Telcos ‘may cut network investments’ if they can’t ride on app messaging wave

SINGAPORE — Telcos and over-the-top (OTT) providers such as messaging giant WhatsApp need to work out their relationship to avoid the risk of the former cutting back on network investments as they have not found a way to monetise the growing popularity of OTT services, analysts said, following the SingTel Chief Executive’s call to allow telcos to charge OTT providers for the use of their network.

“If this is not resolved in some way, then you will see the freeze on further network investments. Networks choke. The little money that carriers are getting does not justify new investment; networks get even slower over time. Carriers need to make money to further continue the investment in critical infrastructure,” Mr Dustin Kehoe, Programme Director for Telecoms at market research and advisory firm IDC (Asia Pacific), said yesterday.

OTT providers deliver messages, video and other media over the Internet and bypass traditional telco distribution. The surge in OTT providers such as WhatsApp, which provides free messaging and other services, has cut deeply into the traditional revenue sources for the telcos.

However, even as the ground becomes less sweet for the telcos, regulators are unlikely to pave the way to resolve this in the near term, leaving it up to the players involved to work out mutually-beneficial agreements.

For now, the Infocomm Development Authority (IDA) is taking a wait-and-see approach. In its response to TODAY, the regulator said yesterday that it is closely “monitoring market developments and international discussions” on the interactions between telcos and OTT players.

“These discussions are complex as they require policies and regulatory measures that balance the need to promote innovation and competition in the Internet space, ensure non-discriminatory access to the Internet, and ensure protection of consumer interest,” the regulator said.

The IDA takes a general policy position that “consumers should be able to access all legitimate content and applications on the Internet”.

“Internet Services Providers are not allowed to block legitimate Internet content; neither should they impose restrictions, charges or other measures that will render any legitimate Internet content effectively inaccessible or unusable. ISPs are also not allowed to adopt Internet traffic management practices that will compromise IDA’s Quality of Service standards for Internet access or any anti-competitive discriminatory practice that would harm consumers’ interest,” it added.

“We are studying SingTel’s and StarHub’s plans to ensure that the IDA’s policies are updated and continue to protect consumers’ interests, while allowing market innovation,” the regulator said.

SingTel CEO Chua Sock Koong had called on regulators to allow telcos to charge OTT providers for the use of their networks. Pointing to the rising trend of consumers using their mobile devices for social networking and watching videos, she said the telcos had been unable to monetise this trend, with revenues and returns declining.

“Without sufficient network investment, our economies will suffer … An economically-sustainable telecoms industry is an issue for future country competitiveness. Regulators and governments need to recognise this,” she said on Monday at the Mobile World Congress in Barcelona.

“We need to put in place pricing structures that better match revenues to underlying use of our infrastructure and spectrum, both to end-customers and to other service providers using our mobile networks,” she said.

Analysts agreed that some sort of financial arrangement between the telcos and OTT providers will need to be worked out here, as it is already taking place elsewhere, such as in the US and China.

Mr Ajay Sunder, Senior Director of Telecoms at consultancy Frost & Sullivan, suggested that a viable model could be a commission-based one, where players such as WhatsApp offer a certain percentage of what they charge users to the telcos.

While SingTel wants to be able to charge OTT providers, the telco told TODAY that it will not be charging consumers for such services.

“We would like to clarify that SingTel Group CEO Chua Sock Koong in her speech called on regulators to allow telcos to charge OTT players for the use of their networks. SingTel does not plan to charge customers separately for the use of these services,” it said yesterday in an effort to calm fears among the Internet community that SingTel will start charging for the use of WhatsApp.