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If South Africa’s biggest mobile networks get their way, over the top (OTT) services such as WhatsApp could soon be regulated. According to Fin24, parliamentary hearings have been set for later this month aimed at exploring “necessary policy interventions on how to govern OTTs, regulatory interventions on the guidelines to regulate OTTs” and the “impact of OTTs on competition”.
The hearings, which will take place under the remit of the the Portfolio Committee on Telecommunications and Postal Services will also discuss, whether “there (is) a need for the OTTs to be defined as telecom services (voice or data) or telecom infrastructure, and thus whether they should be subject to licensing and regulatory obligations (such as legal intercept and emergency call access) or not?”
In support of regulation, the mobile operators will argue that OTTs are eating into their profit margins and ability to survive. If regulation is pushed through however, it could fast get ludicrous, and may in fact hasten the demise of the mobile operators, hurting their ability to compete with each other.
Who moved my cheese?
At the heart of the mobile operators’ argument is the fact that text and voice calling services such as WhatsApp, Skype, and Google Hangouts usurp their traditional revenue models and that they should therefore be subject to the same kinds of regulation as the networks themselves. Moreover, they argue, these services benefit from the infrastructure built by the mobile networks without having to invest in it.
“A lot of your data growth is driven by the same people who are trying to cannibalise you,” Shameel Joosub, Vodacom CEO Shameel Joosub said in an earnings call late last year. It’s a sentiment that was echoed by MTN then Mteto Nyati, who told an interviewer “you have these players which are getting huge benefit out of an industry without making any investment.”
It’s the kind of knee-jerk reaction typical of an industry that’s just realised it’s been disrupted. It’s what happened with the metered cab industry and Uber and, earlier, with Google News and the newspaper industry.
South African mobile operators aren’t alone in this fight either. UK networks have also sought regulation of OTTs and in December last year Brazil shut down WhatsApp for roughly 12 hours. While the latter shutdown turned out to be because WhatsApp refused to share information relating to a criminal case, it was a stark reminder that the Brazilain Telecoms industry had been lobbying for months to have these kinds of OTT services declared illegal.
“We are disappointed in the short-sighted decision to cut off access to WhatsApp, a communication tool that so many Brazilians have come to depend on,” said WhatsApp CEO Jan Koum at the time and sad to see Brazil isolate itself from the rest of the world.”
It’s an understandable ploy, but one which will, at best, only delay the inevitable. Moreover, it’s one which has the potential to get incredibly ludicrous incredibly quickly.
What to regulate
The first problem comes in figuring out exactly which apps to regulate. While target number in one, in South Africa as in many other markets, is WhatsApp — it has more than 10-million users in the country — going after it alone would be foolhardy. Even if courts allowed the banning of one OTT player, people would simply move to another. When WhatsApp went down in Brazil, for instance, rival app Telegram saw more than a million downloads.
But even if the proposed regulations take on all OTT players that offer voice and text services, things could get very complicated very quickly.
As Dominic Cull, a communications regulatory expert at Ellipsis Regulatory Solutions told Fin24, “just about everything provided over the network could be regarded as an OTT”.
“Once you can’t divide them up, it obviously becomes ludicrous to try and regulate them,” he added.
Think about it. Would the proposed regulations apply to the email app on your phone? After all, what is email but form of communication via text? And what about Twitter? It’s currently free to MTN users, but its DM functionality could easily take up the role of an instant messaging service. But when last did you hear someone describe Twitter as a threat to the mobile networks?
That alone could damage perceptions of the mobile operators but there are other concerns on that front too.
Killing (the wrong) competition
It’s worth noting that South Africa’s two biggest mobile operators, Vodacom and MTN, have made the loudest noises around regulation of OTTs, despite those OTTs driving up much of the data spend on their networks. By contrast, the country’s third-largest operator Cell C has used cheap unlimited price bundles to try and lure people away from those markets.
If stringent enough regulations were passed, then it could hamper the ability of South Africa’s mobile operators (of which there are an increasing number) to innovate along these lines, effectively preserving the near duopoly that MTN and Vodacom currently enjoy.
Except the OTTs and other mobile operators shouldn’t be their biggest worry. Quite aside from the fact that the proposed regulations would mean taking on some of the biggest tech companies on the planet, any additional costs resulting from regulations are likely to turn sentiment against mobile operators.
And that’s something they can’t afford to have happen. While the mobile networks have traditionally been how most South Africans access the internet, that’s rapidly changing. Fixed line internet is becoming cheaper everywhere, bringing more people online at home and free Wi-Fi (subsidised by advertisers or municipalities) is becoming increasingly ubiquitous in urban centres.
And if regulations affect the cost of using data on mobile networks, it will only hasten people moving away from them as a means of accessing the internet. Of course, if the networks manage to convince the parliamentary committee “will affect the price of data coming down – or the rate of data coming down,” then things may just turn in their favour.