Operators around the world are grappling with the idea of over-the-top (OTT) players. The idea that open services are making revenue from our customers using our exceptionally expensive infrastructure has many operators in a flat spin.
Boardrooms across the world – and make no mistake SA is no exception – are talking about how they will “deal” with services like WhatsApp and Skype. And many of them, most recently our own competitors, are trying to take pot shots at these players drawing rings around what is and isn’t acceptable for players like WhatsApp to offer its customers.
Their boardrooms are filled with lobbyists discussing pricing for services like VoIP – basically voice services over data connections like Skype. Vodacom and MTN, for example, have reserved the right to charge R25 per MB for calls over data – and MTN’s data packages also carry the stipulation that you “may not” use its data to carry voice calls. To put this into perspective, Cell C charges anything from 1c to 15c per MB for in-bundle data.
Even Telkom is talking about regulating these players, making media statements about implementing an interconnection fee for them, using sweeping statements like “regulatory and policy interventions must deal with the risks associated with OTT providers”.
While none of these players are charging their customers for OTT services yet, it seems likely that at some point they will, given the statements they have recently made in the media using phrases like “its not fair” and “free riders” to describe the over-the-top players.
The truth is, I am not surprised by their reaction. OTT players represent competition to all our voice revenues. And we have seen how dominant players respond to the idea of competition.
The threat of OTT players has been around for years, but its only really now that our landscape is making it easier for these players to make headway in the market, and that is making all telecoms players take note.
It’s almost reminiscent of the Mobile Termination Rate saga, where the larger players get to protect their revenues and smaller players have had to struggle to compete and bring the cost to communicate down.
The real difference between Termination Rates and OTT services is that the OTT players will continue to do what they do, with or without the “consent” of mobile operators. This is something that Cell C understands, and rather than shutting the doors with a R25/MB ultimatum, we are trying to find ways to work with OTT players and make the market a fair play environment for them to compete in.
That is why, despite the lack of regulatory support that we had hoped the Independent Communications Authority of SA would offer us, we are providing access to WhatsApp on a zero-rated service, albeit on a promotional basis. That is why, from last week, Cell C customers on all contracts and selected prepaid tariffs, will be able to send and receive pictures, voice messages, videos and text messages via WhatsApp absolutely free of charge without incurring any data charges.
This is an unprecedented offer in the South African market, because while WhatsApp is a free service, it still uses data as an access point – that means for most customers, quite a chunk of their data bills will be used on WhatsApp. Cell C is taking out the data charge, meaning that customers will be able to communicate – for free – with their loved ones.
Because we believe in innovation, we believe in giving the best value to the consumer. We believe that it’s not fair to charge exorbitant rates to OTT players, or even our customers, when they themselves offer their services for free. In fact, the services offered by players like WhatsApp are adding value to our customers. Our competitors, it seems, are concerned only about their bottom lines.
Globally, WhatsApp message volumes overtook SMS volumes two years ago. In South Africa, there are 15 million smartphones, and that figure grows exponentially on a monthly basis.
Customers will always choose the service that works best for them. Yes voice revenues are declining but that has less to do with people calling less and more to do with prices coming down. It also has to do with how people are using services. Voice has become an “application within an application” and we as mobile players need to innovate around that rather than act like children in a playpen.
The idea that “this infrastructure is mine and you can’t use it like that” is no longer a viable game to be playing. That our competitors are so accustomed to getting their way that when anything remotely innovative comes along they become peevish – is simply another sign of failed competition.
WhatsApp is just the start for Cell C, we have more to offer OTT providers than many might admit, and we are willing to find ways of making it fair for all players. We launched free WhatsApp last week and for the very first time in SA, consumers can communicate with their loved ones for free with no hidden costs. Maybe we are wrong, but let’s see what South Africa has to say.
A shortened version of this column was first published in the Sunday Times