Regulators Cannot Halt OTT Trend, Though Some May Try and Slow It

Communications policy makers around the world have been grappling with thorny regulatory issues raised by over the top apps for more than a decade, with mixed results, one might argue.

In some cases, where IP-based alternatives function as full substitutes for legacy carrier services, many regulators have simply brought the new IP alternatives into the existing regulatory framework.

That is the “if it walks like a duck, and quacks like a duck, it is a duck” approach. It is not without merit.

The tougher issues are instances where over the top apps do not actually represent full substitutes for carrier services, as they often require opt in, and therefore cannot replicate the “any to any” communications typical of common carrier services.

"WhatsApp is competing with us, not only with messaging but with voice, too," Telefonica chief operating officer Jose Maria Alvarez-Pallete has said.  "The premise should be, same services, same rules."

It is possible to agree with those views, but also argue that WhatsApp is not an instance of “same service” as carrier voice and messaging.

The financial implications for service providers in most emerging markets are clear, since voice continues to represent as much as 80 percent of total revenue, where in developed markets data services already have taken the lead.

In December 2015 WhatsApp was temporarily suspended after telecom interests complained of unfair regulatory treatment. Egypt and India are other markets where restrictive measures have been taken.

Egypt has shut down several internet calling apps, while India has outlawed zero rating of Internet apps.

In South Africa, MTN and Vodacom contend that services such as WhatsApp, Skype, Google Hangouts and the Viber messaging app cost the country billions of rand in tax revenue and compromise security because their encryption makes it easier for criminals to avoid government surveillance.

South Africa's telecom regulator has begun an investigation into the impact of over-the-top services, and Nigeria is considering regulating them.

Most likely could agree that full substitutes should be regulated the same. The key issue is that many voice and messaging apps are, in fact, not full functional substitutes, but based on community membership.

It arguably is a losing battle, even if some would argue the rate of decline matters quite a lot.
Strategy Analytics, for example, predicts a 42 percent drop in carrier messaging revenue between 2001 and 2021.

“The weakening role of operators in the messaging value chain suggests that it is only a matter of time before SMS services are dislodged from their current default position on smartphones, analysts at Analysys Mason argue.

In a similar manner, voice revenue continues to drop as a percent of total fixed network revenue, as well.


That will happen, even as messaging volume grows dramatically, because most of the growth will happen using the OTT apps.

And though emerging market revenue continues to grow, as new accounts are added, the growth rate is slipping.

Concern about competition or substitution of carrier services from OTT apps is understandable. But nothing has halted the erosion so far.
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