The document discusses the impact of Over the Top (OTT) services on the Information and Communications Technology (ICT) sector and its stakeholders. It notes that OTT services are disruptive innovations that provide the same products and services more affordably, making them available to more people. However, this disrupts traditional telecom operators' business models and revenues. The document examines issues around net neutrality, changing regulations, security and privacy concerns, and new business strategies that operators and regulators can adopt in response to OTT services. Case studies from India are presented to illustrate some challenges and responses.

1. Impact of
Over the Top (OTT)
Services on the
ICT Sector and its
Stakeholders
www.sacomforum.org.za
Connect to Connect Summit
19th to 21st July 2016
20 July 2016
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2. Innovation is Disruptive!
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3. Disruption is Happening on a Global Scale
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4. Converging ICT Ecosystem
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One Cloud, One Pipe, Multiple Devices, Multimedia Content
Source: http://www.cmswire.com/cms/web-engagement/enterprise-content-management-for-
converging-media-channels-007804.php#null

5. OTTs are Disruptive Innovations
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OTT technologies, products and
services are “Disruptive Innovations”
which makes the same product more
affordable and accessible so that a
far larger population can afford it,
want it, and be able to use it.
Disruptive Innovations are a natural
and highly desirable consequence of
technological evolution
They present new entrants and
incumbents with new opportunities
to create new products and services,
and enable improvements and cost
reductions of existing products and
services thereby driving user
demand and satisfaction upwards
They encourage traditional operators
and service providers to leave their
comfort zones of past successes, to
become highly competitive
innovators of new products and
services

6. Changing Market Conditions
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“Incumbent” telecommunications operators that
offer services such as fixed and mobile
telephony, broadband and pay TV services,
among others, are being utilised by online
content service providers, specifically those
known as over-the-top (OTT) applications,
services and content.
A fundamental characteristic of OTTs is that
the Internet Service Provider (ISP) does not
profit nor is involved in the distribution of the
OTT applications, services and content.
OTT suppliers, which need the ISP
infrastructure to reach the user, offer products
that compete with the services offered by the
ISPs (voice, instant messaging, online TV). In
this regard, and paradoxically, the broadband
that incumbent operators supply acts as a
platform for the development of these new
businesses that represent the challenge faced
by incumbent operators.
At the same time, the OTTs generate a
growing flow of traffic and an increasing
demand for broadband, which translates into
a need for investment in the network.
Shift to data from saturated voice markets
accelerated by the introduction of low-end smart
phones, declining revenue from traditional
services.
Multiple new business models emerging
from data competition to retain and attract
new customers including zero-rated
services, social media bundles, blended
bundles, build-your-own-bundle

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A Growing Range of OTT Services
TV and Video Music Communication
Productivity Technology Community

8. Disruptive
Innovation:
High Level
Dilemma
OTTs present a disruptive impact on VOICE and
SMS revenues for Network Operators and thus
potentially on investment for 4G network roll
out. OTTs reduce incumbent operators’
incentives to invest in the deployment of
networks that ensure access to the speeds
necessary for a good OTT experience.
OTT provide a growing source of DATA
revenues of Network Operators. However it is
not clear that the increase in data revenues of
the MNOs is currently sufficient to
compensate for this impact
Network Operators are licensed and governed
under the laws and licensing regime of the
country in which they are providing the
network - which do not evenly apply to OTTs
There is concern that
policy and regulations have
not kept pace with
technological
developments, leading to a
situation in which new
disruptive technologies
enjoy favour through much
less onerous regulatory
provisions compared to
the still vital legacy
networks and services
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9. Legal and Regulatory Differences
Operators
• Unregulated, global and
“seasonal”
• Mostly centred around use
of consumer data (service
not “free‟)
• Usually no license needed;
exposed to minimal
obligations
• No sector-specific taxes,
freedom to structure
business primarily for tax
planning (Revenue
recognised outside of
jurisdiction)
• Uncertain enforcement
• Minimal restrictions on data
location, retention and LI
• No specific enforcement
outside major countries
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OTT`s
• Regulated, licenced, high-
CAPEX, long-term and
nationally-based
• Focus on connectivity /
services,
• Customer data for user
enrichment
• Multiple licenses including
obligations on rollout,
interconnection and CSR
• Sector-specific fees e.g.
spectrum, USO, licence
and general corporate
taxes
• Horizontal laws; sector
obligations • Rules on data
localisation, retention,
disaster recovery and LI
• Customer-centric
obligations e.g.
transparency, contract
info, QoS, SMP
Consumer
Protection
Privacy &
Security
Taxation
Licensing
Business
model
Source: https://www.itu.int/en/ITU-D/Regional-Presence/AsiaPacific/Documents/Events/2015/Dec-
OTT/Presentations/01_Session02_Jonathan_Yap_ITU-ASEAN%20Forum%20on%20OTT-SSSR%20FNL.pdf ITU -ASEAN Forum on OTTs

