation. Today it is owned and

operated by Data Centre operator Equinix. The North American

market is dominated by commercial exchanges, but there are

community-led open exchanges also in the USA of which the Seattle

Internet Exchange (SIX) is the largest with more than 270 peers. The

not-for-profit Seattle IX (SIX) handles more traffic than any other

public exchange in the U.S., with peak speeds approaching 2 Tbps as

of May 2021.

4.26 As Equinix runs a commercial operation, it has certain advantages

over associations and other not-for-profit exchanges. Equinix bundles

a range of Data Centre and interconnection services. Equinix has

quickly become the leader in the Internet exchanges. As a commercial

exchange, Equinix doesn’t publish traffic statistics. It is not known

how much traffic is being exchanged under either its bilateral or

multilateral peering services, however, Equinix’s global traffic is

substantial.

d. Kenya: KIXP, 2000

4.27 In Kenya, the Kenya Internet Exchange Point

(KIXP) grew rapidly and

now ranks among the world’s top 15 IXPs in terms of growth in traffic

exchanged. After nearly a year of preparatory work, including the

design and implementation of a capable technical operation, funding

model, and legal framework, the KIXP was launched in late November

2000 and is located in Nairobi. To leverage the value of KIXP, Google

installed a Google Global Cache in Kenya, which can be seen as an

instance of a local Data Centre. This had a significant impact on traffic

levels in Kenya and a dramatic surge in traffic exchange was seen after

https://www.tespok.co.ke/?page_id=11651

116

the Data Centre was installed. The benefits of the KIXP extend beyond

the Kenyan borders, KIXP members are beginning to attract customers

from neighbouring countries due to the increased bandwidth and low

latencies. In addition, Kenya is starting to attract external ISPs to

exchange their own traffic at the KIXP further boosting its revenue.

e. The Bahamas

4.28 The Bahamas regulator the Utilities Regulation and Competition

Authority (URCA) released a consultation

on ‘Framework for

Establishment of IXPs in the Bahamas’ in May 2019. At that time,

there were no IXPs in The Bahamas. As a result, local ISPs routinely

routed locally generated internet traffic destined for local users

through intermediary networks and digital infrastructure in another

country. URCA initiated the Consultation intending to stimulate the

market entry of IXPs in The Bahamas and set out its initial thinking

on the regulatory measures for the setting up of IXPs. The creation of

a local IXP was cited as one of the critical factors if the Government is

to realize the Grand Bahama ‘technology hub’ ambitions. The

consultation aimed to promote public awareness of the contributions

that IXPs can make to the development of the internet and digital

economy in the Bahamas; to alert potential IXP users of URCA’s

framework for the entry of IXPs in the market, and to ensure that the

regulatory framework is favorable for IXPs to operate successfully. For

this URCA proposed strategies regarding IXP location, governance and

decision-making, participation, business model, and funding.

4.29 In the final paper issued on 21st August 2019, URCA clarified the

regulatory framework for market entry of IXPs in The Bahamas. URCA

favored the light-touch regulatory measures, as per the statutory

framework of their Communications Act. URCA aimed to put in place

fit-for-purpose measures for market entry of IXPs, and to foster

dialogue/consensus on IXP implementation factors among

stakeholders, in a twofold process. URCA also proposed to set up a

https://www.urcabahamas.bs/framework-for-establishment-of-ixps-in-the-bahamas-consultation-ecs-07-2019/

117

Working Group to facilitate further discussions and consensus on IXP

governance and operational factors amongst the stakeholders.

f. Others

4.30 Several countries have an independent body like the IXP Association

(IXPA) for coordination of all the IXP operators and regional IXPs for

easy management, interconnection, cooperation, knowledge sharing,

promoting competition, and global development. The IXPAs are

established on a regional basis: AFIX for Africa, APIX for Asia and the

Pacific, Euro-IX for Europe, and LAC-IX for Latin America and the

Caribbean. Along with the internal functioning of the exchange, the

external environment to the exchange is equally important. An IXP

grows with its large geographical user base, the service providers that

address that user base, and the infrastructure and regulatory

environment in which it finds itself. A compilation of Global practices

in IXP services from other countries is given in Annexure III.

Need for more Interconnect Exchanges in India

4.31 An IXP is an essential part of the internet ecosystem in countries with

multiple ISPs and other content service providers. Operation and

maintenance of a high-capacity and robust IXP is crucial for providing

low-cost internet to end-users. With no IXP, internet traffic will go

outside the country to foreign IXPs for peering. As the number of ISPs

as well as their traffic is increasing, there is a need to localize the

internet traffic and avoid using foreign IXPs to peer domestic ISPs.

According to ITU, the Government can further encourage the creation

of IXPs by advising ISPs and other service providers on the benefits of

connecting to an IXP. This can aid both ISPs and non-ISPs to rent

ports to connect to IXPs.

4.32 Most of the developed countries already have IXPs operating in their

network. The developing countries are in the process of deploying self-

sufficient IXPs and saving the foreign exchange. Figure 4.3 represents

the number of IXPs by countries per 10 million habitants wherein

India is having less than 1 IXP per 10 million habitants. Having more

118

than 800 million internet users at present and expected to reach 975

million by 2025

, the existing number of IXPs in India may not be

sufficient to meet the internet traffic demands. Establishing more IXPs

not only helps in managing traffic but encourages more local content

development, creates incentives for local hosting of Internet services

due to the larger pool of local users, who will be able to access online

content faster and cheaper. Need for setting up more IXPs in the

country arises, so that the ISPs peer together to route the domestic IP

traffic within the country.

Figure 4.3: Number of IXPs per 10 million inhabitants (2021)

(Source: 'Inclusive Internet Index 2021' produced by Economist Intelligence Unit Limited)

4.33 The boom in internet usage and content consumption online has

necessitated the expansion of internet exchange infrastructure. The

Data Centre industry in India would further require exchanges that

allow for transmission and interconnection at cheap rates and without

any delays or congestion in the network. There is a need for

encouraging IXPs to be set up and expand capacity at exchanges.

These can further allow a variety of new peers such as CDNs, Content

https://www.statista.com/statistics/255146/number-of-internet-users-in-india/

12.27

12.65

9.52

3.56

4.54

2.66

1.48

1.41

0.87

0.05

0.17

1.5

4.5

7.5

10.5

13.5

Number of IXPs (per 10 million inhabitants)

119

Providers, and Data Centres to connect and allow low latency services.

Several other aspects that demand operating an IXP are deliberated in

the subsequent section.

4.34 IXPs help in improving network design and infrastructure for service

providers. However, the IXPs in India are situated in Tier-1 cities only,

resulting in a scalability issue of individual interconnections and

confining the peering and internet landscape to limited areas. As traffic

exchange is required closer and closer to the edge, more exchanges

might be needed in smaller cities and locations. Alternatively, an ISP

can connect directly to content providers, resulting in lower costs and

helping smaller ISPs compete with larger players.

As the data traffic is increasing in the country, more IXPs will be

required to meet the growing traffic demands. The Authority, therefore,

seeks the views of the stakeholders on the following question:

IXP Business Models

4.35 IXP business models vary depending on whether an IXP is for-profit or

not-for-profit. In general, a for-profit IXP aims to be profitable and

distributes this profit as a dividend, or payment, while not-for-profit

IXPs exchange traffic, without the intention of distributing profit, but

to invest any surplus funds in the future development of the IXP. Some

not-for-profit IXPs charge fees for their services based on a cost-

recovery model, whereas others seek external support such as

sponsorships, subsidies, or donations. Normally, a not-for-profit IXPs

operates under one of the following models: free, subsidized, or

independent.

120

Table 4.1: Non-profit IXP business models

Model

Free

Subsidized

Independent

Descripti

• Relies on

contributi

ons from

IXP

network

members

and

volunteer

• Contribut

ions can

be in the

form of

labor,

equipmen

t, time,

money, or

other as

per the

IXP

needs.

• No

members

hip,

joining or

monthly

fees are

charged

to the IXP

participa

nts.

• Based on subsidies

from the

Government or an

external entity that

sponsors the IXP,

mostly for a

sustained period.

• The IXP meets

some of the

operating costs by

charging members

a nominal fee.

• In some cases,

contributions from

IXP members

gradually allow to

cover OpEx and

members to take

ownership of the

IXP and eventually

to the transition to

a fully independent

model.

• Based on income

generated by fees

paid by members

on a recurring

basis.

• Additional

revenues from

value added

services, one-time

fees, etc.

• All operational

expenses are met

by the IXP.

• Typically, this

model is

introduced when

the IXP matures

and has proven its

value to operators

and the ecosystem.

Advantag

• Low cost

of peering

for

members

with no

additiona

l costs

other

than

capacity

to IXP.

• Low-medium cost

of peering for

members in

addition to the cost

of leasing capacity

to the IXP.

• Sustained revenue

to meet operational

expenses.

• Easy to scale and

grow due to ability

• Neutrality of the

IXP is guaranteed

in a self-sustained

model.

• Sustained revenue

to meet operational

expenses.

• Easy to scale and

grow due to ability

to implement and

maintain

https://www.itu.int/en/ITU-D/IXPs | Governance and Financial Models : Best practices for sustainability.pdf

121

• Low

operating

costs for

the IXP

organizati

on.

• Volunteer

driven;

less

complexit

y on

organizati

on and

managem

ent.

to implement and

maintain

management/oper

ational structures.

management/oper

ational structures.

Examples

• IXP in

Seattle

and

Washingt

on in the

USA.

• IXP in

Uganda

(UIXP)

• Nigerian IXP

(IXPN).

• IXP in Malaysia.

