ZIMBABWE’S mobile phone operators initially colluded to push for a ban on over-the-top (OTT) services including the most popular instant messaging application for smartphones WhatsApp and Skype before opting for high floor prices on data and voice as a way of arresting a plunge in their revenue and acute foreign currency shortages, it has been established.
Whereas government wanted to control social media use to prevent an Arab Spring style uprising triggered by an economic implosion, mobile network operators (MNOs) wanted this for the profit motive and to preserve foreign currency, creating a marriage of convenience between the authorities and telcos executives. An increased uptake of OTT saw mobile phone users migrating from regular voice calls and short messaging services which traditionally were the main sources of revenue for the country’s three operators—NetOne, Econet and Telecel.
Last week the government directed the operators to set a floor price on data before suspending the decision amid a public outcry that the increases were astronomical.
OTT services have over the past year given currency to a wave of demonstrations, prompting government to effect a blackout during one of the protests and the crafting of a new ICT policy to snoop on internet users.
Over-the-top is where a telecommunications service provider delivers one or more services across an internet protocol network. It embraces a variety of telco services including communications such as voice and messaging.
According to informed sources and documents seen by the Zimbabwe Independent, the country’s mobile network operators wrote to the Post and Telecommunications Regulatory Authority of Zimbabwe (Potraz) raising concerns over the sagging revenues and problems in meeting their obligations to international companies that benefit from the use of OTT.
Sources said the country’s telecoms regulator this week wrote to the Finance ministry appraising Treasury on the tiff between mobile phone operators particularly Econet and Potraz over the genesis of the floor prices. Experts say the beneficiaries of OTT voice traffic were WhatsApp, Facebook, Skype, Viber and others, who were reaping without investing in the local networks.
Official figures show that from June 2015 to April 2016, MNOs lost 186 million voice traffic minutes to OTTs, of which 95% of the traffic was WhatsApp calls. For that period, the potential loss to MNOs was US$26 million in revenue, for Potraz it was US$139 000 and for Government it was US$4 million in taxes.
“In their submissions to Potraz, the operators advised that they had considered a number of options to deal with OTTs which include a ban on OTT, reduce the quality of services on OTT calls and differential charging of the voice calls enjoyed through OTT applications i.e. a price on WhatsApp calls and the other culprit applications,” a source familiar with the developments said.
“Having considered these, the operators had discarded the options of banning the OTTs and reducing the quality of service and had recommended the introduction of a tariff for both voice and video OTT calls to protect MNOs, Potraz and government revenues.”
After discarding the initial proposals, mobile network operators under the auspicies of the Telecommunications Operators Association of Zimbabwe in October 2016 agreed on the proposed floor price for voice. The operators, documents show, had however not agreed on the floor price of data.
“Econet and NetOne’s agreed position was that the floor price for data should be set at 5 US cents per Mb (megabyte). Econet agreed with the collective position that the minimum or floor price for voice should be 12 US cents per minute,” reads one of the documents.
“A minimum regulated tariff was required to avoid significant erosion of value for all its stakeholders and the price floors should apply to both mobile and fixed operators as well as voice over internet protocol operators. The floor prices would assist in decongesting the networks as networks were now facing capacity problems. Econet quoted Sri Lanka as having introduced floor prices and Pakistan as considering doing so.”
In its letter dated October 27 2016, which Telecel submitted to Potraz in its capacity as TOAZ chair, the MNOs said they had agreed to set the voice floor prices at 12 US cents per minute. Telecel had proposed a floor price for data of 1 US cent per Mb.
Meanwhile, Potraz is now carrying out cost modelling studies to enable further informed decision making on appropriate pricing of data, which, while protecting consumers, ensures that the sector remains viable.
“In addition to floor pricing, MNOs had also asked Potraz to engage the Reserve Bank over unavailability of foreign currency to pay for the maintenance and upgrade of their networks,” a source said.
“The MNOs had also asked Potraz to make representations to the Zimbabwe Revenue Authority in connection with import duty on mobile handsets which they had said was causing a reduction in ICT services uptake by consumers, thereby affecting their revenues and revenues for government, through taxes and fees. In good faith, Potraz had held meetings with the Reserve Bank Governor and Zimra to make representations on behalf of the operators as well as advise on the impact of these problems on consumers. These efforts were designed to complement floor prices in ensuring sector viability.”
Declining voice revenues over the past three years have resulted in the proliferation of promotional packages in the form of data bundles of various forms and sizes with validity periods of up to three (3) months.
The data bundles were offered either as stand alone internet bundles or as a package that included voice, SMS and data services, resulting in situations where data services were priced well below 1c per megabyte.
“Consequently, data traffic has increased significantly but without a corresponding growth in revenue being realised. The situation had seen the overall revenues realised from the telecommunications sector continuously going down at the rate of 10-12% per quarter since the beginning of 2016,” one of the documents reads.
Last week Econet criticised ICT minister Supa Mandiwanzira for not taking ownership of the floor prices before the minister hit back at the operator saying it had pushed for the data charges hike.