NOMVUYISO BATYI: Act now on fair share or risk SA’s digital future

The sustainability of SA’s telecommunication sector is under threat if we do not begin to grapple with the vexing issue of the impact of over-the-top (OTT) services on the country’s digital infrastructure, which is critical for the digital economy.

OTT providers continue to demand quality network infrastructure while network operators — faced with declining revenues as consumers move away from traditional services to digital substitutes like video calling and instant messaging — will be hard-pressed to maintain continued investments.

The benefits of the digital economy will be delayed in SA if investment in digital infrastructure is not sustained. For example, one estimate is that the digital economy will account for 15%-20% of SA’s GDP by next year, up from 8%-10% in 2020.

But that sustained growth will not happen without all key players of the digital economy becoming accountable for their fair share of the costs of the enabling infrastructure. Networks are facing unprecedented pressure thanks to the exponential growth in data consumption primarily driven by OTT services such as Microsoft Teams, Netflix, Showmax, YouTube, Facebook, WhatsApp and a plethora of other services.

Fair share arrangements ensure that OTT providers contribute their fair share to the costs of building, maintaining and upgrading the infrastructure that supports their business. This is why the Association of Comms and Technology (ACT) has published a white paper, Exploring Policy, Commercial, Competition and Socio-Economic Perspectives in SA’s Over-The-Top (OTT) and Telco Ecosystem 2024, to help inform the conversation and ideally move the issue towards resolution.

The scale of the challenge is significant. According to studies cited in our research, just six OTT operators account for 55% of global internet traffic. A study in South Korea shows that Google and Netflix’s mobile video streaming services alone accounted for 27.1% and 7.2% respectively of the total mobile network traffic. Another study, the Ericsson Mobility Report for 2024, shows mobile data traffic in 2029 is expected to be almost seven times greater than in 2023, with video making up 80% of this.

ACT argues that the “fair share” principle must be applied in our market given the infrastructure deficit. This principle attempts to address the imbalance between the resources used by OTT providers and the network operators that enable OTT providers to deliver their services.

The “fair share” argument stands on three legs. The first leg says OTT providers should contribute proportionately to the costs of building, maintaining and upgrading the infrastructure they need to enable their businesses.

The second leg says we need to have a sustainable digital ecosystem to create a valuable and viable digital economy. This benefits all stakeholders and fosters a healthier marketplace. Network operators need OTT players to contribute to costs to continue investing in network expansion and capacity.

There are proposals for a shared fund, isolated from the competitive dynamics between the network operators, that merits proper consideration. While this may not be the exact proposal, network operators in most countries, including SA, are currently obliged to contribute a percentage of their revenue to the Universal Service & Access Fund (USAF). Its purpose is to finance interventions to increase access to telecommunications services and to bridge the digital divide.

The final argument is that for our ecosystem to continue to grow, there have to be continued investment incentives. Fair compensation goes hand in hand with fair share and helps sustain the investment case for digital infrastructure necessary for a robust digital ecosystem.

But we also acknowledge that these debates are nuanced and complex. Some OTT providers argue that they should be entitled to revenue share from network operators due to the volume of data revenue they generate for the operators. They also argue that others like Google can point to their investment in undersea cable infrastructure, such as the Equiano cable that services SA, as evidence of their actual investment in the digital backbone.

We are also cognisant of the argument that some proposed “fair share” usage calculations might create market entry and viability barriers for smaller OTT players. This needs to be considered. We believe this can be resolved with the right approach. We propose a collaborative approach and feel the most favourable solution would be a commercially negotiated arrangement between the parties.

ACT has initiated a discussion to establish a structured approach to address these challenges, advocating for a framework that ensures fair competition but encourages innovation and safeguards the interests of all stakeholders in the evolving digital landscape. SA is not alone in grappling with this issue. We can learn from the approaches implemented or being assessed elsewhere.

The South Korean framework is often cited as a pragmatic precedent. Introduced in 2018 as the first regulatory attempt to deal with the “fair share” debate, South Korea's rules oblige heavy traffic generators to compensate carriers based on usage and traffic imbalance ratios.

Australia is considering a mix of regulatory approaches, including several that we have mentioned here. The EU is considering a digital levy paid into a national or European fund for infrastructure investment. Direct payments between OTT providers and network operators through negotiated agreements are also on the table.

Meanwhile, the timing is opportune for SA to get to grips with this properly. Proposed amendments to the Electronic Communications Act and the department of communications' draft White Paper on Audio and Audiovisual Media Services, which propose licensing requirements for OTT operators, provide vehicles for addressing these challenges.

We believe SA needs a flexible, non-disruptive and co-ordinated approach to building an information society. This includes clear regulations, innovative solutions and close collaboration between policymakers, regulators, OTT providers and network operators to foster a thriving and competitive ICT sector in SA.

ACT’s recommendation for fair share arrangements offers a balanced solution. It would encourage collaboration and co-operation between network operators and OTT providers to ensure a sustainable digital ecosystem where all participants contribute proportionally to the infrastructure they use.

A shared responsibility regime is crucial for finding common ground between network operators and OTT providers. This approach would ensure fair compensation for infrastructure costs while maintaining affordable access for end users.

• Batyi is CEO of the Association of Comms and Technology.