• Most of European

IXPs

• Kenya IXP (KIXP)

• IXP in

Johannesburg

(JINX)

4.36 While community-led exchanges have to treat all members equally, put

the interests of members first, and avoid competing with its members,

a commercial internet exchange can make itself an attractive

colocation site over and above the interconnection offer. A for-profit

commercial exchange can have favorable pricing suiting to the

prospective member. The differential pricing practices allow for better

margins than the cost recovery charging at not-for-profit exchanges.

Further commercial exchanges have the potential to raise capital or

take debt to grow through acquisition

4.37 For the non-commercial IXPs, the choice of business model is an

important factor that impacts the management and sustainability of

its operations. Ensuring the presence of a local interconnect exchange

(IX) has become an increasingly important economic priority for many

countries. IXPs help in developing the local internet industry, improve

the market competitiveness and serve as a hub for new technical

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activities by ensuring better and more connectivity, particularly in less

connected areas of a country.

Policy and Regulatory initiatives In India

4.38 The requirement of creating an Internet exchange point for peering of

the ISPs was felt in India as early as 2002 when TRAI set up a Task

Force involving experts from DIT, IIT Delhi, IIM Ahmedabad, C-DOT,

TEC, and ISPAI, with an objective to prepare an action plan to achieve

faster growth of the internet in the country. The Taskforce

recommended the establishment of IXP for the exchange of internet

traffic within the country.

A. National Internet Exchange of India (NIXI)

4.39 TRAI forwarded the recommendations of the task force to the

Government in August 2002, it included setting up of NIXI in the

country under the umbrella of an Industry representative not-for-

profit, neutral body. The taskforce emphasized that this would result

in cost-saving on international connectivity, lower internet usage

prices for the consumers, and also improve the quality of service. The

Government accepted the recommendations for setting up NIXI under

a grant by the Department of Information Technology.

B. Present Status of NIXI

4.40 National Internet Exchange of India (NIXI), registered as a Section 25

company under the Companies Act of India, is a public-private

partnership between the government of India and industry ISPs. NIXI

offers different ports capacity to ISPs, CDNs, with different billing

cycles. Initially, four nodes of NIXI were made operational at Noida,

Mumbai, Chennai, and Kolkata, which were physically hosted at the

premises of Software Technology Parks of India. Currently, NIXI has 8

nodes

, one each at New Delhi (NOIDA), Mumbai, Chennai, Kolkata,

www.nixi.in

https://nixi.in/en/noc-locations

123

Bangalore, Hyderabad, Ahmedabad, and Guwahati, with a plan to

interconnect Mumbai IX to Hyderabad IX. NIXI is presently working

on expanding to two more IXP nodes at Lucknow and Mohali.

Table 4.2: Number of ISPs connected at NIXI nodes over the

years

Year

Total ISP operators *

ISPs connected to

NIXI

2003

135

2011

167

2019

358

2021

449

91**

(* Number of ISP operators as per TRAI Performance Indicator Reports, ** by the end

of August 2021)

4.41 Presently, 91 ISPs are connected with the various nodes of NIXI by the

end of August 2021, and the aggregated maximum traffic exchanged

at all the nodes is 245 Gbps as of May 2021

. Table 4.1 shows the

trend of ISPs joining NIXI since its launch.

4.42 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 Authority expressed concern over

the limited number of ISPs linked with NIXI resulting in sub-optimal

utilization of the infrastructure.

C. The Authority’s earlier regulatory interventions

4.43 To promote a better utilization of NIXI infrastructure, TRAI sought

views on the need to establish NIXI nodes at all state capitals to

support small ISPs and made the recommendations on “Improvement

in the Effectiveness of National Internet Exchange of India (NIXI)” to

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124

DIT and DoT, in April 2007. Recommendations

focused on improving

interconnections between NIXI and ISPs, which were accepted by DoT

in June 2009. Some of the recommendations regarding the

announcement of routes by ISPs, connection by regional ISPs to NIXI

through upstream ISP over a single link, and upgradation of ISP link

to NIXI were implemented. NIXI has also reduced various charges,

including connectivity charges.

4.44 TRAI issued another Consultation Paper on “Issues related to

Telecommunications Infrastructure Policy” on 14

January 2011.

Issues were raised for consultation regarding the need for effective

IXPs in the country to efficiently route domestic IP traffic; on the

licensing framework of the entities for setting up IXPs in India; and

whether to permit the Unified licensees to setup IXPs in the country,

who have no vested interest in the routing of the IP traffic. TRAI issued

Recommendations in 2011, dealing with the issues related to IP

infrastructure covering IXPs. The Authority recommended that:

a. IXPs may be brought under Class license. Once this recommendation is

accepted, detailed terms and conditions of the Class license for IXP

services will be provided by TRAI.

b. Data Centres may be permitted to connect directly to the IXPs.

c. National level ISPs and International Internet bandwidth (IIB) providers

may be mandated to connect to all IXPs.

Although ISPs and IIBs are mandated to connect to all IXPs, the

number of ISPs connected to NIXI is still few. (refer to Table 4.1)

4.45 The significant difference between NIXI and most IXPs around the

world is in charging according to the amount of data peered. Most

exchanges across the world have flat rates for membership or a rental

per port according to the speed of the port. NIXI charges customers

who wish to peer on a volume basis, according to the amount of data

peered by them, which is paid for by the requester of data. NIXI initially

adopted mandatory multilateral peering, enforced a system of

https://www.trai.gov.in/sites/default/files/recomen20apr07.pdf

125

settlement fees, and barred content providers from joining the

exchange. Only ISPs, as recognized and licensed by DoT, were till

recently allowed to peer on NIXI, which excluded the content providers.

The delay in allowing cloud and content providers has accordingly

shaped the ecosystem. The largest content and cloud companies have

established their peering facilities at competing exchanges, or within

ISPs. NIXI has only recently changed this policy to allow CDNs to peer.

The daily traffic graph of various NIXI nodes is depicted in Figure 4.4.

Figure 4.4: Traffic analysis of NIXI

a. Aggregated daily graph for all locations

b. Aggregated daily graph for Delhi (NOIDA) port

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c. Aggregated daily graph for Chennai port

d. Aggregated daily graph for Mumbai port

(Source for all 4.4 a-d: mrtg.nixi.in

Note: MRTG bandwidth data (5-minute average): GREEN Incoming Traffic

and BLUE Outgoing Traffic in bits per second as on 11-Oct-2021.)

NIXI as an IXP has not been as effective as some of the similarly placed

global players have been. Presently NIXI is not a telecom licensee and

therefore is not directly under the regulatory purview of TRAI and DoT.

There is clear resistance of the service providers to join NIXI, which

cannot be mandated as NIXI is not a service provider.

D. Existing regulatory framework Issues

4.46 During the Consultation on “Roadmap to Promote Broadband

Connectivity and enhanced Broadband speed” in 2021 the

stakeholders raised concerns about the performance of core networks

affecting the performance of the fixed and mobile broadband together

and solicited that for matching the global average broadband speed,

delivery of maximum content to users at the edge of the network

becomes a necessity. This delivery however is dependent on the design

and resilience of core networks as well as on how much of the traffic

originates outside the nation. Further concerns have been 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 have been suggested to avoid

latency and give a boost to the domestic traffic.

4.47 The Authority has noted the concerns expressed by the stakeholders

regarding frequent congestion of NIXI ports and the suggestion of

stepping up of investment in NIXI to increase capacity at peering sites

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for avoiding latency, and it was stated that a separate consultation on

the issue of Internet Exchange Point (IXP) along with content delivery

networks and Data Centres will be done with the industry.

4.48 Presently there is ambiguity in Licensing framework of IXP in India,

leading to confusion. While some IXP players in India are operating

under ISP license, one of the major players, i.e., NIXI does not have

any license. Another IX player who was operating without license has

litigated against DoT. Lack of clarity and confusion has resulted in

litigation and new private investment is getting affected. Therefore,

clarity in respect of licensing framework for operating IXPs is required.

4.49 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. Being in

the same business and competing with other ISPs, they 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. Another issue discussed with

respect to the CDN content blocking is that the blocked contents

ordered for blocking under Section 69A of IT Act have been found

hosted at IXPs which are neither regulated nor mandated to implement

the blocking system at exchange points. This scenario may result into

bypassing of blocking directions of Hon’ble courts and MeitY under the

IT Act in matters of national security. For unbiased peering,

interconnection and security, it can be argued that there is a need for

a regulatory framework whereby a separate license may be given for

IXPs. This can help in promoting IXPs in the internet ecosystem.

Observing the present status of NIXI and in view of the above

discussions stakeholders are requested to provide their response to

the following questions:

Q.38: Do you think that presently there is lack of clear regulatory

framework/guidelines for establishing/operating Interconnect

Exchanges in India?

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Q.39: What policy measures are required to promote setting up of more

Internet Exchange Points (IXPs) in India? What measures are

suggested to encourage competition in the IXP market?

Q.40: Whether there is a need for separate light-touch licensing

framework for operating IXPs in India? If yes, what should be the

terms and conditions of suggested framework? Do justify your

answer.

Q.41: What business models are suitable for IXPs in India? Please

elaborate and provide detailed justifications for your answer.

Other Challenges for growth of IXPs

4.50 The presence of Internet Exchange benefits the entire Internet

ecosystem and encourages broadband penetration in India. However,

the establishment and operation of IXPs encounter several technical,

economic, and policy-related issues that are deliberated in this

section.

Location and Resource availability

4.51 The internet exchange must be located in a building that is can fulfil

its space, power, cooling, and security needs. Before setting up IXP at

a location, availability of electric power, backup supply or generator,

availability of reliable telecom links to the site, access to fiber facilities

or rights-of-way, ability to build antenna towers or dig trenches for

fiber, ease of access, etc., need to be ensured among others. Identifying

potential site locations and managing them is one of the primary

issues faced by an IXP.

