The CDN Conundrum: Why Regulatory Overreach Threatens India’s Digital Future

Introduction

In the rapidly evolving digital ecosystem, the role of content delivery networks (CDNs) has become indispensable in ensuring seamless content delivery and enhanced user experiences. The CDN market in India was valued at $792.5 million in 2023 and is projected to grow at a compound annual growth rate (CAGR) of 13.3% between 2023 and 2030.¹ This growth is fuelled by an increasing demand for online content, rising digital media consumption, and the rapid expansion of the e-commerce sector.

Recent discussions surrounding the potential regulation of CDNs under the Telecommunications Act, 2023² (Telecom Act) have sparked significant debate on 2 aspects:

(i) Whether CDNs fall within the definition of “telegraph” within the Telegraph Act, 1885³ or as “telecommunication service” under the new Telecom Act?

(ii) Whether regulating CDNs via licensing, registration, or light-touch guidelines is the appropriate path?

This article discusses the role and functioning of these entities in India, Telecom Regulatory Authority of India’s (TRAI) proposed regulatory framework, and its potential impact on stakeholders, including a comparative analysis with global practices to evaluate whether such regulation would ultimately benefit the end customer.

What are CDNs? And how do they operate?

CDNs are dispersed networks of servers that coordinate to provide users with internet material more effectively. CDNs increase content load times and lower latency by caching content closer to end-users. By caching content for the end-users, CDNs reduce content lags and load times. Simply, CDNs optimise the delivery of any content by reducing latency and improving speed.⁴ A CDN, which has caching servers across India routes the user’s request to the nearest server where content is already cached. This ensures minimal buffering, fast playback and reduced load on the origin server, delivering a seamless streaming experience.

Internet companies often utilise CDNs, like Akamai or Cloudflare to facilitate faster delivery of their content to users. In exchange, CDNs have contracts with telecom service providers (also known as “TSP(s)”) or internet service providers (also known as “ISP(s)”) to host servers on their network.

Why regulate CDNs?

(i) History of licensing telegraphs in India: Earlier, ISPs and TSPs, as “Telegraphs”⁵ under the Indian telecom regulatory framework, were required to obtain a licence to function, in accordance with the Telegraph Act, 1885, with regulatory oversight from the TRAI.

To simplify and consolidate various telecom licences under a single umbrella, enhance regulatory clarity, flexibility, and ease of doing business in India’s telecom sector, and ensure adherence to national security requirements, the Department of Telecommunications (DoT) in 2013 introduced the Unified Licence (UL)⁶ which mandated existing licence-holders to migrate to the UL framework upon licence renewal and incorporated recommendations from the TRAI on the Terms and Conditions of Unified Licence (Access Services)⁷.

The UL initiative allowed service providers to offer multiple telecom services, including internet, mobile, landline and long-distance communication, under a single licence instead of obtaining separate ones. Operators can choose between a pan-India licence or a circle-based licence based on their business needs. The licence is valid for 20 years, with an option for renewal. Licensees are required to pay a one-time admission fee, a yearly licence fee, and spectrum usage fees determined by their Adjusted Gross Revenue under a revenue-sharing arrangement. Additionally, operators must comply with mandates pertaining to lawful interception, data localisation and national security directives to ensure regulatory compliance.

In 2018, the DoT unveiled the National Digital Communications Policy⁸ (Policy) which outlined a comprehensive strategy to strengthen India’s digital infrastructure and broadband ecosystem. This multi-pronged approach focused on expanding core physical infrastructure — such as optical fibre networks and mobile towers — while accelerating rural connectivity through the BharatNet program and satellite-based internet solutions. The introduction of the Act further aimed to simplify licensing regimes and deregulate satellite communication to encourage greater private sector participation and operational efficiency.

On September 2022, the DoT released the first draft of the Telecommunications Bill, 2022 (Bill)⁹. The Bill sought to revise and unify the laws pertaining to spectrum assignment, the growth, expansion and operation of telecommunications networks and services, as well as related issues. On 4-7-2024, the Union Government published a notice in the Gazette to enforce a number of the Telecom Act provisions. The Wireless Telegraphy Act, 1933¹⁰ and the Telegraph Act, 1885 were essentially superseded by the Act.

(ii) Regulatory developments for CDNs in India: Until now, CDNs were exempted from any licensing mandates. However, the TRAI, via a 2021 consultation paper,¹¹ referencing the Policy, to maintain oversight over these entities, recommended that CDNs should register with the DoT through a simple online process.

Following up on this, the TRAI in 2022 via a Press Release¹² proposed a one-time registration fee of Rs 10,000, along with a registration form and certificate for CDNs — indicating a framework aimed at maintaining oversight without stifling innovation or entry. Additionally, TRAI recommended that data centres (DCs) should receive infrastructure incentives to facilitate the proliferation of CDNs and boost the broader digital infrastructure ecosystem.

