The effects of Over the Top Technologies such as What’sApp and Skype have turned out to be a thorn in the flesh of telecommunications operators, who are beginning to feel jittery over revenue losses, writes Emma Okonji
When the first set of telecommunication operators were licensed in 2001, the second generation technology, known as 2G was in vogue. Hence, the operators had to invest in 2G technology for their network expansion in order to provide telecoms services to the growing subscriber number that was about 400,000 at that time.
But five years later, 3G technology became the in thing and operators had to top up their game to invest in 3G technology for network expansion.
From 3G, it moved to 3.5G and later to 4G Long Term Evolution (LTE) technology, and some countries are beginning to explore 5G technology, which is still in its trial stage.
However, some of the characteristics of the emerging technology in the telecoms sector are the speed of connectivity as well as the voice and image quality, which come sharper and clearer.
But in all of these, the bottom line is all about capital investment on the part of telecoms operators who continue to invest billions of naira in new technologies as they emerge.
Confident that they will have high returns on investments from investing in emerging technologies, telecoms operators had to reinvest their revenue for network expansion, even when the federal government was not prepared to establish telecoms infrastructure for the smooth takeoff of telecoms operations in the country.
Since technology is evolving, new technologies kept emerging and telecoms operators continued to invest and build future network for telecoms service delivery, with the hope that some day, they will begin to reap from their investments. But little did they realise that another form of technology called Over the Top Technologies (OTT) will emerge and this technology is beginning to give telecoms operators sleepless nights because it is eating deep into their revenue stream, and the telecoms regulator, the Nigerian Communications Commission (NCC) is finding it extremely difficult to regulate the OTT technology in Nigeria.
Telecoms operators are highly apprehensive that the emergence of OTT is one form of technology that may send them out of business if they do no proactively think of alternative means of revenue generation.
Issues with OTT
OTT refers to applications and services that are used over the internet or mobile data plan, rather than over the network of a service provider, in order to bypass traditional distribution and carrier fees.
OTT messaging is defined as instant messaging services provided by third parties as an alternative to text messaging services provided by a mobile network operator. An example is the Facebook-owned mobile application WhatsApp, that serves to replace text messaging on internet connected smartphones. Other providers of OTT messaging include Viber, WeChat, Skype, among others.
The third party service providers use open internet communication protocols to replace and sometimes enhance existing operator controlled services offered by mobile phone operators.
Consumers can access OTT content through internet-connected devices such as mobile phones, smart TVs, set-top boxes, among other devices.
OTT services are often offered free of charge and the service providers have nothing to lose because services are transmitted over the internet.
But the situation is posing serious concerns to traditional telecommunications operators like MTN, Globacom, Aitel, Etisalat, and ntel, who have over the years, spent huge sums of money in building their networks to provide telecoms services to subscribers.
Worried about the situation, the operators are collectively calling on the telecoms regulator, the NCC, to consider regulating the emerging technology, which they said is causing a lot of pains for them, since they are losing revenue. This is because most subscribers have stopped patronising the traditional service providers and have devised a new means of making voice calls and sending text messages through the OTT platform that is absolutely free of charge.
NCC’s position on OTT
The operators have argued that apart from interference that would be created in the telecoms space, such free service provision is also eating deep into their revenue generation, since they invested so much in telecoms infrastructure in the country and are still investing in the maintenance of such infrastructure and the staff that operates them.
But the Executive Vice Chairman of the NCC, Professor Umar Garba Danbatta, who spoke recently on the issue, noted that the countries of the world are deliberately treating the regulation of Over The Top applications with caution.
“The whole essence of this digital transformation and emerging technology that we so passionately talk about is to ensure more participation of citizens in governance,” Danbatta observed.
He said: “There are many other important things happening, the smart phones, the social networks and mobile applications. These have transformed the society in unprecedented manner that things will never ever be the same again. We are hoping that these transformation will be positive transformation. It’s our hope again that the disruption associated with these transformations will not completely destroy legacy, system, process among others.”
“Look at the impact of social media in ensuring free fair and credible elections. Many people hailed the last election in Nigeria as the most credible ever in the history and the role played by the social media cannot be ignored. When the history of elections in this country is eventually written, the role of social media in the last election will occupy an important portion,” Danbatta added.
Country Manager, Ericsson Nigeria, Johan Jemdahl, told THISDAY that
over the years new technologies have been evolving and it would be detrimental to regulate those technologies.
