The Africa Conundrum: OTTs can’t be allowed to screw telcos again

The last decade has seen the rise of the OTTs at the expense of the telcos; if the Africa connectivity issue is going to be addressed, this is a trend which cannot be replicated.

If you head back to the 90s and early 00s, the telcos ruled the world. The mobile revolution was in full swing, with the telcos hoovering up cash through tariffs built on text messages and voice minutes. It was a glorious time, but then came the OTTs, and some would say the telcos felt a bit used and abused.

Nothing has changed over the last couple of years; the OTTs still enjoy a much more lenient regulatory environment allowing them to monetize data and services on a different scale to the telcos. This is unfair, after all the telcos have mountains of data waiting to transform into fortunes, but this isn’t the point we are getting at. The point here is much more basic; OTTs reap the rewards of the digital age without having to build the networks which facilitate it.

All over the world this is a relationship which ultimately screws the telcos. They spent billions on building the infrastructure, but the OTTs are the ones getting rich. It is the status quo which many operators have come to accept, however grudgingly. But it cannot happen in Africa, and there is one simple reason; incentive.

During the 90s and 00s, the telcos built the infrastructure and had an opportunity to monetize it. Years passed where we paid a fortune to the telcos for SMS messages and voice minutes, and then the OTTs came along. This might have destroyed the traditional telco business model, but at least they were given the opportunity to generate some ROI in the early days.

In many places on the African continent, the basic infrastructure is not there. This means there are greenfield projects without the promise of monetization; forking out the cash with the fear there might be a few OTTs out there just waiting to take advantage of your hard work and significant investment. If this trend continues in Africa, there is no incentive for the telcos to build the infrastructure in the first place.

“To tackle the infrastructure challenge, you have to go back to the root cause; it isn’t commercially viable,” said Charles Murito, the head Googler in Kenya.

Google seems to be one of the tech giants who are helping address the basic issue of connectivity. Across the continent, there are numerous projects where Google is contributing hard cash to roll out infrastructure. But there aren’t many other supporting voices from the OTT community.

During one of the panel sessions at AfricaCom this week, the topic of discussion was network sharing. It sounds like a good idea, one which has been floated in other regions as well, but there has been little evidence of it been taking beyond glorious promises so far.

One of the jobs of the government should be to encourage investment. In Africa, this is especially true considering the connectivity issues which the continent is facing. One of these responsibilities should be to create a regulatory environment which demonstrates to the telcos that there will be a ROI.

This is certainly easier said than done, but Airtel’s Purumedh Gupta highlighted this should come with cross-border infrastructure projects, the harmonization of SIM registrations, rural connectivity and the removal of fragmentation across the continent. In short, a consolidated effort.

Sometimes this will start with government funding into infrastructure projects. In this sense, it reduces the financial burden, but also provides the telcos with a  bit more security; there is confidence from the government behind these projects. It also creates an independent focal point for network sharing. Don’t forget, most of the time these telcos are fierce competitors; getting them to play nice is a tricky task.

Ultimately, the telcos need to see there is an opportunity to make money, which brings us back to our original point. The OTTs, who so readily benefit from connectivity, need to create a model where they assist the telcos. This could be from upfront investment in the infrastructure, like Google has done, or assurances there will be some sort of revenue sharing scheme moving forward. The connected economy could easily be known as the sharing economy; if the wealth is not dispersed throughout the ecosystem, it fails.

The OTTs have made billions off investments made by the telcos; that is the operating model of this fast growing segment. It might be a successful business in Europe, but it won’t work in Africa; the basic infrastructure is not in place, and it never will be if there is no incentive for the telcos. In short, the OTTs cannot be allowed to screw the telcos again.