South Africa’s OTT Services’ Regulations Could Hurt Facebook Inc (NASDAQ:FB) And Twitter Inc (NYSE:TWTR)


On Tuesday, South Africa’s Parliamentary Portfolio Committee on Telecommunications and Postal Services will be discussing possible regulation of over-the-top (OTT) services.

Most South Africans who purchase a smartphone expect to be able to use services such as Facebook Inc (NASDAQ:FB), Twitter Inc (NYSE:TWTR) and Whatsapp on their gadgets. Currently with the continued growth of mobile users of these services and increasingly affecting the profit margins of network providers such as MTN and Vodacom, there have been calls for these services to be regulated.

These third-party applications are grouped into what is termed over-the-top (OTT) services. They rely on the network the user is connected to but are provided by other organizations and usually are free to use except for normal data usage charges. The leading South African network providers are losing revenue to OTT services and are very much concerned.

Executive Director at Research ICT Africa, Dr Alison Gillwald says the launch of broadband technologies; carriers and gadgets such as smartphones have resulted in low cost and free services that have adversely affected the conventionally voice and SMS business models. She added while certain network operators such as Cell C have accepted this development and expressed support other operators are depending too much on voice revenue in spite of increasing data revenue.

South African mobile network operators are not able to develop original content or have partnered with the platforms popular on the Internet. They have been making effort via industry associations such as the International Telecommunications Union for OTT services to be compelled to pay mobile operators.

As per mobile operators, these services lack regulation, do not have quality assurance standards and make no contribution to the local economy in terms of taxes. The reality is mobile operators are losing revenue and profits. Voice and messaging consume almost no data. However, certain services such as video consume a lot of data. Mobile networks have been more than happy to make money by charging more for data intensive services. As voice and messaging are also using up data now, it is affecting the revenue of the mobile network operators.