What’s threatening Nigeria’s $38bn telecoms investments?

The emergence of Over-The-Top (OTT) services via call applications such as Whatsapp, Viber, Netflix, Skype, among others have empowered telecoms subscribers all over the world. The OTT, which ride majorly on GSM service providers has really reinforced the principle of the world becoming a global village. However, while telecoms subscribers continue to have better connection […]

The emergence of Over-The-Top (OTT) services via call applications such as Whatsapp, Viber, Netflix, Skype, among others have empowered telecoms subscribers all over the world. The OTT, which ride majorly on GSM service providers has really reinforced the principle of the world becoming a global village. However, while telecoms subscribers continue to have better connection and networking over OTT, no doubt that the voice revenue of the GSM service providers upon which various OTT platforms run are on the decline. This constitutes a threat to over $38 billion investments in the nation’s telecoms sector.

OTT services are services carried over the networks, delivering value to customers, but without any carrier service provider being involved in planning, selling, provisioning, or servicing them, thereby implying that traditional telecoms cannot directly earn revenue from such services. The service provider whose network services are being utilized for the OTT service has no control, no rights, no responsibilities and no claim on the latter.

This is because users are free to make use of the Internet the way they want. The network carrier only carries the IP packets from source to destination. They can be aware of the packets and their contents, but can do nothing much about it. The coming of smartphones have revolutionized OTT services, namely voice and video services over wireless networks, since these machines have multimedia and advanced communication functions.

OTT has also been a vector in the proliferation of Internet TV, also known as IPTV, which is the legal distribution of videos and television content over the Internet. These video OTT services are obtained free online, from YouTube for instance and from other sites where more sustained and constant streaming video content are offered. Telecommunications operators have recently threatened to bar OTT services from their networks over lost of revenue.

MTN Nigeria CEO, Ferdi Moolman is quoted as saying that his company’s local business is being adversely impacted by Whatsapp and other non-tax paying products including Viber, Skype among others which deplete its revenues.  He warned that the activities of these operators threaten the sustainability of the telecoms industry in Nigeria.

According to a report by Informa on World Cellular Revenue Forecasts for 2018, global annual SMS revenues will fall from US$120 billion in 2013 to US$96.7 billion by 2018, due to increasing adoption and use of Over-The-Top (OTT) messaging applications. Another research company, Spirit DSP, in its own report tagged “The Future of Voice” also studied the impact of OTT VoIP (Voice over Internet Protocol) applications on voice revenue, declaring that the overall global telco voice revenues including fixed subscriptions will decline from $970.4 billion in 2012 to $799.6 billion by 2020, at a CAGR of 2.4%. It is also estimated that, as a result of VoIP, by 2020 the telecom industry worldwide will see a loss of revenues approximately worth $479billion which accounts for 6.9% of the total revenue from voice.

Several views are that these forecasts, when they happen, could give tremendous economic power to the final consumer. However, they may not do so to traditional telecom operators and the GDP of many tech nations. In the same vein, Ovum Research stated in a report recently that several billion dollar loss would accrue over a period of six years – between 2012 and 2018 – from Nigerian customers using the OTT voice applications.

There are suggested strategies for Sustainable growth of traditional telephony in the era of OTT Services. For example, according to Nigeria Communications Commission’s(NCC) report on provision of OTT services, providers of traditional telephony need to think of and implement business models that are agile and adaptable to compete favorably with these new services in order to retain their market. Reports have it that  the OTT invasion is occurring on four distinct battlegrounds, and telecoms operators that have a variety of strategic weapons stand the best chance of gaining a foothold.

 Operators face the risk of eroding revenues and profitability but still have the opportunity to influence consumer behaviours, defend the perception that circuit-switched voice is superior in quality, and slow which would invariably help slow the global impact of VoIP.  They Introduce “smart” plans as is the case with matured markets, operators create integrated voice and data bundles and link them to devices. Create differentiated quality positioning. Operators have the ability to shape the quality perception of traditional voice networks considering the challenges in delivering quality VOIP calls.

It is said some operators around the world are beginning to, either launch in-house OTT services or partner with OTT providers with the aim of adapting the services to the operators within the competitive text. There is no reason to assume that SMS will disappear. Operators may consider  leveraging on defensive SMS plans. This implies that operators can offer tiered SMS bundles,  which can help slow down the impact these other OTT messaging services have on SMS services.

Also  emphasize enterprise messaging, which is  changing the paradigm in subscriber identity module (SMI) connectivity, and  move to M2M, where operators can leverage on third parties by opening up network applications. In Namibia and South Africa dominant and smaller operators adopted bundling as part of their pricing strategies – MTN and Cell C in South Africa and MTC and TN Mobile in Namibia. According to NCC’s report on of provision of OTT services, net neutrality or Internet neutrality is a regulatory concept which eliminates any type of discrimination in transmission and access of content on the Internet.

It means all end users are able to access content, applications and services of their choice at the same level of service quality, Internet speed and price with no priority or degradation based on the type of content, applications or services. This will protect all innovators and consumers and preserve the Internet’s role as a core of free expression and democratic principles. The basic principle of net neutrality proposes that networks do not discriminate between different data packets ensuring that innovators or content developers do not need to ask permission for new projects, making internet a collection of a large amount of information, analysis, opinions and services with no sole content provider or regulator.

However, while some argue that strong legislation is required to ensure that internet service providers do not restrict or filter internet traffic that pass through their network as Net neutrality lends competitiveness to the market, with users getting more options to choose from; other argue against Net neutrality suggesting that it can be used as a tool for internet censorship or invasion of privacy when it is in wrong hands. It is important to note that while there are presently no concrete laws or regulations for the enforcement of Net neutrality, Internet access is generally unrestricted across the world except in a few countries where their governments impose specific restrictions in such jurisdictions.

 

Nwonah wrote in from Lagos.