Why OTT has Vodacom hot and bothered - TechCentral

Why OTT has Vodacom hot and bothered

Shameel Joosub

Shameel Joosub

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.

WhatsApp ... in the line of fire

WhatsApp … in the line of fire

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

12 Comments

  1. Just to be sure: This is another example of Vodacom calling for regulation.

    Networks should become dumb pipes because that is what would benefit consumers the most. That billing relationship is a bit once sided, with Vodacom calling all the shots so a little competition is good for us as consumers. It gives us options that Vodacom doesn’t want us to take.

    The fact that they do not consider themselves as dumb data pipes and try to dream up added services that nobody wants but we all pay for is hurting them.

  2. Greg Mahlknecht on

    >Networks won’t become dumb pipes. There is a billing relationship that exists with the customer

    There’s a billing relationship between me and eThekwini municipality for my water. That’s the dumbest possible pipe you can get.

  3. This isn’t about regulation or customer safety that they are pretending to care about. This is about the ability of smart phones to connect to WiFi and make calls and send messages cutting out the expensive mobile data being provided by carrier networks. That is what Vodacom and the rest fear.

  4. Ditto, add loss of revenue on SMS and a bit of loss in revenue on voice,
    as well as government most likely putting the heat on them to provide
    monitoring services on OTT services, and they can see a serious dip in
    their orgy of profits from the past.

    ” 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.”

    This keeps on popping up??

    Throw it back to government for regulation and they WILL mess it up!

  5. Vusumuzi Sibiya on

    >>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.

    …and now Virgin Mobile and FNB Connect are “piggybacks on infrastructure providers”; does competition and real value have any meaning…??? from the utterances of these questionable captains of industry – seemingly, they have no meaning whatsoever.

    Rather than entertaining these #GreedyCravingCrybabies, government needs to focus on sorting the mess resulting from their meddling asap and get spectrum available to be allocated to new entrants; it really is becoming sickening to hear the kind of twisted reasoning being spewed out from these colluding MNOs, hellbent on stifling competition.

  6. exactly how are you going to regulate, viber, wechat, yahoo messenger, google hangout, facebook messenger, kik, skype, snapchat, dasher and may others. this is just a retarded idea from lazy big corporations. They must roll up their sleeves and work on new revenue streams. Shameel is an accountant he know how to work with the books but he is not a technology guy.

  7. “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.” – And that’s the core of his argument – we don’t want competition because we can’t innovate.

  8. Take your shot Vodacom . we will just switch to Telegram or Signal , good luck regulating encrypted traffic.

  9. So they want Vodacom’s traditional voice communication regulations to apply to OTTs. I don’t think they even know how 3G works.

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