Going Over The Top

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Next week Parliament will hold hearings on whether to legislate WhatsApp, Facebook, Twitter, WeChat and other so-called over-the-top (OTT) internet players.

It will be a profound disaster if the technophobic MPs believe the song-and-dance, poor-me show being sold by the cellular networks that these OTT services are a crime against humanity, threat to their businesses and horrible bad, naughty, no-good revenue stealers.

These messaging services are the lucky recipients of a number of trends, including our good old human nature (for wanting to share and communicate with others), the surge in more powerful smartphones, the growth of super-fast networks, built by cellular operators who now feel they are being taken for a ride.

The ironic problem, however, is that the networks themselves have been the lucky beneficiaries of years of fat, healthy profits on both voice calls and SMS messaging. They are now seeing these profits being eroded by lower interconnect rates and cheaper OTT alternatives.

To use that wonderful South African expression: shame.

The cellular networks are crying foul – although it’s often more like wolf – and have gotten Parliament to at least hear their complaints. And that is where it should end.

Parliament’s primary job is to serve the interests of its people. Regulating global messaging companies so that local service providers can continue to reap their long-outdated business plan making handsome profits – from what have been constantly decreasing cheaper services in the rest of the world – is not looking after its citizens. I really hope the MPs understand that; and are aware of how damaging such a move would be to people who now rely on their phones as a communication lifeline to the internet. Meanwhile those cellular operators get paid for all the data used to access these social networks.

We don’t call it the mobile internet anymore, just the internet.

SMSes are the most effective communication mechanism in the world, and it’s the most expensive. For the networks, it’s by far the most profitable. An SMS cost the network a fraction of a cent to send, but they charge 50c to 80c.

Compare that to the fraction of a cent that an instant message costs in data charges when sent via WhatsApp or Facebook Messenger or Skype or Telegram. It’s a no-brainer. What consumer would pay even the 20c a message offered in some SMS bundles, when WhatsApp costs nothing?

There are an estimated 14m WhatsApp users out of 19m internet users in South Africa, according to researchers World Wide Worx. Facebook has 13m users, Twitter 7.4m, BBM still has about 4m loyalists and new entrant WeChat has 6m users. The vast majority do this on a phone. The kids don’t even call them mobile anymore.

That’s also a lot of customers skirting paying for SMSes. And why should they?

Of even bigger concern to the networks must be the efficiency of voice calling via Skype, WhatsApp, Apple’s FaceTime, and Viber. Voice revenue is plummeting, and have been artificially expensive in South Africa for far too long.

In the social media age, we live in the era of consumer power. Consumers are more tech savvy and more discerning. They know where to get the best deal; and have scant loyalty to a number because it’s no longer the main identifier given how few voice calls. WhatsApp lets you keep your original number, while changing SIM cards.

These networks have missed the point. There was a time when Nokia was the biggest cellphone maker in the world when networks provided both connectivity and content (voice calls and SMSes). That world is long gone. The walled garden has been destroyed.

The networks need to refocus on their new roles in the larger ecosystem and become better at competing with each other as leaner, more efficient businesses. That’s the future.

We don’t call it the mobile internet anymore, just the internet.

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About Author

Toby Shapshak is editor-in-chief and publisher of Stuff, a Forbes contributor and a Financial Mail columnist. He has been writing about technology and the internet for 20 years and his TED Global talk on innovation in Africa has over 1,5-million views. He has written about Africa's tech and start-up ecosystem for Forbes, CNN and The Guardian in London. He was named in GQ's top 30 men in media and the Mail & Guardian newspaper's influential young South Africans. He has been featured in the New York Times. GQ said he "has become the most high-profile technology journalist in the country" while the M&G wrote: "Toby Shapshak is all things tech... he reigns supreme as the major talking head for everything and anything tech."

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