Why Vodacom and MTN want Netflix and YouTube to pay them – MyBroadband

South Africa’s mobile network operators believe that companies like Netflix, Amazon (Prime Video), Disney, Google (YouTube), and Facebook should contribute towards building their infrastructure.

This is according to a paper that was recently released by the Association of Communications and Technology (ACT), an industry body whose members include Cell C, Liquid, MTN, Rain, Telkom, and Vodacom.

They argue that the video, audio, and messaging services these companies offer compete directly
against regulated service providers without any regulatory obligations.

The industry refers to these platforms and services as over-the-top (OTT) because they bypass traditional distribution channels by running on top of alternative infrastructure — the Internet.

The idea that OTT players should pay network operators to contribute towards the building and maintenance of the Internet infrastructure they rely on is not new.

Ten years ago, South Africa’s mobile operators were saying the exact same thing about WhatsApp.

WhatsApp had announced plans to roll out voice calling. It had already decimated operators’ SMS revenues, and now it was coming for their cash cow — voice.

Operators lobbied the government to impose regulations on services like WhatsApp and Skype. They argued that it was unfair that they had to comply with laws like RICA and have universal service obligations, while WhatsApp could do whatever it pleased.

At the time, operators weren’t too concerned about the growing online video content industry. These were helping to drive data traffic growth, offsetting carriers’ declining voice revenues.

Ultimately, South Africa did not impose restrictions on WhatsApp or other similar services.

With its impact on voice revenues already felt, operators have shifted focus to global video entertainment giants.

This new incarnation of the clash between operators and OTTs has been given a clever name — “Fair Share”. Carriers say OTTs must contribute their fair share to the infrastructure they benefit from.

“Fair share arrangements ensure that OTT providers contribute their fair portion to the costs of building, maintaining, and upgrading the infrastructure that supports their business,” ACT said in its paper.

“This helps balance the utilisation of resources and prevents network operators from shouldering the burden alone.”

ACT also argued that fair share arrangements incentivise network operators to invest in infrastructure.

“If network operators perceive that OTT providers are not contributing their fair share, it may discourage them from investing in the necessary infrastructure to support the growing demands of the OTT services,” it said.

“Fair compensation encourages continued investments in network development, leading to enhanced connectivity and better services for users.”

This debate is not unique to South Africa, nor did the “Fair Share” concept originate here. Carriers in the US, Europe, and elsewhere have all campaigned for fair share arrangements from OTTs.

Initial attempts by US carriers to get OTTs to pay them failed. Some carriers tried to implement a system where OTTs would pay for “priority traffic”, essentially creating a two-lane system for the Internet.

This raised immediate net neutrality concerns, as those who could not or would not pay the carriers’ price would be relegated to the slow lane.

Similar concerns surround the revived “Fair Share” concept. Would it not naturally happen that paying OTTs will get priority over companies who couldn’t pay the fees?

In response, operators have assured that Fair Share would fully comply with their net neutrality obligations.

ACT said that, ideally, fair share contributions will be determined through negotiations between operators and OTTs.

“Fair Share should encourage commercial arrangements being entered into between the network operators and OTT service providers,” ACT CEO Nomvuyiso Batyi said in response to a question from MyBroadband.

MyBroadband asked Vodacom, MTN, Cell C, Rain, and Telkom for their individual views on Fair Share. Vodacom provided feedback, and Telkom referred us to ACT.

“Mobile network operators (MNOs) have largely shouldered the infrastructure costs to provide mobile and fixed services to consumers and businesses, such as voice and messaging,” a Vodacom spokesperson told MyBroadband.

“Today, the bulk of the data usage on mobile networks is attributed to services not provided by the MNOs, yet the MNOs get little relief in terms of obligations,” they explained.

Vodacom said its obligations have also expanded over time.

“Network traffic has increased significantly over the past few years, and it has been driven by platform services,” the spokesperson said.

“In spite of the massive network investments made by telco operators, the pace of data demand has outstripped the feasible rate of investment within the sector.”

Vodacom said that some of those controlling the large platform services have not invested sufficiently on the ground where it matters most to South Africa.

“It is clear that the connectivity ecosystem requires a further injection of investment to ensure that we close the digital divide,” said Vodacom.

“We believe that both telco operators and OTTs have a valuable role to play, and government should ensure an enabling ICT infrastructure ecosystem is maintained, and ideally grown.”

Asked who would pay and what constitutes an OTT player, Vodacom referred to the ACT document, which describes them as platforms or services that deliver digital content, such as
video, audio, and messaging directly over the Internet.

“Critically, it is important to distinguish between global commercial platform service providers — so-called hyper-scalers — and much smaller local entities that nevertheless play a wide enabling role in our society.”

Companies like Netflix, Google, and Facebook might baulk at being criticised for not investing enough in infrastructure when they already pay for much of the international bandwidth to transmit their content to South Africa.

This is part of the reason prices of high-speed uncapped fibre services have become so cheap in South Africa — the cost of bandwidth for Internet service providers has dropped to nearly zero.

Asked about this, Vodacom said research shows that the greatest investment gap lies in the access network.

“MNOs are already overburdened with social obligations, license fees, spectrum fees, and universal service fund contributions,” Vodacom said.

“To close the digital divide, we need all hands on deck, and all stakeholders must play their part.”

Vodacom said OTTs should see this as an opportunity to make an ongoing, meaningful, and dependable contribution to the very society that enables their business.

“We support a level playing field and hope that as part of their social contract with South Africans, the OTTs will come to the table.”