10. Security and Privacy Concerns wrt OTTs
• Agreements which allow the NSA to collect data directly from
the servers of nine of the biggest internet companies,
including Google, Facebook, Skype, Yahoo!
• NSA carries out Computer Network Exploitation, placing
malware in individual computers to surveil users
• Communications Metadata being collected
• Surveillance being used for economic and political advantage:
economic espionage.
MEANWHILE:
In September 2015, the U.S. and China have agreed that neither
government would support or conduct cyber-enabled theft of
intellectual property
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11. In line with these
evolving trends, are
new rules required
for the healthy
development of the
whole ecosystem?
Options:
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• Net neutrality
standards mean that
carriers should treat all
data equally and not
impose differential
treatment or charges
on different kinds of
data.
Net
Neutrality
• massive and high-
frequency traffic to be
managed.
• Premium services of
enhanced Quality-of-
Service (QoS) to be made
available for service
requiring higher
performance at higher
prices
Managed
Services

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Net Neutrality
• The principle that Internet service providers (ISPs) should enable access to all
content and applications regardless of the source, and without favouring or
blocking particular products or websites.
• In principle, this means that all legal electronic communications content
delivered over the internet must be treated equally, without favour of one
type, or a specific company’s product, over any other. ISPs may not charge
different per unit delivery rates for premium, high demand, or operator/ISP
owned content
• It also implies that ISPs may not block, throttle, or charge more for, or
inhibit any legal content including OTT messaging, voice or video content,
hence the conflation of OTT issues with Net Neutrality
• The Net Neutrality principles have generally been supported by users and
content providers who do not have commercial interests in ISPs
• They have tended to be resisted by operators and ISPs who fear abuse of
their networks leading to network congestion and/or unfair dominance of
limited broadband networks by well-resourced content providers.

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Net Neutrality: The South African debate
• On 27th March 2014, ICASA gazetted a Notice of Public Inquiry into the State of
Competition in the Information and Communications Technology Sector of
South Africa
• One of the key components of this inquiry was Net Neutrality, treated by ICASA
as a competition issue
• Most SACF members viewed the Net Neutrality issue as premature for South
Africa: the national broadband capacity was too low to accommodate Net
Neutrality: the freedom to charge higher prices for premium content would
generate the revenues that network operators needed for network expansion
• As national broadband networks progress to wide coverage high speed high
capacity networks, the argument against Net Neutrality would dissipate: all
such content could then be accommodated equally on such networks: the
present expansion of FTTH networks in South Africa’s wealthier urban enclaves
is an example of this
• While ICASA has not yet arrived at a firm conclusion and regulation from its
inquiry, the Authority has noted the trends in most developed, and a growing
number of developing economies, that favour Net Neutrality as a policy and
regulatory framework

14. How should Operators and
Regulators respond?
OTTs:
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How do Operators and Regulators respond?
Ban or strongly regulate: A few countries,
mostly developing, have shielded their
operators through national regulations (e.g.
China, Middle East). No outright bans, but
breathing room for operators to react;
Link OTT to Net Neutrality issues:
FCC linked OTT to net neutrality debates:
“a level playing field where consumers can
make their own choices about what
applications and services to use, and
where consumers are free to decide what
content they want to access, create, or
share with others.”
“Bundling strategies” – Offer bundled (fixed
and mobile telephony, Internet and TV)
services. However, this strategy is
questionable from the point of view of
competition policy. Furthermore, the
purchase of packages tends to be accessible
only by those demand segments with high
purchasing power, which are very sensitive to
the quality of services, rendering it necessary
that all of the products included in the bundle
be competitive in terms of quality.
Development of proprietary applications
that compete directly with the OTTs.

