ALTON’s Telco Challenge and Solution to Nigeria’s OTT (WhatsApp, Facebook, etc) Issue

Nigerian government should do all necessary to avoid the temptation of trying to regulate the OTT solutions like Facebook, WhatsApp, etc despite the agitations from the industry players. The fact remains that no person can effectively stop the trend of innovation which is global.

“For example, the likes of YouTube, Facebook,Twitter, WhatsApp, Blackberry Messenger and many others are called over-the-top services that are not part of the core services for which operators are licensed.

“These over-the-top services have social, economic and security implications.“If they are not licensed, it means they are not regulated, and in that case, there is no limit to the scope of what they can do.“There is also no control over services and content they may provide,” ] Gbenga Adebayo, Chairman, Association of Telecommunications Operators of Nigeria (ALTON)] said.

According to Adebayo, nowadays people send messages mostly on WhatsApp and some other social media platforms than they do on the conventional SMS services.He noted that telecom operators were only licensed to supply voice, data and text messages for which they were charged on annual basis.“Over-the-top services don’t have those types of attraction, which I believe is a loss of revenue for both regulators and the country,’’ Adebayo said.

While one can understand the challenges these solutions pose to the business models of telcos, the fact remains that telcos still have options available if they want to work harder. For the very fact that users must have internet access to use WhatsApp and Facebook, telcos can move from pay-as-you-go (PAYG) billing to subscription billing. Once the user has paid the monthly subscription, it is largely irrelevant what he/she does with it within a bounded bandwidth/data transfer capacity.

But the telcos do not want to invest in research to invent new business models. And that is why they are complaining. They have the customer biometric data with all demographic data. The industry can create an equivalent of BVN [I would prefer they merge them] to pioneer subscription contract-based billing. So, at the beginning of every month, people have to pay for subscription to enjoy internet on their phones. They would categorize the products based on data transfer/bandwidth tiers. Indeed, the credit system that doesn’t exist in Nigeria can be built. Telcos are well positioned to do just that if they partner with banks.

The problems of OTT are not unique to Nigeria. It is global. Most global telcos which have moved to subscription-based billing are handling the challenges better.

OTT players, are unregulated; they don’t have to have a licence, they don’t have to produce local content, they don’t have to employ anybody in any country, and they don’t have to pay any taxes. Everyone loses with OTT

Aggregation Construct

ALTON’s thinking that “telecom regulators should no longer be neutral to technology regulation” is unfortunate. The fact is this: any telco that blocks YouTube, Facebook, WhatsApp and Twitter in its network would go out of business. And any regulator that tries to do that would not be effective doing it. It is a very complicated challenge that no one can solve in Nigeria through regulation because you are dealing with aggregators who are largely sequestered from your domains.

Twitter does not have any physical presence [I am aware, I must note] in Nigeria but its services are used there. How do you police them? If you push Facebook too much, it can simply abandon Nigeria – we do not have the scale of China to make these companies bend. I am not sure YouTube would change its business model because of Nigeria.

All Together

Telcos should invest in business model research and find ways to move from PAYG to subscription-based billing. That way, they would care less on what people do with their phones on their networks as the subscription must have covered those expenses. Regulating technology would be extremely dangerous. If we allow Telcos to succeed, the newspapers can ask for the same consideration since Facebook and Google are decimating their business models also. When you are dealing with aggregators, you rarely win because aggregators operate with near-zero marginal cost. Yes, their products are extremely valuable to the users even when they pay absolutely nothing [sure, I get it – privacy of data]. If you hit them hard, you would lose the soul of your business.

Comment from LinkedIn

This is a comment on my LinkedIn feed on this piece. You would like this further insight.

Interesting piece Prof. OTT’s are disrupting business model globally like you clearly stated. Evolving their business model could come in as a succor to the Telco operators, which comes with some further investment to really thrive. I also think the Telco operators in Nigeria are not really keen towards further innovations in generating new revenues streams. Preserving their existing revenue stream seems to be their best alternative by seeking for regulations over the OTT. Apparently you get better call quality using the OTT services than some of the providers network, still perplexed at this. The demand for more data to utilize the OTT services led some operators in other developed country to focus on their data services by improving the speed of connections, data plans, expanding the network reach and upgrading their Network to be LTE capable to grow the demands for data. Since Data usage will overtake voice calls at some point, there are specific number of calls or chat I can have per day or data I can consume per month. Innovation towards other value added services, especially content aggregations via the Telco with flexible plans and affordable data bundles packaged can complement for the revenue short falls on Voice.

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