Understand the Dynamics and Opportunities of OTTs. Dr Martin Koyabe Manager, Technical Support & Consultancy CTO) Over The Top (OTT) Study:
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1 Over The Top (OTT) Study: Understand the Dynamics and Opportunities of OTTs Presentation to ICT Ministers Forum June 2018 Dr Martin Koyabe Manager, Technical Support & Consultancy CTO)
2 What is Over The Top (OTT) Services? Over-The-Top commonly referred to as OTT stems from the fact that Over-The-Top communications bypasses traditional network distribution approaches and run over, or on top of, core Internet networks there are suggestions to refer to OTT as Online Service Providers
3 What is Over The Top (OTT) Services? The EU broadly regards OTT as an online service that can be regarded as potentially substituting for traditional telecommunications and audiovisual services such as voice telephony, SMS and television. It further distinguishes between OTTs, Online Services and Managed services noting that OTTs represent a subset of online services, which also differ from managed services
4 Emerging OTT trends Reality Check!! OTTs are here to stay
5 Emerging OTTs Key Drivers OTTs increasingly supporting future service model Communication and media
6 Emerging OTTs Key Drivers OTT services rapidly expanding Across multiple communications & digital service domain
7 Emerging OTTs Key Drivers Availability of bandwidth capacity High speed connections, avenue for new OTT apps
8 Emerging OTTs Key Drivers Growth of smart phones Easily affordable and improved mobile infrastructure
9 Emerging OTTs Key Drivers Deployment of cloud infrastructure Increased mobility and brought convenience
10 Emerging OTTs Types [1/3] Voice & Messaging Communication o WhatsApp (~1.5 Billion users) o Facebook Messenger (~1.3 Billion Users) o Skype (~1.3 Million Users) o Viber (~980 Million Users)
11 Emerging OTTs Types [2/3] Application eco-systems Mainly non-real time o Dropbox o icloud o box o Google Drive o SugarSync
12 Emerging OTTs Types [3/3] Media TV & Video/Audio (YouTube, Hulu+, Netflix, Amazon)
13 The sticky effect of OTTs Compatibility - with all devices connected online
14 The sticky effect of OTTs Expansion of mobile infrastructure WiFi, 3G, 4G & now 5G
15 The sticky effect of OTTs Applicable on various platforms TV, Tablets, Laptop etc
16 The sticky effect of OTTs It s free Offers perceived savings to users
17 Understanding the IMPACT of OTT How about Advantages & Disadvantages? 17
18 The impact of OTTs Advantage Benefit from worldwide coverage by Internet quick to deploy over the Internet Exploit economies of scale cheaper with increased usage Exploit broadband connectivity pushes the demand side for broadband (data usage) Benefit from publicity revenues cost-efficient way to market a product/business High negotiation power towards suppliers in terms of revenue generation
19 The impact of OTTs Disadvantage (1/2) Difficulties to assure end-to-end quality control difficult to maintain QoS across different domains Less advantage for proximity and consumer experience related requirements Lower capability for national dependent services operational model not contained within a jurisdiction Lack of contribution to the USF very difficult to collect OTT revenue towards USF
20 The impact of OTTs Disadvantage (2/2) Revenue loss in voice and messaging services despite uptake of mobile handsets & SIM cards OTT tax evasion/avoidance collection over non-domicile jurisdictions is a problem Personal data protection and privacy issues hardly addressable by national regulation Security concerns hardly controllable users have no control over data collected
21 Are countries starting to take action? Net neutrality and OTT services Indian government formed a committee on Net neutrality including OTTs» Encourages growth of OTTs and removal of any impediments» Messaging OTT aps should not be interfered through regulation» VoIP OTT communications services, there exists a regulatory arbitrage
22 Are countries starting to take action? FCC foregoes Net Neutrality (NN) FCC repealed Obama-era NN rules» Requires ISP to be more transparent about their practice» Enables consumers can buy the service plan that s best for them and entrepreneurs and other small businesses can have the technical information» There is fear this might lead to another Portugal trend. Where mobile internet is packages like cable package
23 Are countries starting to take action? SA MTN and Vodacom want OTTs regulated, but Cell C feels otherwise yet to be resolved by SA parliament
24 Are countries starting to take action? CA vs. KFCB over regulation of Netflix Kenya ICT ministry has reviewed previous ICT policy to address OTTs
25 Are countries starting to take action? World s Largest Taxi Company Owns NO vehicles Largest Accommodation Provider Owns NO real estate Most Popular Media Provider Creates NO content Fastest Growing TV Network Lays NO Cables
26 The OTT debate: One way forward CTO has been listening to ALL our stakeholders Most recently at the CTO ICT Ministerial Forum, London (2016)