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New Business Models & Strategies
1. Choose your platform. An understanding of the factors driving OTT voice, messaging,
media, and cloud is key to choosing the appropriate business models, positioning and
determining whether your competitive posture is offensive or defensive. Above all, be
clear about where, when, how, and with whom you are going to compete.
2. Redefine value propositions and business models. The OTT surge will force a rethink on
value propositions. While OTT services are evolving fast, consumer behaviors are shifting
faster, so operators will have to create business models that are both agile and
adaptable, and whether partnering will be the best way to do it.
3. Create new platforms and approaches. The mantra of the new digital era is customer
experience. Delivering a memorable one will require new technology solutions, of
course, but more important will be a deeper integration of network, IT, product and
service development, and mobile, fixed, and media assets.
4. Rethink organizational approaches. OTT media and video services compel more creative
approaches to organizational structures, skills, systems, and mindsets.
5. Remain flexible and ready to adjust. Understand changes in consumer behavior and
creatively adjust strategies accordingly.
6. There cannot be one OTT strategy. Indeed, each platform-voice, messaging, media, and
cloud—will demand a different strategy.

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OTT VOD Innovation in South Africa
South Africa’s MTN launched its “FrontRow” video streaming subscription
service in December 2014, and rebranded it as VU in December 2015 with free
data usage for MTN subscribers to counter the growing OTT (video) competition
South Africa’s Times Media Group was the first local company to launch a
streaming Video on Demand (VOD) service in September 2014, offering 100s of
online TV programmes and video rentals to customers with high speed
broadband internet connections. The service shut down in February 2016
South Africa’s global media giant Naspers launched its VOD streaming service in
August 2015, with clear intention of competing head on with similar global OTT
giants like Netflix, leveraging Naspers African footprint, and its strategic global
partners which include China’s Tencent OTT giant. Naspers partners with local
network operators, including Mweb and Telkom for online content distribution.
ONTAPtv launched a competing VOD service in Sept. 2015, announcing plans to
produce TV content locally in anticipation of local content preferences and
regulations. The Hong Kong Telecom (HKT) owned service will be operated by
HKTs international subsidiary PCCW Global, a global broadband service provider.
South Africa’s CSIR, recognising the inevitability of OTT, assisted the
development of a video streaming OTT service Tuluntulu, which enables cost-
effective video downloads even on slow mobile networks.

18. Meeting the OTT challenge in Africa
http://www.detecon.com/sites/default/files/VP_Value%20Killer%20OTTs%20in%20Africa.pdfSource: Detecon:
The following case studies were chosen to assess the impact of OTTs on African Telco
operators and derive region specific strategies for operators based on current trends.
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19. Case Study: India
 The Telecom Regulatory Authority of India “TRAI” released a consultation paper in March
2015 with the aim to propose a regulatory framework for OTT services, Internet services
and net neutrality.
 The objective of the paper was to analyse the implications of the growth of internet
services / Apps and OTT’s and consider whether changes are required in the current
regulatory framework.
 The question was raised as to whether there is still any incentive for telecommunication
operators to invest in infrastructure due to declining revenues.
 These are some of the questions the consultation paper sought to address :
• Is it too early to establish a regulatory framework for OTT services?
• Is the growth of OTT services impacting traditional revenues of
telecommunication services?
• Should OTT players pay to use Telecommunication operator’s networks?
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The overwhelming response to the consultation paper was a call for fair and
uniform regulation across the board, through a light touch approach

