By Nomvuyiso Batyi
In Europe, the Caribbean, India and elsewhere the “fair share” debate between data-hungry over-the-top (OTT) operators and network providers is becoming sharper, providing impetus for South African regulators to move swiftly and decisively to address the issue here.
OTT platforms like Netflix, YouTube, Facebook and Spotify have changed how consumers access media and have significantly disrupted the revenue streams and business models of network operators. For example, telcos have seen OTT platforms like WhatsApp, with direct messaging, or Zoom and similar platforms, with voice and video calls, displacing SMS and voice call revenue.
But even as the revenues plummet the network providers continue to invest in the underlying infrastructure. This effectively enables OTT operators who overwhelming dominate traffic but who contribute nothing to the infrastructure’s creation and growth.
According to a study by Sandvine, a network monitoring company, it is estimated that only six OTT operators account for 55% of global internet traffic.
Across the world, major network operators are increasingly demanding that OTT players pay a “fair share”, an issue that has introduced complex policy challenges.
The tension has intensified as revenues for network operators stagnate amid surging data demands. In the Caribbean, for example, the Caribbean Telecommunications Union (CTU) 2022 report indicates that OTT-driven traffic generates an estimated annual cost of between $232 million to $332m for operators. This represents 45 to 65% of their annual network investment but only between seven and 10% of their revenues.
The issue is coming to the fore in South Africa where the telecommunication industry continues to invest billions on infrastructure to meet surging data consumption demand, also largely driven by OTT players international and domestic. The Independent Communications Authority of South Africa’s (Icasa) annual sector report of 2022 shows that the telecommunications industry spent R39.7bn on network infrastructure in the year under review.
As the Association of Comms and Technology (ACT), representing local telecoms stakeholders, we believe the time is ripe to shape forward-looking policies that provide certainty on fair share obligations.
This is becoming even more pressing as the industry ramps up investment in rolling out high-speed 5G infrastructure to meet the exponential demand in growth of data consumption by South African consumers.
It is also an important issue in the context of national ambitions to ensure that all South Africans enjoy broadband connectivity and can participate in the digital economy.
In July this year, ACT successfully convened a roundtable on the issue and brought government, regulators, research institutions, non-profits, industry associations, OTT platforms and network operators together.
Key outcomes included a better understanding of SA’s OTT policy landscape, revenue models, competition dynamics and strategies for sustainable growth. Participants recognised the need to balance commercial interests and consumer rights.
However, we believe that the discussions also enhanced co-operation and alliances among relevant parties, establishing a solid groundwork for us to advance the matter in the direction of a just and proportionate distribution of infrastructure contribution.
Back in 2016 when this issue was considered by the parliamentary portfolio committee on telecommunications, South Africa adopted a “wait-and-see” approach on OTT governance, allowing the market to evolve organically. In retrospect, this provided space for some of the uncertainties and debates to settle with more concrete examples now available to inform our own deliberations here.
Today, there are more options on the table and more reasons for a policy position on this issue from the Department of Communications and Digital Technologies and to empower Icasa with fit-for-purpose regulatory interventions.
The South Korean framework is often cited as a pragmatic precedent. Introduced in 2018 as the first regulatory attempt to deal with the “fair share” debate, South Korea’s rules oblige heavy traffic generators to compensate carriers based on usage and traffic imbalance ratios. For example, if Netflix sends back more than 1.8 times the data it receives from the network operator, it must compensate the network operator for the imbalance via regulated prices.
In Europe, opinions are split. The network operators support regulator-led fair share contributions from internet majors like Google, Meta, Apple and Netflix to finance network investments. The OTT players and some national governments like Italy, however, oppose it.
Beyond Europe, the Caribbean and India are grappling with the same dilemmas. Caribbean telcos want commercial agreements forcing compensation for the more than 67% of traffic attributed to OTTs in their territory.
Indian telcos are pushing for a “telco tax” on tech platforms to sustain revenue losses from declining voice and SMS traffic and their ever-increasing investments in infrastructure.
As the global developments demonstrate, we in South Africa are far from alone in seeking to balance OTT innovation and network sustainability.
ACT believes now is the time for the Department of Communications and Digital Technologies to move on implementing framework options that provide policy certainty while upholding consumer interests. We remain committed to shaping an equitable solution to the complex debate through open dialogue and evidence-based recommendations.
Nomvuyiso Batyi is the acting CEO of Association of Comms and Technology.