Technology

New CTO report heightens OTT argument

By Prince Osuagwu (Hi-Tech Editor)
Since the turn of digital economy, the traditional telecom operators and their over the top, OTT service provider counterparts, have been enmeshed in cold war. The issue is that the activities of Over the Top, OTT operators appear to be creating unrest for telecom operators particularly in the areas of revenue growth.

New CTO report heightens OTT argument 1

OTTs

Many traditional telecom service providers are of the opinion that traditional telephony and SMS revenues are under threat from newer, IP- based alternatives like WhatsApp, Skype, Viber, among others, who are purely over the top services providers.

Similarly, third party web content and social networking companies such as Google and Facebook are increasingly generating huge revenues and driving high levels of data traffic which ride on the broadband networks of traditional telecom operators.

To further worsen this issue, the traditional operators still have to make significant investments in upgrading their networks to handle the increasing volume of data generated by the same providers of OTT services. The telcos therefore argue that unless there is a revenue flow to them from such services, they do not have an incentive to continue to maintain or upgrade the networks.

OTTs are agents of disruptive technology. They mostly haul their services across to the consumers, over the network of traditional operators, bypassing controls. For instance, on instant messaging, over the top providers are third parties, providing the services free of charge, as an alternative to text messaging services already being provided by a mobile network operator for a fee.

An example of this is the WhatsApp messaging platform, which is narrowly focused to replace text messaging on internet-connected smartphones.

Although whether to regulate the activities of this set of service providers or not, has remained a lingering debate in Nigeria’s telecom space, several options are reportedly being canvassed by the operators towards checkmating a growing concern which appears not to be getting better due to increasing forecasts towards a steady growth.

Forcast revenue losses

For example, Informa’s World Cellular Revenue Forecasts, says that global annual SMS revenues will fall from US$120 billion in 2013 to US$96.7 billion by the end of 2018, due to increasing adoption and use of Over-The Top, OTT messaging applications. Another research company, Spirit DSP, in its own report tagged: The Future of Voice also studied the impact of OTT VoIP (Voice over Internet Protocol) applications on voice revenue, declaring that the overall global telco voice revenues including fixed subscriptions will decline from $970.4 billion in 2012 to $799.6 billion by 2020, at a CAGR of 2.4%. It is also estimated that, as a result of VoIP, by 2020 the telecom industry worldwide will see a loss of revenues approximately worth $479billion which accounts for 6.9% of the total revenue from voice.

Several views are that these forecasts, when they happen, could give tremendous economic power to the final consumer.

However, they may not do so to traditional telecom operators and the GDP of many tech nations.

Unending Argument

This realisation has had the operators and the regulatory body, the Nigerian Communications Commission locked in unending argument whether or not the OTTs should be regulated.

The operators express deep concern that in spite of the revenue loss they suffer as a result of encroachments from the OTTs, they are still under obligation to pay relevant taxes as and when due. Throwing the challenge back to government, the operators are calling on the Nigerian Communications Commission, NCC, to ensure that all service providers in the telecom space come under the law by way of regulation.

Chairman, Association of Licensed Telecommunications Operators of Nigeria, ALTON, Engr. Gbenga Adebayo, came out bluntly to challenge the regulator on why it should remain technologically neutral over the issue of OTTs.

According to Adebayo,”the idea of technology neutrality is what allows the OTTs to operate in Nigeria without any licence, at the expense of the licensed operators. They are eroding our revenue. The licences we have enable us to provide voice, data and text message services and these are the avenues through which we make money. “However, today, people are no longer sending texts because of the OTTs.

Our voice and text message revenues have been affected because subscribers now prefer to send messages over Whatsapp or Facebook rather than text messages; video calls are also gradually replacing the regular voice calls. If we must maintain the over $70 billion investments in the telecom sector, government must balance authorisation between our services and these disruptive technologies. We are losing money. People that have no presence and no licence in the country are the ones making money, the regulator must be concerned about this,” he added.

Growth enablers

However, the regulator is looking at the issue from a different perspective. It regards OTTs as growth enablers rather than revenue disrupters. In fact, the NCC believes that the over 100 million data subscription that Nigeria enjoys today and the surge in mobile internet subscription, wouldn’t have been possible without the activities of over-the- top telecom service providers.

The regulator has once said it has no plans to regulate either the internet or social media, maintaining that they have a peculiar way of growing the industry and balancing out competition in the sector.

At a recent event in Lagos, NCC’s Director of Policy, Competition and Economic Analysis, Mrs Josephine Amuwa, challenged the telecom operators to be more open-minded and accept that the OTTs benefit their activities more than they disrupt. She said: “When you talk of OTTs, the only way the consumers enjoy OTT services is through data subscription, and it is the operators that are providing the data. From our in-house study, we have seen tremendous growth in data consumption as a result of the increase in usage of these OTTS.”

She added: “If data consumption is growing, it doesn’t matter whether the OTTs are inside or outside the country. They are positively impacting telecoms development in Nigeria.”

New CTO report

Meanwhile, the findings of a recent study by the Commonwealth Telecommunications Organisation,CTO, show that the majority of stakeholders recognise and appreciate the innovative nature of over-the-top services, OTTs and do not want innovation to be stifled as OTT services offer numerous benefits to consumers.

There is, nonetheless, widespread support for regulatory responses although, predictably, less so from the OTT sector itself, the report says.

However, in another stretch, the report warned that while larger and more advanced Commonwealth countries have the scale and market and regulatory sophistication to take advantage of the App economy, particularly by building domestic digital businesses, this is not necessarily the case with emerging and small Commonwealth countries.

It advised that given the widely acknowledged role of telecommunication services in promoting economic development, it is critical that such markets focus on attracting investment in communications infrastructure by ensuring that network operators can earn sufficient margins to sustain the rollouts and upgrades that underpin the App economy.

The report recommends further consultation to involve all stakeholders at national level in the countries surveyed, and also at regional and international level, given that the issues raised in the survey are not peculiar to any specific country.

The report did not also make specific pronouncement on whether OTTs should be regulated as the telcos are wont to canvass but rather pointed out that while it is understood that countries will vary in terms of existing policies and regulations, cross-border collaboration is also useful in sharing experiences and learning from mistakes and best practices.

Recommendations

The report recommended: *The creation of favourable ICT environment in terms of policies, regulations and legislations.

*Adoption of OTT services as part of the App economy to encourage innovation

*Countries should determine suitable frameworks through regional and international considerations;

*Countries should develop national cyber security strategies to include robust legal structures/instruments and governance to address data protection and privacy.

Meanwhile, the CTO promised to assist the Commonwealth countries to develop further internal OTT frameworks, after seeing that the report was well received and adopted by the Commonwealth ICT ministers during the CTO ICT Ministers’ Forum recently.

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