The rise and popularity of over-the-top (OTT) services has taken a huge toll on the bottom line of telcos across the globe. The OTT services include instant messaging, voice/ video calls and others. In Nigeria, there appears to be no regulatory framework to halt the decline, LUCAS AJANAKU reports that telcos are rooting for far reaching reform to save the industry.
These are certainly not the best of times for telcos in Nigeria. Disruptive technologies have come and with its coming are daunting challenges. Disruptive technologies can are now in virtually every facet of human endeavours. From car hailing, advertising, education, financial service to e-commerce, it has left its mark by disrupting the traditional way of doing things and had left in its trail, job losses and shut mortality of businesses.
In the telecoms sector, disruptive technologies manifest in the emergence of Over-the-Top (OTT) apps which allow users to access services such as Voice Over Internet Protocol (VoIP), live video streaming. Other social media apps such as Facebook Messenger, WhatsApp, Blackberry Messenger (BBM), Viber, Skype, Google+, Pinterest, Instagram and many more also play in the space.
These OTT offer services over the networks, deliver value to customers but without any carrier service provider being involved in planning, selling, provisioning, or servicing them.
Executive Commissioner, Stakeholder Management, Nigerian Communications Commission (NCC), Sunday Dare, said active subscribers figure witnessed decline because subscribers prefer to use these OTT platforms for making voice and video calls as well as send messages. This means that the traditional telcos cannot directly earn revenue from such services and they are literally now screaming, as they see their incomes continue to nosedive in the face of these disruptors.
The Chief Executive Officer, MTN Nigeria, Ferdi Moolman, captured the impact of OTT when he made a short presentation before members of the National Assembly .
He had said: “MTN is committed to continue its efforts to provide the best data network to the people of Nigeria. In this regard, however, there are a number of factors that impact the sector’s sustainability such as: the depletion of operator revenues by unlicensed providers of “over-the-top” telecoms services who do not have any physical presence; nor pay any taxes; nor make any significant contribution to employment or other socio-economic objectives of government in Nigeria.”
When South African leading carrier, Vodacom released its interim results for the six months ended 30 September 2016, it showed sharp decline in short message service (SMS) volumes declined.
SMS volumes peaked in September 2011, with 3.3 billion messages sent over a six-month period on Vodacom’s network.
Since then, SMS volumes have shown a steady decline – which is mainly a result of the increased use of messaging services such as WhatsApp and Facebook Messenger.
In Nigeria, the uptake of WhatsApp and Facebook Messenger is fueled by the increased use of smartphones which is a product of affordability.
The telcos have been aggressively growing their smartphone user base by making more affordable devices available in the market by partnering original equipment manufacturers (OEMs). They have been doing this in the hope of shoring up revenue lost to voice calls from data services. This however appears to be hurting the interests of the telcos.
These users then take advantage of the benefits of mobile messaging services.
ALTON reacts
The Association of Licensed Telecommunication Operators of Nigeria (ALTON), the industry body of all licensed telecoms operators and infrastructure providers, by the consumers, the regulator and the policy makers, has lamented the impact of OTT on the bottom line of carriers.
Its Chairman, Gbenga Adebayo, said OTT utilise traditional Mobile Network Operator (MNO) infrastructure to offer social networks, voice and instant messaging services to retain users’ loyalty and drive stickiness with a view creating large on-line communities and eventually attract huge advertisement revenues.
The MNOs have neither rights nor control over the OTT services, as customers have the discretion to use the internet as they like.
Increasing usage of OTT services by customers is adversely impacting on traditional telecoms platforms. According to Ovum, the independent analyst and consultancy: The growing adoption of OTT services by customers instead of traditional telecoms services will occasion global revenue loss of $386billion over a period of six years (2012 – 2018) for the traditional telecom operators, thus endangering network development.
On the OTT services in Nigeria and the ‘Displacement Effect”, he said data shows that voice minutes have been declining due to impact of OTT; voice minutes has been declining while VoIP has been increasing; OTT Data flux has been increasing as shown with the 2016 data. telcos are losing money due to this trend.
