Simplifying the proposed PEMRA WebTV & OTT Regulations

There is a hue and cry around the recent call for consultation by PEMRA on regulating the Web TV & Over The Top (OTT) Content Services. There is also a lot of disinformation and misinformation being spread related to this call from a notice being served to YouTubers to imposing the regulations. Although PEMRA has released a rebuttal to this and the focal person of Prime Minister for Digital policies, Dr. Arsalan also has refuted all of these claims but still, there is a lot that remains to be explained. I have tried to simplify all of that for a common man who may get affected by the proposed regulations. 

Should PEMRA be more clear on their ask?

Well based on this document I am pretty sure that they are just as much confused themselves as they have made us. Their proposed draft has left a lot of ambiguity in many areas and that is the real cause to stir such a stiff response from the masses. It is not clear whether regulating the internet content is the topmost agenda or making money from regulating the internet space is the priority here. But this proposal fails to provide a clear picture on both ends. Let’s review some of these concerns one by one.

What is a WebTV Service according to PEMRA?

According to the proposed draft, WebTV is equivalent to a broadcast TV channel’s live stream. As with a TV Livestream, WebTV may have a program schedule composed of various live shows as well as recorded programs, but it must be shown to an internet audience in a non-linear way using a ‘Website.’ In simple words, it has to be a live stream like the live-streams you can currently watch on a TV channel’s website. However, it is still not clear in the proposed draft, whether these live-streams have to be running 24/7 to be considered as WebTV or even a web-only show that goes live once a week at a specific time would also be considered as web tv?

What is an Over The Top (OTT) Content Service according to PEMRA?

PEMRA has encapsulated all of the video-based content services that are available on as per demand basis under OTT. So if you have an archive of videos on a ‘website’ where your audience can watch them in any order as they may please would be considered having an OTT service.

Does this include Mobile Applications?

Well, the simple answer, as per their proposed draft is ‘No’. They have repeatedly used the words ‘website’ & ‘URLs’ throughout the proposal. They also have shared how they plan to block the content with the help of PTA in case of nonconformity by blocking these ‘URLs and websites’. This brings up a very important question, what about mobile apps? And messenger based applications? Generally, most of the OTT and WebTV services worldwide have relied heavily on the mobile applications ecosystem. Does this mean you do not need to conform to these requirements as long as you do not have a ‘website or URL’ that PEMRA could get blocked? Or perhaps they must have thought to block the ‘app download’ URL from their respective store. But what if that is being distributed by any other way than those app stores? How about millions of people who already have those apps on their mobile? What if that is a platform app? How about messenger based apps as they have their own rapidly evolving ecosystem and main source of spreading fake news? Have you ever thought about that yet? The most probable answer to all of these questions is… NO!

How about third-party platforms like Facebook & Youtube? 

It is interesting to see that this draft does not shed much light on the usage of WebTV & OTT based content services on existing third-party platforms. They have shared that aggregation services would require such a license but also mentioned that UGC based platforms would not require it. How about a user-generated aggregation based website where users are sharing all kind of video embeds from all over the web? Would that require a license? They also have failed to clarify that if this is the platform that is going to require such a license or do they also plan to impose this requirement on individual contributors to that platform as well? What if they change their location from Pakistan to Panama? Would this make things any different? Would the license be obtained on a per-platform presence basis or will be valid across all known platforms? What if there is a new platform in the market? How about platforms that only provide reach and not share any revenue with users? How on earth are they going to exercise any control over these platforms?  Blocking a URL would not help as it does not cost users much to upload that content again and get a new URL and on a large scale, this will turn the whole ‘blocking URLs’ scenario into a classic case of wild goose chase for PEMRA employees. Then what else? are we going to impose license restrictions on these international platforms? So let me guess, are we going to see another ban on Youtube, Facebook, or maybe on TikTok as well in the near future? Then comes the even trickier part. PEMRA not only wants to charge a one-time license fee and an annual fee but also wants to charge 2% of the gross revenue generated through these services. Well, how about the revenue being generated from their mobile apps? Would you ask the platform to show you the split between the revenue generated between URLs and apps? 

Are they going to charge a 5M to 10M Rupees fee from individual contributors?

Well, as per this proposal, this is also not clear. But from a pure technical & commercial perspective, they really can not charge individual contributors this kind of a fee. It is not only counterproductive but counterintuitive as well. If I have a 10Million rupees I would rather go and spend it on a more tangible business than giving it away just to create a YouTube channel or a Facebook page. No matter how naive the people who developed this draft may seem by proposing such a draft to regulate digital space, they definitely know better than biting the hands that may feed them later. So this is highly unlikely to be an intention here. Yes regulating the content they put up on these platforms must be the agenda and that is the reason they kept mentioning the Code of Conduct 2015 throughout the document that I will talk about later in another question. But a word of caution here for all of the individual contributors who also happen to run their blogs and have made this content available on these blogs may have to get a license.

How would this impact large publishers? 