4.52 In India, the majority of IXPs are located in coastal states and

metropolitan cities where submarine cable infrastructure exists for

connecting to foreign exchange. Figure 4.5 and table 4.3 shows that

very few IXPs are located in the northern, central, and northeast

regions, though there is significant penetration of internet and use of

digital services in these areas. The growth of IXP in India has been

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confined to Tier-1 cities like Mumbai, Chennai, Kolkata, Delhi, etc.,

only.

Figure 4.5: Internet Exchange Map

(Source: pch.net – Internet exchange directory)

Table 4.3: IXPs operating in India (as of September 2021)

S.no.

Location

Name of the IXP

Connected Peers/

ISP Participants

Mumbai

(5 IXPs)

National Internet

Exchange of India (NIXI)

Mumbai Internet

Exchange (Mumbai IX)

359

Extreme IX Mumbai

189

AMS-IX India

Bharat IX - Mumbai

Chennai

(4 IXPs)

National Internet

Exchange of India (NIXI)

Extreme IX Chennai

DE-CIX

REDIX

Kolkata

National Internet

https://www.pch.net/ixp/dir

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(4 IXPs)

Exchange of India (NIXI)

Extreme IX Kolkata

IIFON IX Kolkata

DE-CIX

New Delhi

(4 IXPs)

National Internet

Exchange of India (NIXI)

Extreme IX New Delhi

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DE-CIX

ANI Peering Exchange

Hyderabad

(2 IXPs)

National Internet

Exchange of India (NIXI)

Extreme IX Hyderabad

Guwahati

National Internet

Exchange of India (NIXI)

Amaravati

Amravati Internet

Exchange (AMR-IX)

Ahmedabad

National Internet

Exchange of India (NIXI)

Bangalore

National Internet

Exchange of India (NIXI)

(Source: pch.net – Internet Exchange Directory)

4.53 India is a vast country with many internet service providers, who serve

around 800 million internet users. Such operating scale requires

highly distributed IXP locations and sites. 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. This would lead to more efficient and economical

interconnection and will serve the customers at the edge itself.

4.54 The content distribution and media networks often attempt to reduce

their transit traffic by deploying peering relationships as much as they

can through implementing an open policy with many IXPs, allowing

other providers to peer with them. On the other hand, ISPs require

connection to IXPs for the exchange of local IP traffic and resilience

purposes. To derive the advantages of IXPs and public peering

relationships, their growth, and sustainability, the number of

connected members should be a good percentage. The successful

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interconnect exchanges will then progressively expand from their

initial Tier-1 site, to create new nodes in second-tier metro areas. In

view of the aforesaid the Authority solicits the views of the

stakeholders on the following questions:

Q.42: Whether TSPs/ISPs should be mandated to interconnect at IXPs

that exist in an LSA? Do justify your response.

Q.43: Is there a need for setting up IXP in every state in India? What

support Govt. can provide to encourage setting up new IXPs in the

states/Tier-2 locations where no IXPs exist presently?

Connectivity and Infrastructure limitations

4.55 Once an IXP is established, ensuring connectivity with Internet Service

Providers is the first important step. IXP operators just provide ports

on their switches to the respective ISP to form a connection. ISP should

bring their own fiber or buy point-to-point links from some telco and

reach the exchange. However, the cost of this connectivity 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 ISP’s. In

the bargain, smaller ISPs lose the advantage of control over their

network design and also on reduction in latency. Further, the major

internet service providers (ISPs), with selective policy, try to increase

the cost of transit traffic of smaller ISPs. For a well-functioning IXP

local IP transport capacity must be available for a reasonable price to

allow stakeholders to connect to the exchange.

In view of the above discussions stakeholders are requested to provide

their response to the following questions:

Q.44: Whether leased line costs to connect an existing or new IXP is a

barrier for ISPs? If yes, what is the suggested way out? What are

other limitations for ISPs to connect to IXPs? What are the

suggestions to overcome them?

Autonomous System Numbers (ASN)

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4.56 An autonomous system number is necessary for any interconnection

between two peered networks at IXPs. ASNs are important because the

ASN uniquely identifies each network on the Internet. A unique ASN

is allocated to each ISP for use in Border Gateway Protocol (BGP)

routing.

4.57 For joining an IXP in India, the member ISP must have its own ASN

and use BGP for peering. The peering ISP must be identified at the

local Internet registry of Asia Pacific Network Information Centre

(APNIC). An IXP does not assign or provide IP addresses, AS Numbers,

etc. The Internet Assigned Numbers Authority (IANA) is responsible for

assigning ASNs to Regional Internet Registries (RIRs), which are

organizations that manage Internet number resources in a particular

region of the world. Asia Pacific Network Information Centre (APNIC)

is the RIR, with which Indian ISPs have to make their own

arrangements for obtaining an ASN.

4.58 There are two options to obtain AS number from APNIC: As a non-

member of APNIC or as a member of APNIC. An ISP, who is a non-

member of APNIC, has to pay AUD 500 (INR 28,027.83) as a one-time

sign-up fee and a membership fee per year to obtain AS Number. This

does not include allocation of any IP address. An ISP who is a member

of APNIC has to pay member fee charges however allocation of AS

number is free. The high fee required to obtain the AS number is the

main barrier. The present cost structure (as of January 2021) for a

new ISP member for obtaining an ASN of APNIC is as follows:

Table 4.4: APNIC cost structure for a new member for obtaining ASN

IPv4

IPv6

ASN

Sign-up fee

Annual fee

/24 (256

addresses)

/48

INR 28,027.83

INR 66,145.68

/24 (256

addresses)

/32

INR 28,027.83

INR 1,11,774.98

/23 (512

addresses)

/48

INR 28,027.83

INR 85,989.38

133

/23 (512

addresses)

/32

INR 28,027.83

INR 1,11,774.98

(Source: apnic.net)

4.59 APNIC charges a very high fee for its membership based on the size of

operation of the ISP. The lowest slab of the annual membership fee is

AUD 1180 (INR 66,145.68) per year as per present rates. The high cost

to obtain AS number, APNIC membership, and leased line to connect

to an IXP are the reasons for many ISPs not joining the existing NIXI.

Only ISPs who have their own AS number and have substantially high

domestic traffic find it economical to connect to an IXP.

4.60 In its earlier Recommendation on “Improvement in the Effectiveness of

NIXI (2007)”, TRAI suggested an option to overcome the AS number

allocation problem is by using private AS numbers from the upstream

provider. As discussed above, small ISPs usually depend on larger ISPs

for their upstream connectivity to International Internet Gateways.

Therefore, these ISPs are expected to take unique private AS numbers

from their upstream providers. However, the present status of NIXI

and the number of ISPs joining over the years (refer to Table 4.2), is

not very encouraging. In view of the above, the Authority seeks the

view of stakeholders on the following:

Q.45: Is the high cost of AS number allocation an impediment for small

ISPs to connect to IX? If yes, what is the suggested way out?

Incentivizing establishment of more IXPs

4.61 Provision of incentives for encouraging investment to establish IXP can

help in the growth of internet exchanges. Some of the incentivizing

options for the growth of IXs in India are discussed in this section.

4.61.1 Fiscal incentives: To attract start-ups into the emerging

domain of IXPs, various schemes can be introduced, including but not

limited to tax exemptions, investment benefits, and credit facilities. As

the IXPs are usually non-profit entities, financial aid can also assist

market growth, especially in small cities. Easy accessibility to bank

loans may be made possible at cheaper rates, i.e., with lesser interests

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and collaterals. Promoting local investment opportunities via tax

benefits, and reduced duties on the operational equipment needed to

build IXPs will encourage the new entrants to get involved in the IXP

business.

4.61.2 Focus on priority regions: As seen in Figure 4.5, IXPs

are clustered in few Tier-1 cities where undersea cables and

infrastructure is adequately available. The upcoming digital explosion

and data localization will surely increase the traffic load in the IXs

serving these areas, leading to inefficient traffic management. The

priority areas need to be proactively identified considering various

scalable factors for infrastructure creation and IXP establishment in

such areas needs to be incentivized. The private IXPs would in turn

necessitate the expansion of new peers such as Data Centres, CDNs,

Content Providers in these areas heading to their overall digital

ecosystem development. More incentives for such priority areas can be

an option.

4.61.3 Peering incentives: Peering at multiple IXPs can

increase reliability, help reduce latency and increase overall QoS.

Direct peering can also be encouraged with content providers and

hosting Data Centres. By giving incentives in terms of peering costs

and port charges for interconnection to more than one IXPs, an ISP

will be able to competitively expand its connections beyond a single

exchange.

4.62 Data Centre and IXPs coordination: The synergy between Data

Centres and IXPs can promote cost-effective strategies for an IXP

establishment. Hosting an IXP in an existing Data Centre facility can

substantially reduce the operating expenses associated with leasing

space, purchasing power, and hiring staff, etc. Moreover, data hosting

Centres already include the facilities that may be considered and used

for an IXP establishment.

4.63 The right ecosystem: An Internet exchange in an emerging

competitive telecommunications market requires technical skill,

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participant trust, community engagement, and operational excellence

to succeed. There needs to be a willingness to commit long-term

budgeted funding, and plans need to be put in place to make the

exchange self-sustaining and preferably self-governing. Finally, the

Internet-aware subscriber base will attract local or international

content companies. Achieving this relies on the availability of

supportive aspects in the ecosystem, access to diverse infrastructure,

a competitive service-provider market, and a capable workforce. As the

majority of the initial IXP expenditure is on the training of staff to

establish and maintain the facility, free, or subsidized skill

development programs can help in this direction.