Adebayo said urgent action is required to save telcos further loss due to activities of OTT players who do not invest in infrastructure.
According to him, telcos incur the costs while OTT players make the money. “Telcos invest a lot on network infrastructure in order to provide basic and innovative services to customers. Core voice and SMS revenues are decreasing continuously due to impact of OTT players who offer voice, video and messaging services free of charge to their users. Telecom operators will continue to invest a lot to make the networks support the data tsunami, with the required quality of service and numerous innovative services.
“On the top of their infrastructures and customers, they will strive to keep with huge investments, the OTTs are offering contents & applications, using huge amount of telcos bandwidth, collecting revenues but paying nothing to the Telco operators and to the government.
The increasing adoption of OTT applications by telecom subscribers negatively impact on incoming international traffic as well as SMS at huge cost to the telcos but revenue to OTT.
OTT players also holds much customers’ personal data they can use for any desired purpose without risk of being sanctioned by the government while telcos are not permitted to use or disclose subscriber information to third party,” he said.
Like Moolman, Adebayo lamented that OTT operators offer the same services as the operators (voice, SMS, content, and others), but are neither subject to licensing under the NCA nor have any contractual obligation with operators in terms of interconnection.
The Executive Vice Chairman, NCC, Prof Garba Dambatta said the cumulative Foreign Direct Investment (FDI) attracted to the country through the telecoms sector now stands at $68billion. He said the contribution of the sector to the GDP is about 10 per cent, adding that the Commission will continue to strive to increase and sustain these gains.
ALTON said the industry is a catalyst for telecoms infrastructural development in the country, and also a major employer of labour having created over 30,000 direct job opportunities and over 500,000 indirect job opportunities.
“Telcos have paid over N300billion to the coffers of the government in taxes and levies annually. The OTT players have no traceable address in the country, which makes little or no contribution to the nation’s direct economy either in employment generation, payment of taxes and others.
“S.31(1) of the Nigerian Communications Act, 2003 (NCA) states that no individual or corporate is authorized to provide telecommunications services in the country without obtaining a prior authorisation or exemption from the Commission.
“OTT service providers are currently providing voice and instant messaging services throughout the country without satisfying this requirement.
“This means that they are also not covered by obligations such as annual operating levies, emergency service provisioning, Do not disturb (DND) and other consumer-protection measures, taxation, subscriber registration/identification, lawful interception, mandatory consumer codes, and others,” he said.
Way forward
In accordance with international trends, we recommend “same service, same licensing” regime to avoid distortion in the digital landscape, ALTON said.
ALTON supports models intended to engender revenue-share arrangements on advertisement-based OTT content. This co-operative model is being developed by operators and may necessitate special data bundles; we support innovative solutions by operators to minimise impact of disruptive platforms in the best interests of consumers and of industry sustainability.
Security issues need to be addressed: because of Lawful Interception (LI) reasons – OTT players will not open up their services for LI, and that poses a huge security risk. There is need to consider regulation regarding LI compliance for OTT services. Sustainability issues also need attention.
He argued that operators should reserve the right to charge for OTT calls based on criteria available to the operators, such as OTT calls terminating to offshore IP addresses; OTT calls based on call count or duration per call; possibly apply limits to call duration or call count for basic unregulated OTT calling, OTT calls based on time of day while OTT video (P2P) is subject to the above.
He however said OTT video content streaming may not need to be regulated as carriers could decide to apply QoS parameters to the specific service, and manage QoS as applicable for their subscribers. Also operators can decide to prioritize or de-prioritize OTT traffic on their networks for economic and quality reasons.
He urged the NCC to introduce data price floor to ensure that telcos price data profitably irrespective of activities carried out by data customers.
“We recommend that OTT players enter into agreement with telcos for revenue share or payment of a kind of interconnect fee to telcos.
“ALTON is committed to the continued growth and development of the Nigerian telecommunications industry and respectfully requests that in order to save the legacy telecoms operators, measures must be put in place which will avoid distortion in the digital space in order to ensure unimpeded development of telecommunications infrastructure in the country,” Adebayo said.
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