Why OTT Blocking Related Policy will turn out to be Achilles Heel for Nigeria’s Telecom Regulator

The policy division within the Nigerian Communications Commission (NCC) has released an overview of the provision of Over the Top (OTT) services days after a telco made public its intention to block voice and video calls on WhatsApp, Facebook and Skype.

The report touches on how access to 3G and 4G networks, which offer mobile broadband and high-speed IP data networks, has further encouraged the uptake and growth of new modes of communication such as OTT services.

This, in turn, enables the provision of services such as live streaming and voice over internet protocol (VoIP). However, telcos in Nigeria claim such services eat into the revenue they generate through international calls because of the country’s large expatriate and diaspora population.

Also, the services are prepaid, unlike say in  U.S., where customers sign up for monthly services which make it materially irrelevant on the services they use as they are contracted to pay monthly. Telcos in U.S. may not face the same challenges on OTT as in Nigeria because of their pricing mechanism which may not be easily adopted in Nigeria owing to poor credit system infrastructure. It remains a challenge to evaluate credit worthiness of people, in Nigeria, and without a central credit rating system, monthly plan may not be optimal for telcos.

The report notes that while VoIP or internet telephony is cheap and offers many features previously unavailable with telephones, the innovation comes at a price for regulators as the “nature of the technology creates unique (and previously unheard of) regulatory obstacles” as well as being susceptible to security glitches.

However, rather than kick against the OTT services, the report makes recommends to the NCC on how to address OTT-related issues, and states there is a need for telcos “to innovate and explore more efficient business models that would enable them to compete favourably with OTT service providers.”

One of such models could require network providers to take advantage of the IP technology in the design of their upgrades, it says, adding that the NCC should conduct a stakeholders’ consultative forum on OTTs to determine if regulation is required for such services.

It also recommends that the NCC review its guidelines on the provision of International Gateway and Voice over Internet Service, and ensure that it does not stifle innovation since internet penetration is still evolving, access speeds are still low and there is limited coverage of high-speed broadband in Nigeria.

Though the regulation of VoIP services remains a topical issue globally, particularly as it is seen to be a threat to the continuous existence of telcos and their operations, traditional network operators are arguing that they do not have an incentive to continue to maintain or upgrade their platforms upon which most OTT services are hosted unless there is a revenue flow to them.

Nigeria has the largest mobile market in Africa in terms of subscriptions with over 150 million mobile subscriptions at end-2Q16 up from about 148 million a year earlier, according to Ovum in its Africa Market Outlook 2016.

Telcos can offer pre-paid monthly plan to Nigerians and this problem will be solved. However, in a relatively poor country, there are few people who can afford to pay one month ahead. So, this piecemeal of N200 or buy any amount when you want remains a tested business model for telcos that works. Bu where they can collect that payment ahead, this problem of OTT will be solved, provided the users do not turn personal phones into business centers where everyone in a community will depend on one phone line.

If Nigerian telecom regulator does not manage this well, it could be the Achilles heel. First, telcos will struggle and some will fail owing to lack of revenue. Second, if they adhere to what telcos want, consumers will see lesser innovation. They have to find a middle ground to balance innovation and sustainability of the industry.