Countering the threat of Over The Top Communications Services (OTTs)

Markets for mobile telecommunications have been blatantly witnessing a migration from voice telephony and messaging to mobile internet with applications like WhatsApp, Skype, Viber, Apple iMessage, Telegram, WeChat and Google Hangouts growing in popularity.

Such services are categorized as Over the Top Communication services (OTT) and present a whole new era of regulatory issues that need to be addressed. In order to keep up with this fast paced change in communication, it will become essential for regulators to get involved in the process to ensure that this shift is maximized upon to promote the development of a stronger economy.

What are OTT Communication services?

Broadly, OTT Communication services are services whose primary applications lie in communications but use the internet as the transport medium rather than the traditional telephony infrastructure. This is especially relevant to telecom operators since these services operate in a similar space as traditional voice and messaging services. They have also been referred to as “free-riders” because they generate no additional revenue on their own, but rather ride on the data services entirely. OTT services therefore provide a direct threat to the telecom operators due to this substitution in service, thus leading to a marked decrease in revenue generation from voice and messages services. What’s more is that OTT services are more extensive and involve services relating to mobilization, localization and socializationwhich are more geared to meet people’s new communication demands. As it stands in Kenya, and in most countries around the world, there are no regulatory provisions for Over the top services. Kenya has however begun steps towards formulating such provisions in its National ICT policy 2016 which is set to be come into force soon.

So why regulate?!

In addition to providing a direct threat to telecom operators in terms of revenue, OTT services are not subject to any regulations. This is the case despite the fact that issues surrounding OTT services would be very similar to those relating to telecom operators due to the similarity in services. Questions of security, transparency, quality of service and tariffs need to be addressed in order to safeguard the development of these new technologies, while simultaneously ensuring consumer protection for the end user. The application of regulatory measures to these aspects is key.

Additionally, operators have argued that if regulators fail to impose the similar regulations or licensing requirements to OTT service provides, incumbents will have fewer incentives to invest in the underlying network infrastructure that everyone needs, including the OTTs.

Failure to invest would ultimately have dire effects on the sector and inevitably stifle innovation and competition in the market. This goes against the role of the regulator, and it is therefore becoming increasingly important that the playing field is leveled for both operators and application providers in order to boost infrastructure development, and the deployment of broadband as we move towards a digital economy.

However, the truth of the matter is that applying regulatory measures to OTT services raises concerns because regulatory measures that worked well for voice and messaging services, are not as directly applicable to OTT Communication services.  In regulating these services, it will be important to ensure that the fundamental rights of players on the internet are not lost. Net neutrality as currently defined is aimed at providing a level playing field to all players on the internet and exists as an underlying principle to most regulatory measures. This would allow OTTs to operate with no discrimination which is an added advantage as it boosts competition, innovation and allows for easy entry into the market.

Market based approaches as a solution?

The National ICT Policy 2016, which is currently being finalized, proposes strategies that will encourage locally and hosted OTT services to thrive alongside similar international services. It also seeks to encourage operators, to develop their business models in order to stay effectively competitive in the light of the challenges of OTTs. It seems that in this instance regulation of the sector has once again fallen behind the development of technology.

An ovum report (2014) noted the decline in voice and messaging revenue, but predicted a tripling in data revenue within the next few years. This therefore means that telecom operators need to stop viewing OTTs as a threat, but rather to start finding ways in which they can work together to ensure the migration of communications from voice and messaging is smooth. It might be worth considering more market based solutions rather than subjecting the new technologies to old regulatory measures.

It has been widely proposed that operators seek to align their revenue models with the traffic so as to reverse the current trend and ensure that the migration does not negatively impact them.

Revenue sharing has also been explored as a possible approach to OTTs which would essentially see cooperation between telecom operators and the service providers in terms of revenue generation. Redefining operators’ business models will better accommodate OTTs and generate the same kind of revenue.

Conclusion

Irrefutably, there is a need for interconnected and complimentary relationship between the telecom operators and OTT services in order to move forward. This issue however goes farther than maintaining revenue streams and must consider quality of service to the consumer as well as increased competition which will lead to infrastructure development. If this can be sufficiently provided for in regulation, then the telecom operators will be able to adjust their business models effectively so as to counter the effect of OTTs on traditional voice and messaging revenue generation.