Well, I do not think this would impact large publishers much from a financial perspective as spending 5 to 10 million rupees for a license that essentially creates strong entry barriers to newcomers who could otherwise have the means to disrupt this market must be a welcome sight for them. But here is the caveat for these publishers. Almost all of them already have WebTV as well as OTT content services on their own websites, apps as well as on all of the mainstream social media and content platforms. Whereas PEMRA has proposed in this draft that no single entity can have the license of both of these services at the same time. This is plain stupid for these channels. It’s their content. It is what their users want. This is what makes their digital presence all more worthwhile for everyone. This is something that is part and parcel of their service itself. This is how it is growing everywhere in the world. This stipulation alone is enough to put an end to all of this growth. And if PEMRA allows them to do so but disallows the newcomers then it would not be a level playing field for them, something this proposal promises to achieve through these regulations. So PEMRA guys really need to think this through and remove this condition. 

What we really need to understand here?

It is important to note that these regulations are not yet proposed to any legal body for formalization. This is more like a first draft that PEMRA has shared with the public and asked their opinion on it. It is a commendable approach on its own as I can not recall many incidents when institutions like these have asked for a public opinion so all of the backlashes were really unnecessary. Instead of criticizing PEMRA, what we could have done is to sit together and propose another draft covering our point of view as a reply, or if that’s way too much to ask, maybe just share our feedback in a more constructive way. Then on the PEMRA end, we can expect that all of the comments they have received, along with the overall sentiments and feedback shared over traditional & social media, will be taken into account while drafting the next version as this is the only way to progress further on this regulation. It is imperative for PEMRA to make necessary revisions to this draft before proposing it to an official legal body (say cabinet & parliament) to be approved as a regulation.

How PEMRA can generate revenue from regulating this space?

Well, they have shared multiple examples from regulatory authorities of other countries on how they are exercising a degree of control around these services but they have not explicitly told if any of these authorities are charging any fee. Yet a few of them are operating without imposing any kind of charges. So what PEMRA can do?

Let’s start with the revenue. We can take an example from a recent email from Google to all of the publishers who earn revenue from US-based traffic.

The AdSense account associated with your YouTube content owner(s) has been identified as earning revenue from viewers in the United States. As a result, payments for this revenue are subject to US withholding taxes and reporting. If any US withholding taxes apply, Google may begin withholding taxes on the payments made to you starting as early as 1 January 2020.

Why is this happening?

Google has a responsibility under Chapter 3 of the US Internal Revenue Code to withhold tax and report in certain instances to the Internal Revenue Service when a partner earns income from viewers in the United States.

How much of my revenue will be impacted?

Only the portion of your content owner revenue earned from US viewers will be subject to U.S. withholding taxes and reporting. These are revenues (e.g. advertising views, transactions, subscriptions) that are generated from viewers in the United States.

The US withholding tax rate that will apply will be based on the tax documentation that you have provided to Google (e.g. Forms W-8 or W-9).

You will see the finalized amount withheld in the AdSense payments report.

How do I update my tax forms?

We have noticed that you have yet to submit a tax form or have provided an invalid form. As a reminder, if we do not receive completed valid tax documentation (e.g. W-8, W-9) from you, future payments to you may be subject to 30% US Federal Tax Withholding. Please visit this site, which has instructions on how to provide your tax information.

So we need to understand the process of making money through these channels and plug into that process. Here in our case, most of the publishers are making their revenue from ads that appear on their websites or on their content pages in a platform or within their content. But no matter where the ad appears, generally the largest bulk of this revenue comes from a single company i.e., Google, and then Facebook is following Google’s lead. There are some other players, but they have a tiny piece of the pie. Some of the large publishers also directly sell their ad inventory but it does reflect in their books. To tap into this revenue stream, PEMRa can take a 3 step approach. 

1. Get these platforms registered in Pakistan as a business. 
2. Make a slab of revenue percentage based on the scale of the publisher.
3. Ask these platforms to deduct this share at source from all of the revenue that was generated through traffic from Pakistan regardless of the medium as in the platform itself, platform’s mobile app, publisher’s site, or publisher’s mobile app.

For revenue that is earned by directly selling this ad inventory to advertisers, there needs to be a reporting mechanism on both ends with the tax authority who will make sure there is no tax evasion or avoidance taking place in the whole process. This would also be the case with all of the subscription-based services.

This will ensure that PEMRA gets its fair share as well as create a level playing field for everyone who is making money from WebTV & OTT based content services. 

How PEMRA can excercise control of the content in the digital space?

Now comes to the regulatory part of enforcing a uniform content policy (i.e., compliance with the Code of Conduct-2015) across all mediums. This can be and should be done without any license fee like all other countries are doing out there as per your own examples. 

In the case of a platform, this can be enforced on the platform level itself by making this mandatory to agree with the PEMRA code of conduct-2015, so no other license is required by the individual content contributor. The same would be the case with mobile applications. For websites, there can be an online process where the website owner could submit their website and agree with all of the terms and conditions set forth in the code of conduct-2015. This would essentially give them a license to go with these services. 

It is imperative to understand for the legislators that these platforms disrupted this market by removing friction and if Govt truly cares about the digital disruption then try to propose policies that are productivity-oriented and not being developed with anomalies in mind by adding unnecessary hurdles for people who can and will make this “tabdeeli” happen.