26 January 2016

South Africa: Over-the-Top Service Regulation Could Hurt South African Consumers

Photo: Whatsapp
OTT services such as WhatsApp and Skype offer voice and text message offerings over data networks - often at a lower cost than traditional telecom services (file photo).

On Tuesday, the parliamentary Portfolio Committee on Telecommunications and Postal Services will be holding hearings on the possible regulation of over-the-top (OTT) services. But what are OTT services, how do they affect the average South African consumer, and should we be worried? STUART LEWIS explores.

Most South Africans who buy a cellphone expect to be able to make use of services like Whatsapp, Facebook and Twitter on their devices. Now, with the number of mobile users of these services continuing to grow and steadily eating into the profit margins of network providers like MTN and Vodacom, a portfolio committee meeting may see them being regulated .

These third-party applications are roughly bundled together into what are often called over-the-top (OTT) services. They are dependent on the network you are connected to but are provided by other companies and generally cost nothing to use beyond ordinary data usage charges.

"Essentially OTT services are any service you can use over a network connection that you don't pay the network provider for. They range from services getting a lot of attention right now like Whatsapp and Viber to things like Youtube or Uber," explained Dominic Cull, regulatory advisor to the Internet Service Providers Association (ISPA) in a phone interview with The Daily Vox.

Cull will be one of the people speaking at the parliamentary Portfolio Committee hearings on Tuesday. ISPA, the organisation he represents, counts internet providers like MWeb and Neotel as part of its membership, but not cellphone companies like Vodacom and MTN, who are two of the major industry players agitating for regulation.

A media release sent out by parliament on 14 January indicated that mobile operators including Vodacom and MTN had asked the portfolio committee to hold hearings to discuss "necessary policy interventions on how to govern OTTs". But it then turned out the statement had not been authorised by Minister of Telecommunications and Postal Services Dr Siyabonga Cwele. It also appears that that portfolio committee chair MP Mmamoloko Kubayi was the one who called for the meeting.

The major network operators are losing revenue to OTT services and have expressed their concern. "This really is an evolutionary step. The current models are taking strain so the people behind them are now pushing back to get some control. It's the printing press all over again," said Cull.

"The introduction of broadband technologies, networks and devices like smartphones have enabled low and no-cost services that have hit at the traditionally voice and SMS business models that have driven the revenues of mobile models for two decades," said Dr Alison Gillwald, Executive Director at Research ICT Africa. While some operators like Cell C have embraced this disruption of the industry - and have in fact been vocal in their support of OTTs - other operators still rely too heavily on voice revenue despite growing data revenue, according to Gillwald.

"Operators (often incumbents) are unable to develop their own content or enter into complementary relationships with the platforms that drive internet use, so have been lobbying through industry associations, like the ITU (International Telecommunications Union) for OTT services to be forced to pay operators," said Gillwald.

"Mobile operators are saying that these services have no regulation, have no quality assurance standards for customers and pay no local taxes - which is hugely ironic coming from South African operators," adds Cull.

The reality is, Cull says, is that mobile operators are losing money: "Voice and messaging take up almost no data. Services like video, on the other hand, use up a lot of data. Mobile networks have been happy to charge a premium on data for intensive services like video, but now that less intensive services like voice and messaging are also using data, it's cutting into their revenue."

"Regulating these services is nonsense. It's quite illusory to think that something like Google is less regulated than Vodacom," he adds.

Meanwhile, Cull cautions, the government is attempting to regulate OTTs over concerns for security based on how social media has been used to facilitate protests like the Arab Spring. "Frankly, I think it's utter claptrap. They are being so transparent about it," he said.

Cull may well be right. According to the ITU, other countries that regulate services like Whatsapp include authoritarian regimes like the Kingdom of Saudi Arabia. Other countries like India and Brazil have had substantial opposition to Facebook's Free Basics service which has attempted to provide cheap, basic internet services to people in countries with expensive data costs.

Both Cull and Gillwald warn that the regulation of OTTs could have severe negative impacts on the average South African consumer. OTT services are "a far more efficient use of the network for delivering voice," said Gillwald and result in lower costs to user.

"If we're going to regulate big international players, we're probably going to see them leave the market. But local replacements will quickly replace them because there are such low barriers to entry. I think the consumer will see some blips in access," said Cull, adding that this was a net neutrality issue as it could potentially allow operators to decide which services get preferential access to their network.

However, it seems unlikely that these hearings will turn into anything concrete. For a start, the portfolio committee is essentially toothless. It cannot create regulations, a responsibility that falls under the ambit of the Independent Communications Authority of South Africa (Icasa), nor can it write legislation. At best, it can recommend that the minister take action against OTT services.

Secondly, there is already a large backup of other legislative issues relating to the Department of Telecommunications and Postal Services, such as allocation of broadcast spectrum and a market review on market dominance that are already bottlenecking the sector.

"Let's assume there is a clarion call at the hearing for regulation. We're still at least two to three years away from that going into effect because it would have to go through the Minister and then ICASA," said Cull.

He will be recommending in his presentation at the meeting that regulation is not the solution to the OTT issue: "The answer is not to regulate these new forms of competitors but to release the fundamental constraints that block the growth of mobile networks. But everything has already been delayed for years."

Cull believes that the fight over OTT regulation may be a good opportunity for consumers to take control of communications. "Mobile operators have gotten too used to the massive margins they've had. They've been charging us 80c for an SMS that costs 0.001c to carry on their network. Ask yourself who that handset you're holding up to your ear belongs to. Is it yours or theirs? You paid for it. I'd say you get to choose how you use it."

Editors' note: Charley Lewis, one of the experts who has been asked to present at the portfolio committee hearing, is the father of the reporter behind this article. However, he was not used as a source in the production of this article.

More on This

Mobile Networks Fear Becoming 'Dumb Pipes'

Parliament's discussions about regulating over-top-services (OTTs) kicked off on Tuesday with an expert saying that… Read more »

Copyright © 2016 The Daily Vox. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 1,000 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.