20. Case Study: India
Bharti Airtel
 previously introduced differentiated tariff plans for voice calls over the Internet and data surfing as
VoIP calls were charged almost three times more than regular data surfing.
 However, this tariff plan was eventually withdrawn following protests by users who accused Bharti
Airtel of violating the principles of net neutrality.
Free Basics by Facebook
 Free Basics is a Facebook operation where, by partnering with local telecoms firms in the developing
world (including South Africa, through Cell C), the firm offers free Internet access – limited only to
Facebook, Facebook-owned WhatsApp, and a few other carefully selected sites and services.
 Facebook paid for billboards, full-page newspaper ads and television ad campaigns to try to enforce
the point that Free Basics is good for India’s poor.
 Free Basics runs against the idea of net neutrality by offering access to some sites and not others. In
practice the submission guidelines forbid JavaScript, video, large images and Flash, and effectively rule
out secure connections using https. This means that Free Basics is able to read all data passing
through the platform. The same rules don’t apply to Facebook itself, effectively meaning that it can be
the only social network, and (Facebook-owned) WhatsApp the only messaging service, provided.
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21. Case Study: India
 Some have likened to a taxi company that will only take you to certain destinations, or an
electricity provider that will only power certain home electrical devices. There are
alternative models: in Bangladesh, Grameenphone gives users free data after they watch
an advert. In some African countries, users get free data after buying a handset.
 May impede development of home-grown Indian commercial alternatives before they
begin. Expanding audience and consumer bases have long been as important as revenues
for Internet firms.
 In India the TRAI pulled the plug on Free Basics while it debates whether telecoms
operators should be allowed to offer different services with variable pricing, or whether a
principle of network neutrality should be enforced.
Source: Mark Graham is associate professor, Oxford Internet Institute, University of Oxford, article was
originally published on The Conversation
http://theconversation.com/facebook-is-no-charity-and-the-free-in-free-basics-comes-at-a-price-52839
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22. Switching off services: Worrying trend in Africa?
• Election Related internet shutdown
– In 2015 some African governments began switching off access to the internet and/or applications
during political protests. The Burundian Government ordered the shutdown of social media
applications including Twitter, Facebook, What Sapp, and Viber on the mobile Web beginning on
April 27, 2015 . The country's telecom sector regulator ordered telecom operators to block the
apps, according to reports. The Democratic Republic of Congo (DRC) also blocked access to the
Internet, social media and mobile phone communications following days of protests aimed at
blocking President Joseph Kabila from seeking a third term of office. In Niger the government had
also ordered telcos to shut down services for three days.
– In 2016 Uganda and Congo-Brazzaville governments order the switch off of their citizens’ access
to the internet or social media during general elections so that people could not access social
media networks like Facebook, Twitter and WhatsApp. The Ugandan Electoral Commission said “It
does not manage internet communications. Our job is to organise elections in this country.”
• In January, Morocco’s three telecommunications companies shut off access to Voice over Internet
Protocol (VoIP) on mobile networks like WhatsApp, Viber, and Skype. The National
Telecommunications Regulatory Agency stated that “corporations using the VoIP technology in
Morocco should hold a license to operate.”
• Zimbabwe recently shut down access to messaging service WhatsApp amidst mass stay-away for a
morning, but it appeared to be working in the afternoon after outrage swept Zimbabwe’s internet
users.
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South African ICT Policy Review perspective
The National Integrated ICT Policy Review Report of March 2015 states:
• The implications of OTT services in economic terms, is that OTT players which
rely on IP based networks to reach their customers do not make any direct
contribution towards the cost of rolling out infrastructure/the network. Some
network service providers have argued this causes them harm.
• There were differing views on whether or not OTT services should be regulated.
• The following points about OTT services, which have been put forward by the
ITU:
 Proliferation of content and applications services is to be welcomed – they add
utility for users.
 Change is inevitable. As network operators migrate to next generation networks,
voice services will become software applications riding over the network. During this
transition, policy-makers are finding different paths to balancing innovation,
investment and competition.
 Regulators cannot hold back the tides of change to maintain the status quo.
 These changes are disruptive and inconvenient for those with a stake in existing
arrangements, but the benefits of change outweigh the costs.
 Regulators generally support innovation. They prevent fixed and mobile operators
from blocking or degrading competing services.

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Recommendations of the National ICT Policy Review Report:
a. For now a wait-and-see approach is taken so as not to stifle
innovation.
b. The impact of OTT services though should be continually
monitored and regulatory intervention introduced if it is deemed
necessary.
Specifically with regard to Broadcasting:
The Panel recommended that: Policy measures must be developed such that
external content providers, using the Internet as a medium, are subject to South
African regulations if they have significant influence in the South African market.
NEXT STEP:
Gazetting of the ICT Policy White Paper, which will reflect formal
policy on OTTs