In view of the above discussions, stakeholders are requested to provide

their response to the following questions:

Q.46: What other policy measures are suggested to encourage

investment for establishing more number of IXPs? Any other

issue relevant with IXP growth may be mentioned.

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CHAPTER 5

DATA ETHICS — PRIVACY, OWNERSHIP, AND

SECURITY

5.1 Data is shaping the future of humanity. The production, distribution,

and consumption of digital data in the data economy are driving rapid

advances in machine learning, artificial intelligence, and automation.

Individuals and businesses are using data to reduce search and

transaction costs and make informed choices. Rapid digitalization has

helped India achieve inclusive growth with improved governance, and

also poised it globally as a data-rich country. ‘Digital India’ is not only

transforming India but also helping to achieve the United Nations

Sustainable Development Goals Agenda 2030.

5.2 With the digital inclusion and proliferation of digital services,

individuals are generating a significant quantum of personal data.

Huge quantities of personal data are being handled by data fiduciaries

today, which has raised the debate around data ethics. Data ethics

are inter-personal, social, organisational, and national norms that

govern how people/data users should conduct and behave in the

digital world. It is a paradigm in which digital transformation is

immune to the moral biases of those running the transformation. It

also implicates not allowing the machines to discriminate and upturn

the ethical values in our society. Data ethics work both ways from

humans to machines and from machines to humans

. There is a

possibility that the erstwhile human biases involved in the decision-

making process may get transferred to the machines, which is one of

the biggest concern areas in data ethics, today.

5.3 The presence of any ethical biases in the data model may lead to fear

of risks emerging from reputational loss and operational risks. Data

processing entities thus need to derive a robust framework for data

ethics. They must ensure that current unbiased ethical practices and

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policies are also applied to the data ethics framework, to ensure a

holistic view of ethics governing their data processing initiatives.

5.4 Data ethics encompasses the moral obligations of gathering,

protecting, and using personally identifiable information and how it

affects individuals.

Appropriate handling of data, ensuring privacy

and security are of equal importance. Fast emerging technologies such

as 5G, IoT, and AI, etc., are poised to dramatically heighten both

connectivity and the endless data wave along with the complexity of

data security and privacy protection. Justice Sri Krishna Committee

has made the first attempt to domestically legislate on the issue of data

protection and laid the groundwork for a robust and responsible data-

usage framework.

5.5 Since data is ubiquitous in the world today, the issue of the protection

of the personal data of the users is a matter of deep concern for

everyone. Collecting, generating, analysing, and disseminating data,

both structured and unstructured, have the potential to adversely

impact people and society. Therefore, the Authority felt it necessary to

examine the issue of privacy and security of data in telecom networks.

Since a sizeable portion of data flows through the telecom networks,

the Authority has issued recommendations on ‘Data Privacy, Security,

and Ownership of the Telecom Data to the Government’. These

recommendations on the telecom sector are still relevant to the present

data economy of the country and would also address the complex

issues of data protection and privacy with the 5G rollout in the future

and the adoption of emerging technologies in India. The following

sections deliberate on the NDCP-2018 provisions on data privacy, the

Authority’s recommendations on Data Privacy that are still pending

with respect to the telecom sector, Draft Personal Data Protection

(PDP) Bill 2019, and the Data Protection and Empowerment

Framework for the telecom sector.

a. National Digital Communications Policy (NDCP)-2018

https://online.hbs.edu/blog/post/data-ethics

138

5.6 If India’s economic, social, and political interests in the emerging data

economy are to be effectively secured, its ‘digital sovereignty’

encompassing the data privacy, choice, and security of its citizens

must be a prime consideration while participating in the global digital

economy. Accordingly, the ‘Secure India Mission’ envisaged in the

NDCP policy aims at ensuring sovereignty, safety, and security of

digital communications with a focus on ensuring individual autonomy

and choice, data ownership, privacy, and security, while recognizing

data as a crucial economic resource. The following goal is laid down

for 2022, under the ‘Secure India Mission’ – ‘Establish a comprehensive

data protection regime for digital communications that safeguards the

privacy, autonomy, and choice of individuals and facilitates India’s

effective participation in the global digital economy’. Further, the

strategy emphasized to achieve this objective of ‘Establish a strong,

flexible and robust Data Protection Regime’ has been spelled out as

follows:

3.1(b)Addressing issues of data protection and security in the digital

communications sector, by:

iv. Ensuring that core data protection and security principles are

applied and enforced.

b. Recommendations on “Privacy, Security and Ownership of

the Data in the Telecom Sector” dated 16

July 2018

5.7 In the backdrop of possible threats to the data privacy of the

telecommunication consumers, the Authority held a consultation

process in 2017 on the issue of ‘Privacy, Security and ownership of

the Data in the Telecom Sector’ and submitted its

recommendations

to the Government on 16

July 2018.

5.8 Salient points from the Recommendations submitted by the Authority

are as follows:

i. Elaborating on the need for and importance of data privacy in the

telecom sector, the Recommendations analyzed the telecom

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139

environment whether the existing data protection framework is

sufficient or not.

ii. The Recommendations defined ‘Personal data’; identified and assessed

the adequacy, efficiency of existing data protection measures; and

proposed resolutions for issues pertaining to data protection in

relation to telecom services.

iii. The Recommendation emphasizes the Rights and Responsibilities of

Data Controllers, Mechanism for regulating the Data Controllers as

well as Accountability, Enforcement Models, and Enforcement Tools.

iv. The Authority proposed that the data controllers or the processors

should be brought under a data protection framework, ensuring

consumers’ protection against misuse of their personal data.

v. Further, proposed measures to encourage new data-based business

consent creation to protect telecom consumers against the misuse of

their personal data by the data controllers.

vi. The Authority re-examined the encryption standards, stipulated in the

license conditions for the TSPs to ensure data privacy and security of

telecom networks. Also, the need to create a data sandbox that can be

utilized by regulated companies for the development of newer services

was emphasized.

vii. The Recommendations outlines issues related to Cross-Border Flow of

Data, Jurisdictional Challenges, and Legitimate Exceptions to Data

Protection Requirements.

viii. Several measures required were recommended for user empowerment

in the telecom sector and to strengthen the safety and security of

telecom infrastructure.

ix. Ensured parity between TSP’s and other similar service providers

through mechanisms to address the issues related to regulated and

unregulated players.

x. Suggested consumer awareness programs be undertaken to spread

awareness about data protection and privacy issues and setting up of

redressal of telecommunication consumers' grievances relating to data

ownership, protection, and privacy by the government.

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c. The Personal Data Protection (PDP) Bill, 2019

5.9 Data privacy issues in India have been becoming more prominent over

the past few years and are in the need of a strong data protection

regime. In July 2017, the Government constituted a committee of

experts under the chairmanship of the retired Supreme Court judge

Justice B. N. Srikrishna. The committee was entrusted with the

responsibility of identifying lapses in the present data protection

regulations and for preparing more robust and comprehensive data

protection laws.

5.10 This committee submitted its report on 27

July 2018, which also

contained a draft data protection law, later codified as the draft

Personal Data Protection Bill, 2018 (Draft Bill, 2018). The report has

emphasized that the interests of the citizens and the responsibilities

of the state have to be protected, but not at the cost of trade and

industry. Later, the committee submitted a revised draft bill which is

the current ‘The Personal Data Protection Bill (PDP), 2019’, introduced

in Lok Sabha after further deliberations by the MeitY, on 11

December 2019. The Bill seeks to provide for the protection of the

personal data of individuals and establishes a Data Protection

Authority for the same. India’s Personal Data Protection framework is

modelled after European Union’s (EU’s) General Data Protection

Regulation (GDPR) and the PDP Bill, 2019, incorporates many

elements of the GDPR.

5.11 Applicability: The Bill governs the processing of personal data by (i)

government, (ii) companies incorporated in India, and (iii) foreign

companies dealing with the personal data of individuals in India.

Personal data is data that pertains to characteristics, traits, or

attributes of identity, which can be used to identify an individual. The

Bill categorizes certain personal data as sensitive personal data. This

includes financial data, biometric data, caste, religious or political

beliefs, or any other category of data specified by the government, in

consultation with the Authority and the concerned sectoral regulator.

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5.12 Below are the key provisions of the PDP, bill 2019:

o Processing and Collection of Personal Data: The draft bill has

covered the processing of personal data by both public and private

entities. The committee recommended that processing (collection,

recording, analysis, disclosure, etc.) of personal data should be

done only for “clear, specific and lawful” purposes. Only that data

that is necessary for such processing is to be collected from anyone.

The bill has jurisdiction over the processing of personal data if such

data has been used, shared, disclosed, collected, or otherwise

processed in India. The Bill has proposed that critical personal data

of Indian citizens be processed in centres located within the

country.

o Individual Consent: The committee proposed to make individual

consent the Centerpiece of data sharing, awards rights to users,

imposes obligations on data fiduciaries (all those entities, including

the State, which determine purpose and means of data processing).

o Data Localization: Personal data will need to be stored on servers

located within India, and transfers outside the country will need to

be subject to safeguards. Sensitive personal data may be

transferred outside India for processing if explicitly consented to by

the individual, and subject to certain additional conditions.

However, such sensitive personal data should continue to be stored

in India. Certain personal data notified as ‘critical personal data’ by

the Government can only be processed in India.

Personal data collected, used, shared, disclosed, or otherwise

processed by companies incorporated under Indian law will be

covered in the Bill, irrespective of where it is processed in India.