(iii) Regulation under the new Telecom Act: The Telecom Act was enacted by the Parliament in December 2023 and received the assent of the President of India on 24-12-2023. It was published in the Official Gazette on the same date.¹³

Section 3¹⁴ of the Telecom Act grants the power to the Central Government to issue authorisation to any person intending to establish, operate, maintain or expand a telecommunication network or telecommunication service.

As per Section 2(p)¹⁵ of the Telecom Act, “telecommunication” means transmission, emission or reception of any messages, by wire, radio, optical or other electromagnetic systems, whether or not such messages have been subjected to rearrangement, computation or other processes by any means in the course of their transmission, emission or reception; further, Section 2(s) defines “telecommunication network” as a system or series of systems of telecommunication equipment or infrastructure, including terrestrial or satellite networks or submarine networks, or a combination of such networks, used or intended to be used for providing telecommunication services, but does not include such telecommunication equipment as notified by the Central Government.

Given that CDNs facilitate the transmission, routing and optimisation of data over electromagnetic systems, and operate as critical infrastructure enabling the delivery and exchange of digital content, they squarely fall within the ambit of “telecommunication” under Section 2(p) and constitute a “telecommunication network” under Section 2(s) of the Telecom Act.

Whether regulating CDNs is appropriate?

(i) Overbroad definitions: While Sections 2(p) and (s) of the Telecom Act are broad enough to technically include CDNs, their inclusion should be interpreted with functional nuance. CDNs do not provide user-facing communication services; rather, they optimise the delivery of content already in transmission. Treating them as telecom operators mischaracterises their role in the internet ecosystem.

Further, CDNs cover a broad spectrum of technologies, from caching and edge computing to content replication. Any attempt to define and regulate them could inadvertently pull in adjacent technologies like cloud storage, DNS, or application acceleration services, resulting in unintended regulatory overreach and significant compliance confusion.

(ii) Global norms favour non-regulation of CDNs: International regulatory practice consistently reflects a light-touch or non-interventionist approach to CDNs, recognising their role as infrastructure enhancers rather than public telecom operators. In leading digital economies, CDNs are not subject to licensing, registration, or telecom-grade compliance obligations, and are instead treated as part of the broader internet infrastructure that supports content efficiency and consumer experience.

For instance, In the US, the Federal Communications Commission (FCC) has maintained a clear distinction between TSP and edge-service providers, such as CDNs. These services are treated as part of the “information services” layer under the Communications Act, meaning they are not regulated as common carriers or telecom operators. Even in debates surrounding net neutrality, the FCC has excluded CDNs from regulatory obligations, focusing instead on ISPs and backbone carriers.¹⁶ Furthermore, in the EU, CDNs are also not subject to licensing or registration under the European Electronic Communications Code (EECC). The Body of European Regulators for Electronic Communications (BEREC) has explicitly stated that CDNs fall outside the scope of direct telecom regulation, and instead, their behaviour is indirectly addressed through net neutrality rules which apply to ISPs, not infrastructure or content accelerators.¹⁷

Thus, the global success of the CDN industry, largely achieved with minimal regulatory intervention, provides a compelling model for India to follow. Unnecessary regulations would hinder innovation and impede India’s ability to compete in the global digital landscape.

(iii) Setting precedents for broader internet regulation: Requiring registration for CDNs would establish a problematic precedent, potentially leading to calls for similar regulations on other internet services like email providers, web hosting, and domain name system (DNS) providers. The internet’s inherent strength and rapid growth are largely attributable to its unregulated nature. Expanding regulatory oversight beyond essential functions threatens this foundational principle and could stifle future innovation. Moreover, misinformation regarding regulation could deter crucial investments in India’s burgeoning CDN, cloud and data center sectors, potentially hampering overall economic growth.

Conclusion

The debate surrounding CDN regulation in India highlights a critical juncture for the nation’s digital future. While the TRAI has previously recommended registration, and the Telecom Act broadens the definition of “telecommunication”, subjecting CDNs to extensive licensing or regulation would be a misstep. Such a move risks stifling the remarkable growth of the CDN market, which is vital for seamless content delivery and user experience. Furthermore, it could lead to regulatory overreach into other internet technologies and deter essential investments in India’s digital infrastructure. Emulating global practices of light-touch or non-interventionist approaches, which have fostered innovation and competition without market failure, is paramount. Therefore, ensuring CDNs remain authorisation-exempt, as recently suggested by TRAI, is the most beneficial path for India, promoting continued innovation, competition and ultimately benefiting the end customer through enhanced digital experiences.