WhatsApp, Skype and other “over the top” services should be regulated in the same way as telecommunications operators, especially as there is a risk that these new competitors will threaten cellphone companies’ ability to invest in their networks.
That is the view of Vodacom CEO Shameel Joosub, who was speaking to Business Times in an exclusive interview this week following a parliamentary meeting on Tuesday on the possible regulation of such services.
The government now intends to include a section dealing with OTT services in an upcoming white paper on information and communications technology policy.
Joosub said a wide-ranging debate was needed to determine how OTT companies that compete with operators’ core services, such as voice telephony and SMS, should be regulated.
The suggestion that these firms should be regulated has sparked outrage among consumers, who have directed their fury at the main proponents of the idea, Vodacom and MTN, accusing them of trying to use regulation to beat back innovation and keep prices high.
The operators have also come under fire from the OTT providers, with Microsoft warning that this week’s parliamentary meeting served only one purpose: “To protect the revenue of mobile operators.”
High cost to consumers
At the parliamentary hearings, Facebook, Microsoft and Google all lashed out at the idea that they should be regulated like operators.
They also slammed suggestions by some of the operators that they do not pay tax in South Africa, do not provide their own infrastructure and are not worried about customer service.
Siyabonga Madyibi, representing Microsoft, which owns Skype, warned that regulating OTT services could come at a high cost for consumers. If it was forced through onerous regulation to shut down Skype in South Africa, it would not impact Microsoft severely, he said, but would hurt the small business owners that depend on it.
Joosub said he was particularly concerned that OTT companies that compete head-on with Vodacom’s traditional profit centres such as voice communication do not face the same regulatory requirements, such as providing interception and monitoring services to the country’s security agencies.
He said he worried, too, that they were not paying tax in South Africa for advertising revenue they generated while providing free services to local consumers.
Although there’s sharp disagreement about the definition of OTT — some argue it could include anything delivered over the Internet, including a website — Joosub said he was more concerned about those providing competitive services.
“For me, it’s when you start providing what I call ‘operator services’ – when you start providing voice services or data services and you are playing in the space we are.”
He said it was crucial that policymakers considered the “unintended consequences” of not regulating OTT providers, which he said were increasingly taking on the same role as mobile virtual network operators — companies like Virgin Mobile and FNB Connect that piggyback on infrastructure providers’ networks but provide their own-branded services to end users.
“There are a number of things that need to be considered. All we are saying is that, in South Africa, the authorities should have the same debate [as elsewhere in the world]. It’s not that we’re trying to block [OTT services] in any way. What we are saying is one needs to apply one’s mind about what are all of the impacts of OTT.”
While OTT providers had helped grow demand for data services on Vodacom ’s network, when they started to play in competing areas like voice, there needed to be a debate about regulation, Joosub said.
Networks won’t become dumb pipes. There is a billing relationship that exists with the customer
“You have to make sure that there is a balance in terms of the investment that is required. At the moment, there’s an ecosystem … that is working very well. If you start to grow that exponentially, what does that mean for the level of investment? The operators need to be able to get a certain level of return to be able to invest.”
He insisted, however, that Vodacom does not want to impose its view on anyone and that South Africa needs a broad debate about whether licensing and regulating OTT providers makes sense, or whether the other extreme — “a free for all” — is preferable.
“You should have a professional review … and decide if there’s something to be done or not.”
Dumb pipes
Critics argue that operators such as Vodacom are terrified about being turned into “dumb pipes” — data utilities where their historically very profitable voice and SMS revenues are eaten away by OTT providers and where they become simple providers of low-margin bandwidth.
But Joosub said he did not believe this would happen. “Networks won’t become dumb pipes. There is a billing relationship that exists with the customer. Yes, it is true that you will have situations where more and more voice is carried over data networks, but that per se is not the issue because what will happen is that the data will need to be appropriately priced so you get the returns so you can continue to invest,” he said.
“Remember, for OTT [services] to exist, there has to be an underlying data network. Data is investment-hungry. That ecosystem has to continue to invest. You can only invest what you have made.”
- This piece was first published in the Sunday Times