However, the data protection law may empower the Central

Government to exempt such companies which only process the

personal data of foreign nationals do not present in India.

o Data Protection Authority: The Bill sets up a Data Protection

Authority (DPA) which is supposed to (i) protect the interests of data

principals, (ii) prevent misuse of personal data, and (iii) ensure

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compliance with the safeguards and obligations under the data

protection framework by corporations, governments or anyone else

processing personal data (known as “data fiduciaries”). The DPA

shall perform the following primary functions:

B. monitoring and enforcement

C. legal affairs, policy, and standard-setting

D. research and awareness

E. inquiry, grievance handling, and adjudication

o Right to be Forgotten: The committee recommended giving “data

principals” (persons whose personal data is being processed) the

‘right to be forgotten’. This means they will be able to restrict or

prevent any display of their personal data once the purpose of

disclosing the data has ended, or when the data principal

withdraws consent from the disclosure of their personal data.

o Obligations of data fiduciary: A data fiduciary is an entity or an

individual who decides the means and purpose of processing

personal data. Such processing will be subject to a certain purpose,

collection, and storage limitations. For instance, personal data can

be processed only for specific, clear, and lawful purposes.

Additionally, all data fiduciaries must undertake certain

transparency and accountability measures such as (i)

implementing security safeguards (such as data encryption and

preventing misuse of data), and (ii) instituting grievance redressal

mechanisms to address complaints of individuals.

o Rights of the individual: The Bill sets out certain rights of the

individual (or data principal). These include the right to:

i. obtain confirmation from the fiduciary on whether their

personal data has been processed,

ii. seek correction of inaccurate, incomplete, or out-of-date

personal data,

iii. have personal data transferred to any other data fiduciary in

certain circumstances, and

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iv. restrict continuing disclosure of their personal data by a

fiduciary if it is no longer necessary or consent is withdrawn.

o Grounds for processing personal data: The Bill allows the

processing of data by fiduciaries only if consent is provided by the

individual. However, in certain circumstances, personal data can

be processed without consent. These include: (i) if required by the

State for providing benefits to the individual, (ii) legal proceedings,

(iii) to respond to a medical emergency.

o Cross-border data transfer: Cross-border transfers of personal

data, other than critical personal data, will be through model

contract clauses containing key obligations with the transferor

being liable for harms caused to the principal due to any violations

committed by the transferee. Personal data determined to be critical

will be subject to the requirement to process only in India (there

will be a prohibition against cross-border transfer for such data).

o Social media intermediaries: The Bill defines these to include

intermediaries which enable online interaction between users and

allow for sharing of information. All such intermediaries which have

users above a notified threshold, and whose actions can impact

electoral democracy or public order, have certain obligations, which

include providing a voluntary user verification mechanism for users

in India.

o Sharing of non-personal data with the Government: The Central

Government may direct data fiduciaries to provide it with any:

a. non-personal data and

b. anonymised personal data (where it is not possible to identify

data principal) for better targeting of services.

Issues not explicitly covered in the Data Protection Bill

5.13 Draft Data Protection Bill applies to the processing of personal data by

any individual or entity, and comprehensively covers most of the

aspects of data ownership, security, and privacy. Whatever has not

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been explicitly covered under the proposed Act, there is a possibility of

covering that through the provisions of subordinate legislations that

have been provided within the proposed Act. Memorandum regarding

delegated legislation that has been attached with the draft bill details

various powers under Clause 93 and 94 to make rules/regulations.

Therefore, it is expected that certain other issues/details that have not

been explicitly mentioned in the Data Protection Bill can be covered

through subordinate legislation subsequently.

5.14 One such issue is regarding the use of metadata. The Authority in its’

recommendations on data ownership, privacy, and security has

recommended that

3.1 (d) All entities in the digital ecosystem, which control or process the

data, should be restrained from using metadata to identify the

individual users.

Metadata here is “data that provides information about other data” or

“data about data”, in certain cases, metadata can be used by the entities

operating in the digital ecosystem itself to identify the individual users,

such entities must be restrained from using metadata to identify the

users/individuals.

5.15 Similarly, some of the issues on User Empowerment that have been

covered for users of the telecom sector in the said recommendations

can also be covered through subordinate legislation, like -

3.3 (b) To ensure sufficient choices to the users of digital services,

granularities in the consent mechanism should be built-in by the

service providers.

3.3 (e) Multilingual, easy to understand, unbiased, short templates of

agreements/terms and conditions be made mandatory for all the

entities in the digital ecosystem for the benefit of the consumers.

3.3 (f) Data Controllers should be prohibited from using “pre-ticked

boxes” to gain users’ consent. Clauses for data collection and

purpose limitation should be incorporated in the agreements.

3.3 (g) Devices should disclose the terms and conditions of use in

advance, before the sale of the device.

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3.3 (h) It should be made mandatory for the devices to incorporate

provisions so that users can delete such pre-installed applications,

which are not part of the basic functionality of the device if he/she

so decides. Also, the user should be able to download the certified

applications at his/her own will and the devices should in no manner

restrict such actions by the users.

5.16 Further, with respect to the Data Privacy and Security of Telecom

Networks, the Authority in its said recommendations mentioned that

in case of breaches, data thefts, etc., timely sharing of information with

the data consumer and various entities in the digital ecosystem is

essential to mitigate the losses/breaches and prevent their future

occurrences and suggested that a platform for sharing of such real-

time information should be created, which would result in creating a

safe and secure telecom network.

3.4 (f) A common platform should be created for sharing of information

relating to data security breach incidences by all entities in the digital

ecosystem, including Telecom service providers. It should be made

mandatory for all entities in the digital ecosystem, including all such

service providers to be a part of this platform.

5.17 The Data Protection Bill has provided that ‘every data fiduciary shall

notify the Authority about the breach of any personal data processed

by the data fiduciary where such breach is likely to cause harm to any

data principal’, but there is no recommendation regarding the creation

of any data breach platform for sharing of information by the entities

in the data ecosystem.

5.18 The Authority in its recommendations on data privacy has realized

that the notification of general data protection law will take some time

and accordingly, it has recommended -

“The existing framework for the protection of the personal information/data

of telecom consumers is not sufficient. To protect telecom consumers against

the misuse of their personal data by the broad range of data controllers

and processors in the digital ecosystem, all entities in the digital ecosystem,

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which control or process their personal data should be brought under a

data protection framework.

Till such time a general data protection law is notified by the Government,

the existing Rules/License conditions applicable to TSPs for protection of

users’ privacy be made applicable to all the entities in the digital ecosystem.

For this purpose, the Government should notify the policy framework for

regulation of Devices, Operating Systems, Browsers and Applications.”

Data Sharing and Consent Management Framework

5.19 Freedom and fairness should be the two main guiding principles while

sharing the personal data of the individuals in a digital ecosystem.

Here, freedom refers to enhancing the autonomy of the individuals

with regard to their personal data in deciding its processing, which

would lead to an ease of flow of personal data. Fairness pertains to

developing a regulatory framework where the rights of the individuals

with respect to their personal data are respected and the existing

inequality in bargaining power between individuals and entities that

process such personal data is mitigated. In such a framework, the

individual must be the “data owner” since he/she is the focal actor in

the digital economy. The relationship between the individual and

entities with whom the individuals share their personal data is one

that is based on a fundamental expectation of trust. Individuals expect

that their personal data will be used in a fairly and transparently.

5.20 A workshop was conducted in TRAI on 28

August 2020 to discuss

the issue of Telecom Subscriber Empowerment with the stakeholders,

including TSPs and ISPs. During the discussion it emerged that while

empowering the telecom subscribers to use their data for establishing

their creditworthiness or financial standings, it is important to

preserve the privacy, security, and ownership of this data. It was felt

that the process of data sharing and consent management by TSPs

would require comprehensive discussion and the Authority decided to

hold a consultation in this matter with the stakeholders.

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Policy and Regulatory Initiatives towards data sharing and

consent management

o Government Initiatives

5.21 The issue of consent has been addressed by the Government to some

extent in the past where in the guiding principles for sharing of user

data across services after obtaining user consent have been outlined

in a key policy document on “Electronic Consent Framework

”

developed by MeitY.

5.22 Subsequently, RBI on behalf of all the financial sector regulators has

issued the master direction known as the “Non-Banking Financial

Company – Account Aggregator (Reserve Bank) Directions, 2016

” for

all the financial sector participants. It incorporates the concept of the

Account aggregator, which after obtaining the consent of the

customers electronically, collects the information from providers of

information based on the standardized consent artefact and securely

transmits the same to users of the information. This direction is for

the benefit of financial sector consumers, as it empowers them to use

their personal data, in the form of financial transactions history, for

availing new services from any other competing service provider.

5.23 The statement of objects and reasons for the PDP bill 2019, inter alia,

mentions:

4. The salient features of the Data Protection Bill, 2019, inter alia, are as

under— (i) to promote the concepts such as consent framework, purpose

limitation, storage limitation and the data minimisation;

Accordingly, the provision for right to data portability has been included

in the draft bill.

5.24 Recently, NITI Aayog has come out with a discussion paper on Data

Empowerment and Protection Architecture (DEPA) for a secure

consent-based data sharing framework to accelerate financial

inclusion. DEPA empowers every Indian with control over their data.

http://dla.gov.in/sites/default/files/pdf/MeitY-Consent-Tech-Framework%20v1.1.pdf

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/MD46859213614C3046C1BF9B7CF563FF1346.PDF

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It democratises access and enables secure portability of trusted data

between service providers. It involves the creation of a standardized

technology architecture implemented within the right institutional

constructs. DEPA’s technology architecture is an interoperable,

secure, and privacy-preserving framework for data sharing through:

a. A technology standard for a machine-readable Consent Artefact;

b. Open APIs for data sharing; and

c. A standard for Financial information.

d. TRAI’s Recommendation on “Privacy, Security and Ownership of

the Data in the Telecom Sector”

5.25 The Recommendations proposed consent mechanisms with varying

levels of granularity in choices to be provided to the users by the

service providers. Such choices are to be explicitly presented to the

user before any data is collected. It is also recommended that the users

be provided with appropriate notices detailing the practises regarding

personal information being collected. Examples of such practises

include purpose of collection and its intended use, and whether the

personal data which is collected will be shared with a third party.