27 Engagement with country stakeholders CTO contacted a number of stakeholders during the study both commonwealth and non-commonwealth countries Afghanistan, Albania, Algeria, Andorra, Angola, Antigua and Barbuda, Argentina, Armenia, Australia, Austria, Azerbaijan, Bahamas, Bahrain, Bangladesh, Barbados, Belarus, Belgium, Belize, Benin, Bhutan, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Brunei Darussalam, Bulgaria, Burkina Faso, Burundi, Cape Verde, Cambodia, Cameroon, Canada, Central African Republic, Chad, Croatia China, Denmark, Dominica, Egypt, Eritrea, Ethiopia, Fiji, Finland, France, Georgia, Germany, Ghana, Grenada, Hungary, Iceland, India, Indonesia, Ireland, Israel, Jamaica, Jordan, Kazakhstan, Kenya, Liberia, Malawi, Maldives, Malta, Marshall Islands, Namibia, New Zealand, Nigeria, Pakistan, Philippines, Rwanda, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, Seychelles, Sierra Leone, Singapore, Solomon Islands, Somalia, South Africa, Sri Lanka, Tanzania, Thailand, Trinidad and Tobago, Tonga, Uganda, United Arab Emirates, United Kingdom, United States, Vanuatu, Zambia, Zimbabwe, Cyprus, Dominica, Malaysia, Guyana, Papua New Guinea
28 Engagement with country stakeholders CTO conducted direct OTT stakeholder consultations In the UK, Trinidad & Tobago, Uganda, Tanzania, Kenya, Nigeria, South Africa and Bangladesh United Kingdom Trinidad & Tobago Nigeria Uganda Bangladesh Kenya OTT Engagement CTO conducted direct OTT consultations South Africa Tanzani a
29 Survey Structure & Methodology The OTT study was based on survey questionnaires targeting four (4) Sectors (1, 2, 3 and 4) 28.4% Sector 4 Consumers (End- Users), Civil Society & Advocacy Groups Sector 1 Government Ministries, Regulators, Departments & Agencies 46.9% Sector 3 OTT Service Providers, Vendors, and Content & Application Providers Sector 2 Fixed & Mobile Operators, ISPs, Telecom, Broadcasters & Other Network Operators 11.1% 13.6% 29
30 Survey Data Collection Target Audience To send Questionnaire CTO & ITU Contact Data Unsolicited Target Sector 1 Questionnaire Response Sector 2 Questionnaire Response Sector 3 Questionnaire Response Sector 4 Questionnaire Response CTO Repository Questionnaire Responses 30
31 OTT study Outcomes & Results Key identified challenges Licencing Obligations Universal Service Fund (USF) Taxation (Jurisdiction) Quality of Service/Quality of Experience Net Neutrality Data Protection & Privacy Interconnection
32 Regulation, Licencing, Pricing, Taxes Q) Are your current regulatory regimes, including applicable laws and regulations able to address emerging OTT services? 100% 88.90% 70.30% Yes No 29.70% 11.10% 0% Sector 1: Government, Regulators & Policy Makers Sector 2: ISPs, Telecom, Broadcast & Other Network Operators Sector 3: OTT Service Providers, Vendors, and Content & Application Providers
33 (1) Licensing Obligations ISPs, Telecom Operators OTT Services Providers Consumers / End Users Regulators/Governm ents Required to purchase a licence in order to operate in a given jurisdiction Generally, no such requirement or condition imposed Rights and obligations inscribed in the license (e.g. Quality of Service, pricing) are balanced in the interest of consumers Regulatory provisions designed to provide certainty to investors, to allocate scarce resources, and exclusivity rights Recommended Options ISPs, operators and OTT services providers MUST pay o Charge all players in the market to level the playing field OTT providers should create a local or regional presence o especially in the jurisdiction where they are operating Regulators should review their licensing regimes/offerings o to accommodate convergence and enable a competitive market Have no licenses regimes/offerings o to spur competition
34 QoS/QoE & Net Neutrality Q) Should OTT service providers contribute to the upkeep of the network(s) they utilise? 100% 88.90% 64.90% Yes No 35.10% 11.10% 0% Sector 1: Government, Regulators & Policy Makers Sector 2: ISPs, Telecom, Broadcast & Other Network Operators Sector 3: OTT Service Providers, Vendors, and Content & Application Providers
35 (2) QoS/QoE Issues QoS and QoE are industry-wide standards - concepts are often imprecisely defined or used interchangeably ITU Definition of QoS - totality of characteristics of a telecommunications service that bear on its ability to satisfy stated and implied needs of the user of the service and QoE: the degree of delight or annoyance of the user of an application or service QoS seems to be on network performance - while other time on perception of service quality
36 (2) Quality of Service/Experience (QoS/E) ISPs, Telecom Operators OTT Services Providers Consumers / End Users Regulators/Govern ments Quality of Service (QoS) commitments included in licensing conditions No such targets or reporting requirements as a regulatory obligation Recommended Options Loss of voice-call quality and service, in exchange for cost Some tolerance of low video quality, so long as it s a free video call. QoS/QoE differentiation is affected by readiness and willingness to pay (WTP), in relation to service Monitoring and enforcement of of QoS/ QoE standards is a challenge for a number of regulators especially in difficult geographical terrains Regulation on QoS/QoE for consumers should apply to ALL players o But its driven by level/class of service subscribed QoS/QoE obligation should apply to all players o but difficult to monitor for all OTT players online Monitoring SLA should be agreed across all players o especially at interconnection points Recommend users to measure the QoS/QoE
37 (3) Taxation Issues Different countries impose various taxes - including corporate taxes on profits, property taxes, and value added taxes on digital goods and services Some countries impose taxes to the ICT industry - e.g. on broadband services (new source of revenue) Tax factored in to the cost of providing a service - passed on to the customers