“You cannot stop technology evolution. I strongly believe that OTT services should not be regulated in any form. What the operators who feel threatened about the OTT services should do, is to look for alternative means to generate money, instead of fighting OTT operators. The regulator on the other hand, must not do anything that could stifle technology growth in the country.
Over the years, technologies have been evolving globally and any attempt to regulate these technologies in some countries of the world, would mean stifling the growth of technology in such countries,” Jemdahl said.
According to him, the traditional telecoms operators should be thinking about innovative ways to serve their customers better, without running out of business.
“We have over 180 countries in the world that are benefitting from emerging technologies like OTT, and it is therefore wrong for any country to regulate such technology, when the same technology is operated freely in other countries of the world. If OTT services could be offered in US and other parts of Europe, them I do not see any reason why it should not work in other countries like Nigeria. So regulating OTT services will definitely hinder development, and it must not be stopped,” Jemdahl said.
President, National Association of Telecoms Subscribers, Chief Deolu Ogunbanjo, told THISDAY that the matter has become highly controversial since subscribers are benefitting from the free service, even though the traditional operators are claiming to be losing revenue.
According to him, although it is difficult to regulate emerging technologies because they are global issues, but NCC must come up with measures that would address the pains of the operators, whom, he said, have invested so much in financial terms to build and expand telecoms networks across the country over the years.
No doubt, telecoms operators have invested huge sums of money in building world-class telecoms infrastructure, a responsibility that the federal government failed to address when it received the first set of revenue from telecoms operators as licence fees.
The operators had since 2001 continued to invest in telecoms infrastructure and a simple business sense demands that all investors must recoup their investments after some years of doing business. The Chief Executive Officer of MTN Nigeria, Mr. Ferdinard Moolman, while speaking on MTN’s investment in telecoms, said the company has contributed over N1.8 trillion to the Nigeria government by ways of telecoms investments, taxes, levies and sundry regulation payments since it commenced operations in Nigeria in 2001.
Part of the N1.8 trillion investment details, show that MTN has paid duties on equipment of over N87 billion; duties on stock of over N12 billion; VAT on revenue of over N299 billion; VAT on operating expenses of over N48 billion; employee tax of over N31 billion; company income tax of over N486 billion, among other taxes and investments, which include building of telecoms networks and expansion, totaling over N1.8 trillion, since it commenced operations in Nigeria in 2001.
Aside the N1.8 trillion investments, MTN also invested over N18 billion in MTN Foundation in executing corporate social responsibility (CSR) projects across 771 local governments in the country, in the areas of education, health and economic empowerment in the six geo-political zones of the country, and over N10 billion has been invested to date to support SIM card registration exercise in the country, thus helping to build a national identity database for Nigeria.
He said MTN would continue to empower its Nigerian workforce and that over 90 per cent of the current executive management staff of MTN Nigeria are Nigerians. Moolman said till date, MTN has employed over 500,000 Nigerians directly and indirectly in the MTN services and distribution chain.
Going by the huge and continuous investments in telecommunications infrastructure in the country by telecoms operators, it is likely that they may not be able to reap the benefits of those huge investments if telecoms operators are left unprotected from the imminent dangers posed by OTT technology and other emerging technologies.
If MTN alone has contributed over N1.8 trillion to the telecoms sector since 2001, it therefore shows that the five major telecoms operators put together must have contributed well over N8 trillion to the Nigerian economy, depending on the size of their networks and investments.
The National Bureau of Statistics (NBS), last year, released figures, which suggested said telecommunication sector is contributing so much to GDP.
According to NBS, the telecommunications sector contributed N1.580 trillion to GDP in the second quarter of 2016, a 9.8 per cent growth, which represents an increase of 1.0 per cent points relative to the previous quarter.
NBS that was the largest contribution to GDP made from this sector in the rebased period, which emphasises that growth in telecommunications has remained robust when compared to total GDP.
The last time that telecoms contribution to GDP was as high as 9 per cent, was in the second quarter of 2015, when it recorded 9.46 per cent growth, according to NBS.
The way forward
Since telecoms operators have invested heavily in network expansion over the years, there is need for government to protect their investments in such a way that they could make good returns on investments.
Also, given the huge sums of money contributed to the country’s GDP it becomes necessary for government to find ways of protecting the interest of telecoms operators to enable them invest more in the GDP of Nigeria and in telecoms infrastructure development generally.