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OTTs: Nigeria
 Nigerian Converged ICT Environment - A massive market for national OTT players:
NCC Recommendations:
1. The Commission should conduct a stakeholder’s consultative forum on the provision of over-the-
top services in Nigeria to determine if regulation is required for such services and its impact on
the growth of the Nigerian Telecoms industry.
2. Following the consultations, the Commission should review its Guidelines on the provision of
International Gateway and Voice over Internet Service and also consider an appropriate
Framework for Provision and Regulation of over-the-top services in the Nigerian Telecoms market.
3. The Commission must ensure that it does not stifle innovation since internet penetration is still
evolving, access speeds are still low and there is limited coverage of high speed broadband in
Nigeria.
4. The Commission should encourage network providers in Nigeria to innovate and explore more
efficient business models that would enable them compete favourably with OTT service providers.
Network providers can also take advantage of the internet protocol technology in the design for
their network upgrades.
The Executive Vice Chairman of NCC, Prof. Garba Umar Danbatta who spoke at a recent function, noted
that the regulators objective should be to catalyse additional opportunities offered by OTT services to the
benefit of the consumer and to support competition while avoiding the OTT related risks in the areas of
security and data protection. The regulators view is that regulating the OTT or internet will stifle creativity
and innovation, and reduce the accelerated growth Nigeria is already recording in new media
developments across the world.
Source: NCC Nigeria Communications Commission (www.ncc.gov.ng)

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OTTs: Kenya
Kenya’s Ministry of Information, Communications & Technology is reviewing ICT sector
guidelines in regards to regulation of over-the-top (OTT) services – such as WhatsApp, Skype
and Viber – amidst complaints from telecoms operators over unfair competition
Under the plan, the ministry is planning to establish three working groups to oversee
infrastructure issues, new emerging issues and applications and content.
In addition, the new National ICT Sector Policy Guidelines will include policies regulating the
operation of MVNOs in the country.
Kenya to review OTT, MVNO regulation guidelines
Source: www.telegeography.com: 21 March 2016

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OTTs: Egypt
 Egypt – National Telecoms Regulatory Authority (NTRA):
• OTT brings about opportunities for entrepreneurs and start-up businesses to
innovate and develop new services
• Some operators have begun to offer their own OTT services; some have partnered
with OTT players; and few are still resisting.
• Concerns are mainly related to security and privacy and the lack of related
regulations and legislations in Egypt. Another intervention made about identifying
our priorities as a country.
• Noting that there is asymmetry in regulatory models between OTTs and telcos,
three key aspects is to focus on: 1) Consumer; 2) Service Provider; 3) Innovation.
• Is network neutrality a priority for us at this stage, or is it more important to get
more people online even if through models such as Free Basics?
According to Ahmed Said, NTRA, Egypt’s NTRA has yet to decide whether OTT services ought
to be regulated. Studies are underway. The one exception is Skype which has been blocked
over mobile networks since 2009 due to its detrimental impact on revenues of international
calls
Source: www.tra.gov.eg Egypt National Telecoms Regulatory Authority

28. Disruption is inevitable
• New approaches and business models will have to be adopted
• Time of innovation and New entrants (bigger is not necessarily better)
• Regulations and Policies must be just as nimble to enable competition and
protect investment and jobs of established business
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29. Some Questions to Grapple with:
1.Is it too early to establish a regulatory framework for OTT services, since
internet penetration is still evolving, access speeds are generally low and
geographically there is limited coverage of high-speed broadband internet
in South Africa?
2.Should the OTT players offering communication services (voice,
messaging and video call services) through applications (resident either in
the country or outside) be brought under the licensing regime?
3.Should the OTT players pay for use of the network over and above data
charges paid by consumers? If yes, what pricing options can be adopted?
Could such options include prices based on bandwidth consumption? Can
prices be used as a means of product/service differentiation?
4.Should and can OTT players be regulated under National laws to address
the imbalances in the regulatory environment?
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30. Some Questions to Grapple with:
5. How should the national security concerns as well as ensuring the
security, safety and privacy of South African consumers be addressed
with regard to OTT players who reside outside South Africa?
6. Should the principles of net-neutrality be adopted? Or allow
discrimination or traffic management practices consistent with a
pragmatic approach?
7. How can we create a conducive and balanced environment such that
Operators are able to invest in network infrastructure and are able to
innovate and grow?
8. Is there a need to encourage localised OTT apps?
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31. Ke a leboga Dankie Ngiyathokoza
Ke a leboha Thank you
Siyabonga Ngiyabonga
Inkomu Ndo livhuwa Enkosi
Loren Braithwaite Kabosha
loren@sacomforum.org.za
011 315 0590
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