Should Zimbabwean mobile phone operators join the bandwagon calling for the regulation of Over-The-Top Services in Zimbabwe?

NetOne Zimbabwe MD Reward Kangai- Image Credit (Fickr)

Speaking at the innovation Africa Digital Summit in August last year, NetOne Managing Director, Reward Kangai spoke about the growth of Over-The-Top (OTT) players – like WhatsApp, Viber and Skype -  riding on already existing infrastructure without paying any taxes locally. And it appears he was onto something, as recently, Vodacom and MTN, South Africa`s two largest mobile operators have been pushing for the South African government to regulate social networking applications such as WhatsApp, Viber, Skype and WeChat ,as the mobile phone operators` profits have taken a beating at the expense of these OTT services. It gets worse, In Morocco, the country`s three largest mobile network operators, Maroc Telecom, Meditel and Inwi cut offal their subscribers` access to FaceTime, WhatsApp, Skype and Viber in January this year, saying these services should pay licenses.

One can almost see Zimbabwe`s telecommunications sector heading in the same direction if the sector`s performance data is anything to go by. Latest industry statistics from the Postal and Telecommunications Regulatory Authority (POTRAZ), show that voice and SMS revenues, which have been the mainstay of operators in this industry have been declining. The argument for those pushing for regulation of OTT services is simple, companies such as Google and Facebook, which own some of these social networking applications should pay, if they want to benefit from their use of the vast investments in next generation broadband infrastructure done by the mobile phone operators.

 But is there any merit to this argument?

For the telecoms players, OTT services present lower margins, which are not commensurate with the investments that the operators need to make on an on-going basis in order to cope with the exponential growth in data traffic these OTT services drive. Conversely, the more traditional SMSes, which are increasingly taking a back seat as a result of the substitution to cheaper alternatives like WhatsApp, are high margin services, which incur next to nothing in the way of costs, implying that virtually all the revenues generated go directly to the bottom-line. Social networking applications are threatening this substantially profitable business for mobile operators. It is clear therefore, why operators would want OTT players regulated in this regard.

But the notion that OTT providers like Google and Facebook are free-riding on mobile phone operators` infrastructure investment does not really hold water, especially considering the fact that customers pay for the data they use while accessing the OTT services via operators` infrastructure. Again, the logic being used by mobile operators is somewhat contradictory. It appears the operators do not mind subscribers accessing high band-width applications like YouTube, for instance, yet they are clamoring for the forestalling of consumers from making use of the same bandwidth for accessing services that directly compete with their traditional services like SMS. Industry experts have argued that if one is already paying to use the band-width, operators should not really be concerned what it is used for.

Then there is the concern that by advocating for the regulation of OTT services, competition in the telecoms sector will be impeded, and customers will invariably hold the shorter end of the stick in such a scenario. New technologies like Instant Messaging applications have, in disruptive fashion, revolutionized the way people communicate. However, if their growth is curtailed by overarching regulations on new technologies, the benefits of competition will not trickle down to the customers. It would not be desirable therefore, to raise barriers to greater competition in this industry through OTT services regulation.  

Again, the technology industry is not a static sector. It is always evolving, with new technologies coming to the fray continuously. Bearing this in mind, regulating OTT services might very well prove to be a fool`s errand, as the regulatory authorities may not be able to keep up with the rapid innovations in this industry. Reports have also noted the potential arbitrage opportunities that may arise as a result of any attempt to regulate this industry. Never mind the outrage from the customers themselves who have come to depend on these social networking sites for communicating with their loved ones.

It is very apparent, that mobile phone operators carry a more taxing regulatory burden the world over, compared to OTT service providers. It would be remiss however, if this was the only justification for the introducing more regulation for OTT providers. Econet, Zimbabwe`s largest mobile operator has in the past come out saying that it does not view these new technologies as threats, but rather as an opportunity to offer new services to its customers. One wonders however, just how long this argument will continue to hold. Smart money would say that it is only a matter of time before Zimbabwe`s mobile phone operators join the bandwagon calling for the regulation of OTT services, as their profits continue to suffer.