Individual consent may be obtained only after providing the notice.

5.26 It was emphasized that Notice, Choice, and Consent are the most

important rights that should be given to the data consumers. Such

notices should include disclosures on what personal information is

being collected; purpose for collection and its use; whether it will be

disclosed to third parties; notification in case of data breach, etc.

Similarly, Choice and Consent implies that a data controller shall give

individuals choices (opt-in/opt-out) with regard to providing their

personal information and take individual consent only after providing

notice of its information practices. Consent may be considered to be a

powerful means of protecting an individual’s information. An

individual is best placed to decide the sensitivity of his/her

information rather than the Government or any other agency deciding

it on his behalf.

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5.27 Regarding issues related to consent management and Account

Aggregators, the Authority recommended that

I. “The Right to Choose, Notice, Consent, Data Portability, and Right to

be Forgotten should be conferred upon the telecommunication

consumers.

II. In order to ensure sufficient choices to the users of digital services,

granularities in the consent mechanism should be built-in by the

service providers.

III. For the benefit of telecommunication users’, a framework, on the

basis of the Electronic Consent Framework developed by MeitY and

on lines of the master direction for data fiduciary (account

aggregator) issued by Reserve Bank of India, should be notified for

telecommunication sector also. It should have provisions for revoking

the consent, at a later date, by users.

The issue of Account Aggregator and Electronic Consent Framework

was also deliberated upon in the recommendations as follows:

“Subsequent to the development of the Electronic Consent Framework

by MeitY, RBI, on behalf of all the Financial Sector Regulators, has

issued the master direction known as the "Non-Banking Financial

Company - Account Aggregator (Reserve Bank) Directions, 2016" for

all the Financial Sector participants. It has the concept of the data

fiduciary (Account aggregator) that, after obtaining the consent of the

customers electronically, collects the information from providers of

information based on the standardized consent artifact and securely

transmits the same to users of the information. This direction is for

the benefit of financial sector consumers, as it empowers them to use

their personal data, in the form of financial transactions history, for

availing new services from any other competing service provider.”

In the same recommendation, the Authority has said that there is a need

to develop a consent framework for telecom sector. Once the framework

for data privacy and security is approved by the Government, the

Authority may work on such framework. Though the Government has not

yet approved any framework for data privacy, however the Data Protection

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Bill, seeks to provide for data portability and consent framework as

mentioned above.

e. Challenges in sharing telecom subscriber data

5.28 In telecom sector, telecom service providers control an individual’s

data as custodians or fiduciaries. Going to each TSP individually to

access or share data becomes a lengthy and tedious exercise.

Collecting individual’s data directly from TSPs, for instance, is also a

cumbersome task – typically involving physical visits to their premises

or call Centre engagements, sharing physical documents using

browser uploads or USB sticks, or sharing of confidential username

and password data with a third party. Moreover, data is stored in

different formats and porting specific data as per the requirement from

one database to another service provider is not a standardised process.

These issues, described here in the context of personal data, also apply

to other forms of data such as derived data (e.g., credit scores). Finally,

there is a lack of harmonisation around the regulations for data

sharing within and across sectors.

5.29 Creating a simple and secure mechanism to share this data with the

individuals’ consent would empower them to use data to improve their

well-being themselves through ease of access to new financial

products and services. However, this is only possible if action is taken

to ensure ease of data flows between siloed data custodians housing

information (e.g., different banks, NBFCs, Government departments,

telecom service providers, etc.) with user consent.

5.30 The end user may more often than not be fully aware as well as have

lower bargaining powers when compared to the custodians of their

data in the digital ecosystem. This asymmetry is exploited on many

occasions by the custodians to their advantage. They may use personal

data of individuals to improve their services; they may even monetize

this data by sharing it with third parties. Users often get plagued with

bursts of targeted marketing, social media engineering strategies, etc.,

not knowing that it was their own data submitted in the past which

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has enabled such campaigns. In the absence of necessary data

protection framework, the end-user does not have any recourse to deal

with the exploitation by the entities in the digital ecosystem. Many

times, the user is forced to part with its personal data with very little

information about how the data is going to be utilized. He has no

facilities to access, view, amend, or delete his submitted data. In case

of any data breach, he may not even be informed about it till it gets

reported.

Data Empowerment and Protection Architecture (DEPA)

5.31 In August 2020, NITI Aayog released a discussion paper

on Data

Empowerment and Protection Architecture (DEPA). Based on the

consent philosophy codified by the PDP Bill, 2019, the aim is to provide

individuals with the practical means to access, share, and use

datasets containing their personal information in an accessible and

easily understandable manner. This includes purchase data, traffic

data, telecommunications data, medical records, financial

information, and data derived from various online services.

5.32 The main objective of DEPA is to give users control over how their data

is used and to enable seamless accumulation and consumption of

personal data while ensuring privacy and security. DEPA offer users

access to better financial services. Its main features include:

a. Designing an evolvable and agile framework for good data governance.

b. Empowering people to access their data and share it with third-party

institutions seamlessly and securely.

c. Giving free, informed, specific, clear, and revocable consent to users.

5.33 The basic building blocks of the proposed DEPA technology framework

consists of:

i. An Electronic Consent Framework

, with a specification for a consent

artefact managed by MeitY.

https://niti.gov.in/node/1299

http://dla.gov.in/sites/default/files/pdf/MeitY-Consent-Tech-Framework%20v1.1.pdf

152

ii. Data Sharing API Standards to enable an encrypted flow of data

between data providers and users.

iii. Sector specific Data Information Standard. For the financial sector,

this is the Financial Information Standard, which explains the

required shared elements of a bank statement across institutions for

instance.

5.34 DEPA’s Institutional Architecture will involve the creation of new

market players known as User Consent Managers. These will ensure

that individuals can provide consent as per an innovative digital

standard for every data shared. These Consent Managers will also

work to protect data rights like the Account Aggregators (AAs) in

financial sector as conceptualised in RBI Master Directive, discussed

in the previous section. The core principle of AA platforms built on

DEPA is to give users complete authority over how their data will be

used.

5.35 Under DEPA, the interaction between an individual, a potential data

user, and the data fiduciary holding users’ information will be

mediated through consent managers—organisations maintaining the

‘electronic consent dashboard’ for users. Consent Managers will be

having the responsibility of making sure that individual data is not

shared without user consent. Figure 5.1 gives an idea about the flow

of consented data in the proposed DEPA institutional architecture.

Figure 5.1: DEPA Architecture

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(Source: DEPA discussion paper)

DEPA-based Consent Management Framework for telecom

sector

5.36 Telecom data is often the first digital footprint generated by a low-

income household, and a steady history of on-time recharges could

contribute to building a credit history. Collecting and sharing user

data in digital form is a key requirement for ensuring that the

interaction between a user and the service provider can be

consummated seamlessly in a paperless, fully electronic, and high

trust way. Efforts to share digital data about users must overcome the

challenge of easy access across various systems in a secure and

traceable manner. It is imperative that all user data sharing is fully

consented to, in electronic form, by the user(s) whose data is shared.

Collecting, managing, auditing, and tracing paper-based consents is

costly, inefficient, and also risky. Thus, it is necessary to create a user-

friendly technology framework for electronic consent. The guiding

principles of such a user-friendly framework are:

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1) User Centricity: Users should be at the centre of any data sharing

and should be given adequate control and decision-making power

on how data associated with them is shared.

2) Trustable and Compliant: Use of digital signatures to guarantee

integrity of access permissions given by users in consent flows. This

avoids security issues faced by existing approaches, and also

makes the framework fully legal under the DEPA and IT Act.

3) Universal Identity: The technical framework should leverage

universal, authenticable, non-repudiable, and digital identities to

allow interoperability and usability across telecom service

providers.

4) Granular Control: The framework should allow users to set

permissions and rights for data access at a granular level.

5) Open Standards Based: The framework should use open

technology and legal standards available in the country. It should

be agnostic to applications, programming languages, and

platforms.

5.37 Consent capture and use process is comprised of two flows - consent

flow wherein consent is created, and the consent parameters are

shared with the relevant entities, and a data flow, where the actual

data access, based on user consent, happens. In the data flow, the

consent artifact is utilized to enable the data consumer to access the

data held by the data provider. In consent flow, where the user grants

permission for a certain kind of data access between a data consumer

and a data provider. The consent flow must necessarily involve an

interaction between the consent manager and the user, at the end of

which, a consent artifact—an electronic representation of the consent

given by the user is generated and shared by the consent manager

with either the data consumer or the data provider, depending upon

who initiates the data share. This consent artifact is used in the

second flow, the dataflow, for the actual data share to happen,

sometimes repeatedly. In the case of data shares initiated by the data

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consumer, the data provider must verify the signature in the consent

artifact before granting access to data. In the case of data shares

initiated by the data provider, the data consumer must verify the

signature before accepting data. The consent and data flows operate

asynchronously in an API-driven manner, which ensures efficiency

and resilience. Events at various stages of the consent and data flows

are logged and digital signatures are used to ensure security in each

of the flows. The separation of the consent and data flows is a key

feature of the consent framework. It is important for data flows to be

executable asynchronously without the engagement of the user.

