South African telcos want streaming platforms to pay for infrastructure

South Africa’s network operators have rejuvenated a contentious debate: over-the-top (OTT) service providers – like Netflix and YouTube – pay telcos for using their infrastructure. The push comes from “Fair Share”, an initiative aimed at reining digital giants into shouldering some costs associated with underpinning networks. 

The Association of Communications and Technology (ACT), with contributions from various industry experts, argues that OTT firms heavily rely on the framework provided by network operators. Telcos heftily invest in building and upgrading networks that take streaming to end users. Reliance creates an imbalance, where operators bear the brunt of the costs. At the same time, streaming platforms rake in revenue without proportionately contributing to sustaining the networks.

ACT CEO Nomvuyiso, echoing the union's concerns, said OTT platforms bypass the traditional legislative requirements that broadband operators must adhere to, threatening industry sustainability. "Fair Share arrangements ensure that these content providers contribute fair portions to the costs of building, maintaining, and upgrading the groundwork supporting their business," he explained. 

They argue that such contributions would not only balance resource utilization but also incentivize continued investment in network expansion, capacity upgrades, and quality of service improvements. This, in turn, would benefit all stakeholders, fostering a healthier marketplace.

The concept is not unique to South Africa. European telcos, including Vodacom Group’s parent company, Vodafone Group, have championed similar initiatives. 

The European "Fair Share" initiative aims to ensure that large traffic generators (LTGs) like Netflix and YouTube contribute to the costs of running networks, helping to fund broadband deployment across the continent. This has sparked strong resistance from content providers, who argue that they already contribute to the digital economy through taxes and other government-imposed fees.

Petrus Potgieter, a professor of decision sciences at Unisa and an associate partner at telecoms consultancy Strand Consult, supports the idea. He points out that while broadband providers face high fixed costs and stringent regulations, content providers enjoy the benefits of copyright protection without similar obligations. 

"The content providers have been hugely successful in leveraging copyright into profitable business models online," Potgieter told TechCentral in late July. "The 'value add' has gone to them and not the access providers, which haven’t been able to monetize their networks beyond selling basic access."

He also suggests that charging more for data in rural areas could be a way to address the higher costs of serving such regions. Yet this would bring a shift in pricing practices.

Despite arguments favoring Fair Share, implementing such a system in South Africa brings complexities. The ACT acknowledges that any arrangement must be grounded in law, commercial fairness, and a consideration of industry dynamics. They suggest a shared fund independent of commercial competition among network operators, could be one way.

In South Korea, regulators have mandated negotiations between large traffic generators and local internet service providers, leading to a paid settlement for traffic. The Independent Communications Authority of South Africa (Icasa), might consider a similar approach: regulating the market like it does call termination rates, potentially introducing per-gigabyte fees for streaming services.

However, SA might struggle to enforce such payments from global giants like Netflix. An alternative solution, according to Potgieter, could be lowering the regulatory burden on network operators to level the playing field between them and OTT providers. This would be a complex conversation with Icasa and the government, particularly if it involves reducing coverage obligations for telecom operators.

On the brighter side, the ACT believes Fair Share arrangements could ultimately benefit consumers. Ensuring network operators have the resources to invest means service improvement. However, there are concerns passing costs may result in higher prices for consumers.

Without regulatory intervention, telcos may pull back from less profitable areas. This is particularly relevant in smaller markets like Mauritius, where the cost of overseas connectivity is high. 

To navigate these challenges, the ACT highlights the need for a coordinated approach involving all stakeholders—policymakers, regulators, network operators, OTT providers, consumer groups, and industry associations. They propose the first step should be creating an environment that enables an in-depth understanding of the OTT market, followed by a review of existing regulations to accommodate the industry’s dynamics.

"The goal is to create an enabling regulatory framework that is technology-neutral, treats similar services consistently, and fosters fair competition," the ACT said. However, they also stress the essence of robust competition policies to prevent anti-competitive behavior in the OTT space.

Ultimately, the future of the country’s telecoms infrastructure may hinge on the ability of all parties to collaborate and find a balanced solution supporting both innovation and sustainability. Whether through Fair Share arrangements, regulatory adjustments, or new pricing models, the outcome of this debate will shape years-long changes to its digital services sector.