WhatsApp regulation in SA – what Vodacom and MTN really want

The war between network operators and services like WhatsApp and Skype is nothing new, but recent comments from MTN SA CEO Mteto Nyathi catapulted the conflict into the headlines.

This resulted in a controversial showdown before a Parliamentary Committee, where networks, tech companies, Icasa, and local industry representatives had it out over the issue.

Vodacom and MTN called for over-the-top (OTT) services to be regulated in South Africa to ensure a “level playing field”.

Arguing for the other side was everyone else, including Cell C, which said that such regulation would be a bad idea.

Taxation, legal interception, and the protection of personal information

Vodacom and MTN have a problem with the fact that they are subject to regulations as communications service providers in South Africa, while OTT operators are not.

MTN also took issue with the fact that services like WhatsApp do not pay taxes in South Africa.

Icasa presented the table below to highlight the regulatory discrepancies between operators and OTT services.

Policy and regulatory implications: Icasa
Regulations Licensed providers OTT providers
Licensing Service licence required No service licence
Quality of Service Subject to QoS standards No QoS standards
Interconnection Mandated in terms of the law No interconnection requirements
Universal Service Subject to obligations Not subject to obligations
Consumer protection Subject to CPA and other relevant laws Not subject to the CPA
Cyber security Strict data protection and privacy requirements for users Practised on a limited and generally-voluntary basis
Taxation Subject to tax regime Not subject to tax regime
Investment in Infrastructure Increased investment in network on an annual basis (>R10bn per yer over the past 5 years) No investment in infrastructure
Geographic limitation Only serve customers within the regulated jurisdiction Serve any user globally
Content regulation National content regulation (must carry regulation, local quotas) No content regulation or carriage requirements of public channels

What Vodacom and MTN want

Vodacom and MTN’s suggestion that they are operating at a disadvantage to the likes of WhatsApp and Skype can be gauged based on Icasa’s regulation and policy table above.

1. Licensing: “No service licence”

While true, you could argue that the lack of regulation on the Internet enables innovation.

2. Quality of Service: “No QoS requirements”

Although true that OTTs are not subject to Icasa’s QoS standards, you could argue that network operators in South Africa aren’t really subject to them either as Icasa has struggled to enforce them.

3. Interconnection: “No interconnection requirements”

It is partly true that there are no regulations which deal with WhatsApp calls and messages being routed to Skype, or conventional networks.

However, voice over IP providers do have agreements in place that let them make and receive calls to and from normal phone lines.

4. Universal service: “Not subject to obligations”

True, OTT players do not have any universal service obligations because they are not licensed operators.

5. Consumer protection: “Not subject to CPA”

True. However, many online services already comply with European consumer legislation – which is often more onerous than SA’s.

Being held to account before our National Consumer Commission and Tribunal also seems to be a moot point at this stage, as new rulings haven’t been published since 2014.

6. Cyber security: “Practised on a limited and generally voluntary basis”

True, and yet South Africa’s mobile operators suffer security breaches just like anyone else.

Some examples:

7. Taxation: “Not subject to national tax regime”

Not entirely true. Many OTT players don’t pay local company taxes. This is not unique to OTTs, though, as many overseas companies do business in South Africa without paying tax.

However, online services providers are supposed to pay VAT on the digital goods and services they sell in SA.

8. Investment in infrastructure: “No investment in infrastructure”

False. Companies like Facebook, Google, Microsoft, and Netflix have invested in major hosting and content delivery infrastructure.

This includes deploying servers in South African data centres.

9. Geographic limitation: “Serve any user globally”

True, but irrelevant. Network infrastructure and access providers can only serve clients where they have infrastructure.

10. Content regulation: “No content regulation or carriage requirement of public channels”

False and true.

Apple did not sell games for iPhone and iPad in South Africa until a ratings agreement with the Film and Publications Board had been established. Steam now displays FPB ratings on the games it sells.

There is no content regulation on WhatsApp, Facebook, or Skype, but the same is true of SMS and normal telephone calls.

It is also true that video services like YouTube, Netflix, and ShowMax are not obligated to carry SABC 1, 2, and 3.

Net neutrality

Trying to regulate OTT services and conventional networks in the same way is impractical, as WhatsApp and Skype are not network infrastructure or access providers.

For OTT regulations to be fair, all similar services will have to be regulated in the same way. You can’t charge WhatsApp licensing or universal access fees because it is prominent and hurting operator revenues.

As regulatory expert Dominic Cull pointed out at the Parliamentary hearings, this is really a net neutrality issue. “Mobile networks don’t complain about YouTube which consumes a lot of data,” he said.

Net neutrality also brings up the topic of zero-rating certain traffic.

For example, MTN gives subscribers free Twitter access, but charges for access to other social networks. It also zero-rates data for VU.

Cell C has packages and promotions that offer preferential data rates for WhatsApp, but not for other messaging services.

Telkom offers a service called TI Entertainment, which gives uncapped access to ShowMax, DStv’s on-demand video services, and iTunes for R99 per month.

These deals may be good for consumers, but they run contrary to the principles of net neutrality.

If operators should not be able to ask for regulation on OTT providers based on this principle, should they still be allowed to advantage some applications over others?

Legal intercept – Rica

Another issue not covered in Icasa’s table is the legal intercept regulations, also known as Rica.

Under these regulations, operators must have systems in place that let the government intercept communications on their networks – provided an interception order is served.

South Africa networks must comply with, while WhatsApp doesn’t have to, according to MTN and Vodacom.

French operator Orange, which runs its own OTT service called Libon, has a straightforward view on the matter:

“It is not about the battle between OTT and operators. It’s a question of sovereignty. Governments must have access to this information for the security of its citizens,” said Orange.

Cell C provided a slightly different perspective:

“These are difficult issues to be grappled with and if it is decided to regulate these aspects, then a ‘light touch’ approach should be adopted.‎”

WhatsApp does not pay tax in South Africa: MTN

Vodacom and MTN do not want to become “dumb pipes” for WhatsApp

Why MTN hates WhatsApp

WhatsApp must be investigated – MTN

You must pay for premium WhatsApp, Skype services: MTN

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WhatsApp regulation in SA – what Vodacom and MTN really want