5.38 Adopting DEPA in telecom sector and allowing TSPs to become one of

the financial information providers may enable subscribers to access

their data and share it with third-party institutions. A new type of

private consent manager institution can ensure that subscribers can

provide consent as per an innovative digital standard for every

granular piece of data shared securely. DEPA roll-out has already

begun in the financial sector, with a closed user group (CUG) launched

by major banks in July 2019, further may be followed by launches in

other sectors also. Figure 5.2 depicts the Account Aggregator model

which has been in forefront of developing DEPA Consent Framework,

that could be implemented for telecom data sharing and consent

management framework.

Figure 5.2: Implementation of Consented Sharing of Telecom Data

https://pn.ispirt.in/tag/account-aggregator/

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(Source: iSPIRIT developers)

5.39 Connectivity of TSPs as information providers with the data sharing

and consent management framework proposed in DEPA via open APIs

can provide telecom subscribers with the practical means to access,

control, and selectively share their personal data. This sharing of data

can be helpful for individual empowerment, while minimising privacy

risks and data misuse. By giving people the power to decide how their

data can be used, this framework can enable telecom subscribers to

control the flow of and benefit from the value of their personal data.

Devising an interoperable, secure and privacy preserving framework

for consented data sharing of telecom subscribers may empower them

with greater control over their data. It is important that such an

electronic framework is created for better management of user consent

in a paperless system.

Q.47: How can the TSPs empower their subscribers with enhanced

control over their data and ensure secure portability of trusted

data between TSPs and other institutions? Provide comments

along with detailed justification.

Q.48: What is the degree of feasibility of implementing DEPA based

consent framework structure amongst TSPs for sharing of KYC

data between TSPs based on subscriber’s consent?

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Q.49: Are there any other issues related to data ethics that require

policy/regulatory intervention apart from the issues that have

already been dealt with in TRAI’s recommendations on the issue

of ‘Privacy, Security and ownership of the Data in the Telecom

Sector’ dated 16th July 2018 and the draft PDP Bill ? Provide full

details.

Q.50: Stakeholders may also provide comments with detailed

justifications on other relevant issues, if any.

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CHAPTER 6

ISSUES FOR CONSULTATION

Q.1: What are the growth prospects for Data Centres in India? What are

the economic/financial/infrastructure/other challenges being

faced for setting up a Data Centre business in the country?

Q.2: What measures are required for accelerating growth of Data Centres

in India?

Q.3: How Data Centre operators and global players can be incentivized

for attracting potential investments in India?

Q.4: What initiatives, as compared to that of other Asia Pacific

countries, are required to be undertaken in India for facilitating

ease of doing business (EoDB) and promoting Data Centres?

Q.5: What specific incentive measures should be implemented by the

Central and/or the State Governments to expand the Data Centre

market to meet the growth demand of Tier-2 and Tier-3 cities and

least focused regions? Is there a need of special incentives for

establishment of Data Centres and disaster recovery sites in Tier-2

and Tier-3 cities in India? Do justify your answer with detailed

comments.

Q.6: Will creation of Data Centre Parks/Data Centre Special Economic

Zones provide the necessary ecosystem for promoting setting up of

more Data Centres in India? What challenges are

anticipated/observed in setting up of new Data Parks/zones? What

facilities/additional incentives should be provided at these

parks/zones? Do give justification.

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Q.7: What should be the draft broad guidelines to be issued for Data

Centre buildings, so as to facilitate specialized construction and

safety approvals?

Q.8: Is there a need to develop India-specific building standards for

construction of Data Centres operating in India? If yes, which body

should be entrusted with the task? Do provide detailed justification

in this regard.

Q.9: Till India-specific standards are announced, what standards should

be followed as an interim measure?

Q.10: Should there be a standard-based certification framework for the

Data Centres? If yes, what body should be entrusted with the task?

Q.11: Should incentives to Data Centres be linked to the certification

framework?

Q.12: Are there any specific aspects of the disaster recovery standard in

respect of Data Centres that needs to be addressed? If so, then

provide complete details with justification.

Q.13: Whether trusted source procurement should be mandated for Data

Centre equipment? Whether Data Centres should be mandated to

have security certifications based on third-party Audits? Which

body should be entrusted with the task? Should security

certifications be linked to incentives? If so, please give details with

justifications.

Q.14: What regulatory or other limitations are the Data Centre companies

facing with regards to the availability of captive fiber optic cable

connectivity, and how is it impacting the Data Centre deployment

in the hinterland? How can the rolling out of captive high-quality

fiber networks be incentivized, specifically for providing

connectivity to the upcoming Data Centres/data parks? Do justify.

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Q.15: What are the necessary measures required for providing alternative

fiber access (like dark fiber) to the Data Centre operators? Whether

captive use of dark fiber for DCs should be allowed? If so, please

justify.

Q.16: What are the challenges faced while accessing international

connectivity through cable landing stations? What measures,

including incentive provisions, be taken for improving the reliable

connectivity to CLS?

Q.17: Is the extant situation of power supply sufficient to meet the

present and futuristic requirements for Data Centres in India?

What are the major challenges faced by Data Centre Industry in

establishment of Data Centres in naturally cooled regions of India?

What are the impediments in and suggested non-conventional

measures for ensuring continuous availability of power to

companies interested in establishing Data Centres in the country?

What incentivization policy measures can be offered to meet

electricity requirements for Data Centres?

Q.18: Should certification for green Data Centres be introduced in India?

What should be the requirement, and which body may look after

the work of deciding norms and issuing certificates?

Q.19: Are there any challenges/restrictions imposed by the

States/DISCOMs to buy renewable energy? Please elaborate. Please

suggest measures to incentivize green Data Centres in India?

Q.20: What supportive mechanisms can be provided to Data Centre

backup power generators?

Q.21: Availability of Water is essential for cooling of Data Centres, how

the requirement can be met for continuous availability of water to

the Data Centres? Are there any alternate solutions? Please

elaborate.

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Q.22: Whether the existing capacity building framework for vocational

or other forms of training sufficient to upskill the young and skilled

workforce in India for sustenance of Data Centre operations? What

dovetailing measures for academia and industry are suggested to

improve the existing capacity building framework, and align it with

the emerging technologies to upskill the workforce in India?

Q.23: Is non-uniformity in state policies affecting the pan-India growth

and promotion of Data Centre industry? Is there a need for

promulgation of a unified Data Centre policy in India, which acts

as an overarching framework for setting Data Centres across India?

What institutional mechanisms can be put in place to ensure

smooth coordination between Centre and States for facilitating DC

business? Do support your answers with detailed justification.

Q.24: What practical issues merit consideration under Centre-State

coordination to implement measures for pan-India single-window

clearance for Data Centres?

Q.25: Is there a need for Data Centre Infrastructure Management System

(DCIM) for Data Centres in India? What policy measures can be put

in place to incentivize Data Centre players to adopt the futuristic

technologies? Elaborate with justification.

Q.26: What institutional mechanism needs to be put in place to ensure

digitization of hard document within a defined timeframe?

Q.27: Would there be any security/privacy issues associated with data

monetization? What further measures can be taken to boost data

monetization in the country?

Q.28: What long term policy measures are required to facilitate growth of

CDN industry in India?

Q.29: Whether the absence of regulatory framework for CDNs is affecting

the growth of CDN in India and creating a non-level-playing field

between CDN players and telecom service providers?

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Q.30: If answer to either of the above question is yes, is there a need to

regulate the CDN industry? What type of Governance structure

should be prescribed? Do elucidate your views with justification.

Q.31: In case a registration/licensing framework is to be prescribed, what

should be the terms and conditions for such framework?

Q.32: What are the challenges in terms of cost for growth of CDN? What

are the suggestions for offsetting such costs to CDN providers?

Q.33: Do you think CDN growth is impacted due to location constraints?

What are the relevant measures required to be taken to mitigate

these constraints and facilitate expansion of ecosystem of Digital

communication infrastructure and services comprising various

stakeholders, including CDN service providers, Data Centre

operators, and Interconnect Exchange providers expansion in

various Tier-2 cities?

Q.34: What measures can be taken for improving infrastructure for

connectivity between CDNs and ISPs, especially those operating on

a regional basis?

Q.35: Is there a need to incentivize the CDN industry to redirect private

investments into the sector? What incentives are suggested to

promote the development of the CDN industry in India?

Q.36: How can TSPs/ISPs be incentivized to provide CDN services? Please

elucidate your views.

Q.37: Are there any other issues that are hampering the development of

CDN Industry in India? If there are suggestions for the growth of

CDNs in India, the same may be brought out with complete details.

Q.38: Do you think that presently there is lack of clear regulatory

framework/guidelines for establishing/operating Interconnect

Exchanges in India?

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Q.39: What policy measures are required to promote setting up of more

Internet Exchange Points (IXPs) in India? What measures are

suggested to encourage competition in the IXP market?

Q.40: Whether there is a need for separate light-touch licensing

framework for operating IXPs in India? If yes, what should be the

terms and conditions of suggested framework? Do justify your

answer.

Q.41: What business models are suitable for IXPs in India? Please

elaborate and provide detailed justifications for your answer.

Q.42: Whether TSPs/ISPs should be mandated to interconnect at IXPs

that exist in an LSA? Do justify your response.

Q.43: Is there a need for setting up IXP in every state in India? What

support Govt. can provide to encourage setting up new IXPs in the

states/Tier-2 locations where no IXPs exist presently?

Q.44: Whether leased line costs to connect an existing or new IXP is a

barrier for ISPs? If yes, what is the suggested way out? What are

other limitations for ISPs to connect to IXPs? What are the

suggestions to overcome them?

Q.45: Is the high cost of AS number allocation an impediment for small

ISPs to connect to IX? If yes, what is the suggested way out?

Q.46: What other policy measures are suggested to encourage investment

for establishing more number of IXPs? Any other issue relevant

with IXP growth may be mentioned.

Q.47: How can the TSPs empower their subscribers with enhanced control

over their data and ensure secure portability of trusted data

between TSPs and other institutions? Provide comments along with

detailed justification.

164

Q.48: What is the degree of feasibility of implementing DEPA based

consent framework structure amongst TSPs for sharing of KYC data

between TSPs based on subscriber’s consent?

Q.49: Are there any other issues related to data ethics that require

policy/regulatory intervention apart from the issues that have

already been dealt with, in TRAI’s recommendations on the issue

of ‘Privacy, Security and ownership of the Data in the Telecom

Sector’ dated 16

July 2018 and the draft PDP Bill? Provide full

details.

Q.50: Stakeholders may also provide comments with detailed

justifications on other relevant issues, if any.

165

ANNEXURE I (Chapter no. 2/Para no. 2.39)

DATA CENTRE STANDARDS AND CERTIFICATIONS

TIA-942 Tier Classification: The Telecommunications Industry Association (TIA)

created the first set of standards for Data Centres in 2005. TIA-942 has been

amended twice since then based on the change in technological ecosystem. The

Uptime Institute standard was formed separately and differed from the TIA standard

because of its specialty in Data Centres, whereas TIA standards could apply to many

aspects of the IT industry. To provide uninterrupted services, Data Centres entail

redundant IT equipment, electrical power, and cooling equipment. In this regard,

Uptime Institute proposed design classification with respect to multi-tier topology to

make Data Centres more reliable and fault tolerant.

Data Centre tiers are an indication of the type of Data Centre infrastructure to be

considered for a given application. It is a standardized methodology used to define

uptime of a Data Centre. A Data Centre tier, or level, in other words, is used for

differentiating key Data Centre requirements, the focus being redundant

components, cooling, load distribution paths, and other specifications. It is a

measure of Data Centre performance, investment, and return on investment. The

tier classes (I to IV) characterize the prospects, showing to what extent a system will

be functional.

Figure 1: Data Centre tiers

166

Moreover, the tier classification sets the foundations needed to compare the

functionality, capability, and relative cost of the designed topology of a particular

Data Centre. The overall evaluation can be performed by determining the least value

of the distinct elements, such as power supply, communication, cooling, and

monitoring. The table below summarizes configurations of the four-tiered system.

Tier

Requirements

TIER I

Basic

Capacity

TIER II

Redundant

Capacity

TIER III

Concurrently

Maintainable

TIER IV

Fault

Tolerance

Distribution

paths (power

and cooling)

1 active/

1 alternate

2 active

Redundancy

active

components

N+1

2(N+1)

Redundancy

backbone

✓

Redundancy

horizontal

cabling

Optional

Raised floors

12”

18”

30-36”

UPS/Generator

Optional

✓

Concurrent

maintenance

✓

Fault tolerant

✓

Annual

downtime

28.8 hours

22.0 hours

1.6 hours

0.4 hours

Availability

99.671%

99.749%

99.982%

99.995%

167

Uptime Institute Tier Certification: The Uptime Institute last revised its

certification process in July 2015. The Tier Certification process typically starts with

a company deploying new Data Centre capacity. The Data Centre owner decides to

achieve a specific Tier level to match a business demand. Data Centre owners turn

to Uptime Institute for an unbiased, vendor neutral benchmarking system, to ensure

that Data Centre designers, contractors, and service providers are delivering against

their requirements and expectations.

Other Standards: Besides the Up Time standard, there are others like EPI-based on

TIA-942 (where “tiers 1-4” are replaced by the terms “rated 1-4”), BICSI based

standards followed in the USA, whereas countries like Europe, China, and

Singapore, etc., have their own standards. The below table shows few international

Data Centre standards followed in various countries.

Standard →

↓ Guideline

Up Time

[USA]

EPI based on

TIA‐942

[USA]

BICSI based

on TIA‐942

[USA]

SS‐507

[Singapore]

EN‐50600

[Europe]

Conformity

Tier: I ‐ IV

Rated: 1 ‐ 4

Class: 0 ‐ 4

Pass / Fail

Class: 1 ‐ 4

Availability

of Standard

Yes

Yes (Paid)

Yes

Certification

Available

Not Available

Available

Scope of

Topology

Tier

Standard

Electrical

Mechanical

Distribution

OS Standard

Other

Element

Electrical

Mechanical

Distribution

Architectural

Telecom

Site Location

Safety‐

Security

Efficiency

Electrical

Mechanical

Distribution

Architectural

Telecom

Site Location

Safety‐

Security

Electrical

Mechanical

Distribution

Architectural

Telecom

Site Location

Safety‐

Security

Electrical

Mechanical

Distribution

Architectural

Telecom

Site Location

Safety‐

Security

Efficiency

168

Incorporatio

Commercial

Non‐Profit

Accreditatio

ANSI

Spring

EN‐

CENELEC

Training

Event

Yes

Auditor

Up Time

Only

Multiple

ORG

N/A

Multiple

ORG

N/A

169

ANNEXURE II (Chapter no. 2/Para no. 2.47)

ILLUSTRATIVE LIST OF APPROVAL/CLEARANCES

REQUIRED BEFORE COMMENCEMENT OF A DATA

CENTRE OPERATION

The approvals required to establish a Data Centre facility may have some variations

indifferent states. As an illustration, the clearances required to build a Data Centre

in Chennai is provided in the below table.

S.no.

Clearance

Authority

Under single

window

Statutory Approvals: Pre-Construction Stage

Environment

Clearance

Ministry of Environment, Forest and

Climate Change (MoEFCC)

Consent to

Establishment

Metropolitan Development Authority

and Central Pollution Control Board

(CPCB)

Yes

Provisional Fire No

Objection Certificate

(NOC)

State Fire and Rescue Services/

National Fire Protection Association

(NFPA)

Yes

Storm Water Permits

State Pollution Control Board

Yes

Sewage Discharge

Approval

Yes

Tree Cutting NOC

Central Pollution Control Board

(CPCB): Forest Department

Drainage/Garden

NOC

Metro Water Supply and Sewage Board

Yes

170

Building Permit/

Approvals

Metropolitan Development Authority

Yes

Commencement

Certificate

Yes

Telecom

Service provider/Controller of

Communication Accounts of

State

Water Supply

Metro Water Supply and Sewage Board

Yes

Power Connection

Feasibility, Design

and Sanction

State Electricity Board

Yes

Traffic Approval NOC

Commissioner of Traffic

NOC for High-Rise

Structure

Airport Authority of India (AAI)

Pre-Construction Stage Compliance

Registration with

DIC

Director of Industry (DIC)

Registration IEM

Ministry of Commerce

Statutory Approvals: During Construction

Stage

220kVPower

connection cable

laying from

substation to

project premises

State Electricity Board

Yes

220kVPower

Connection

State Electricity Board

Yes

171

Substation Testing

and Charging

Form V Approval -

Labour

Labour Department: State Government

Yes

Plinth Checking

Certificate

Metropolitan Development Authority

Yes

Electricity Safety

License

Central Electricity Authority (CEA) /

Chief Electrical Inspector to Government

(CEIG)/

Public Works Department (PWD): Electrical

Inspector

Elevator Permits

and Certification:

Safety License

Central Electricity Authority (CEA)/Public

Works Department (PWD) Electrical Inspector

Diesel Generator

System approval

CEIG/State PCB/PWD-Electrical Inspector

High Speed Diesel

License

Petroleum and Explosives Safety

Organization (PESO)/Chief Controller of

Explosives Department (CCOE)/PWD:

Electrical Inspector

Statutory Approvals: Post-Construction Stage

Lift Operating

Licenses

Public Welfare Department: State

Government:

Lift Inspector

Yes

Occupancy

Certificate

Metropolitan Development Authority:

Fire Department

Yes

172

Completion

Certificate

Metropolitan Development Authority

Yes

Consent to Operate

Certification

Central Pollution Control Board (CPCB)

Statutory Approvals: Fire and Explosive

Preliminary

Explosive License

for HSD

Petroleum and Explosives Safety

Organization (PESO)/

Chief Controller of Explosives Department

(CCOE)

Final Explosive

License for HSD

173

ANNEXURE III (Chapter no. 4/Para no. 4.30)

IXPs: GLOBAL EXPERIENCE

Countr

IX Name

Whether

license is

required

become

IXP

Publi

c or

Priva

Governing

Structure

Profit/No

t for

Profit

Whether

allows

Bilateral/

Multilateral

peering

Whether

Peering

amongst

IXP

mandated

What are

fees

charged?

(One time/

Per port/

Traffic

dependent

etc.)

Whethe

r the

tariffs

are

regulat

Allows

peering to

what all

entities

(Only

licensed

or non-

licensed)

Kenya

Internet

Exchange

Point

(KIXP)

Yes,

Kenya is

the first

and the

only

country in

the world

to adopt

an IXP

licence

requireme

nt.

Privat

KIXP is

operated by

Telecommunica

tion Service

Providers

Association of

Kenya

(TESPOK), a

non-profit

organization

representing

the interests of

ISPs and other

TSPs in Kenya.

KIXP is a

member of the

European IXP

association,

EURO-IX.

Non-profit

Multilateral

peering

No, in 2009

restrictions

are removed

on peering

relationship

s between

participatin

g networks.

Members

connecting

to the KIXP

will be

registered as

TESPOK

members of

a special