38 (3) Taxation ISPs, Telecom Operators OTT Services Providers Consumers / End Users Regulators/Govern ments Establishment of commercial presence in the country of consumption of a service is required Intention to impose tax obligations and to establish commercial presence is growing, but this has been contested (even by some EU countries including UK & Ireland) Recommended Options Concern that imposition of taxes on the services/apps will be passed on to the customers and hamper adoption Sector regulators are not responsible for the tax regime. Jurisdictional enforcement is challenging. ISPs, operators and OTT services providers MUST pay taxes o Charge all players in the market to level the playing field OTT providers should create a local or regional presence o especially in the jurisdiction where they are operating Need for reciprocate arrangements between countries o to avoid double taxation
39 Data Protection & Privacy Q) Do you have any Cybersecurity and data protection concerns regarding your use of OTT services? 26% Yes No 74%
40 (4) Data Protection & Privacy Issues Data security issues transverse national borders and are not limited by physical jurisdictions - requires international cooperation and harmonization of legislation on privacy and data protection frameworks are crucial Limited intra-country cooperation between various intersecting e-government databases - e.g. GDPR remains a challenge to many countries Co-ordination still a challenge - passed on to the customers
41 (4) Data Protection & Privacy ISPs, Telecom Operators OTT Services Providers Consumers / End Users Regulators/Govern ments Protection of user personal data and privacy is required, under data protection & privacy law Required to protect consumer information and personal data. End-to-end encryption mainly used Concerned when data is shared without their consent. Default settings sometime allow for this without users knowledge once they opt in Sector regulators must ensure consumers Information & Data is protected. Regulation based on Data Protection and Privacy Law. Recommended Options Regulatory regime and institutional frameworks for protecting personal data o difficult to monitor and enforce for online services Limit /control end-to-end encryption in OTT apps o but this leads to legal intercept vs. user privacy debate Updating current criminal prosecutions regime to align to the digital reality
42 (5) Net Neutrality Issues Net neutrality most definitions underscore the idea - a) equality of treatment of data flows b) level playing field c) traffic management principles BEREC definition of network neutrality: the principle that all electronic communication passing through a network is treated equally. In BEREC s definition, equally means that it [electronic communication] is treated independent of (i) content, (ii) application, (iii) service, (iv) device, (v) sender address, and (vi) receiver address
43 (5) Net Neutrality ISPs, Telecom Operators OTT Services Providers Consumers / End Users Regulators/Govern ments Throttling and blocking of OTT services, as detected by regulators, is against Net neutrality principles Threat of user-data discrimination and throttling is a source of concern The tussle between net neutrality proponents and non-proponents affects users, especially if paid prioritization will result in two-speed internet or intensified pay-for-play scenario A number of regulators have published guidelines on network neutrality which prohibit discrimination, throttling and blocking of access, as well as, requirement to share information on traffic management and user s access rights Recommended Options: Net neutrality needs to be understood better o different countries have published guidelines Repeal Net neutrality all together o in order to encourage investment
44 Interconnection, Network Infrastructure Q) Should OTT service providers contribute to the upkeep of the network(s) they utilise? 100% 88.90% 64.90% Yes No 35.10% 11.10% 0% Sector 1: Government, Regulators & Policy Makers Sector 2: ISPs, Telecom, Broadcast & Other Network Operators Sector 3: OTT Service Providers, Vendors, and Content & Application Providers 44
45 (7) Interconnection ISPs, Telecom Operators OTT Services Providers Consumers / End Users Regulators/Governm ents Required to provide detailed plans of network rollout and to invest in delivery of such infrastructure Not subject to interconnection obligations but reliant on infrastructure as a key input to deliver services and applications to customers Recommended Options Fair, reasonable and nondiscriminatory interconnection terms benefit consumers, due to network externalities Interconnection SLAs need to be more transparent o in order to charge accurately for services offered Operators highlight regulatory burden of Intercon o operators demand level playing field Managing interconnection imposes administrative and financial burden on the regulator. The risk of arbitrage a real concern
46 Consensus on the Way Forward Use report output to create favourable ICT environment in terms of policies, regulations and legislations Adopt OTT services as being part of the App Economy innovation needs to be encouraged as well Countries are encouraged to determine suitable frameworks requires regional and international consideration Data protection and privacy develop a national Cybersecurity strategy, include robust legal structures/instruments and governance
47 Special Acknowledgement Richard Eyo Deputy Manager - Policy, Competition and Economic Analysis, NCC, Nigeria Mpho Leseka Director International Agreements, DTPS, South Africa
48 Q & A Session Further Information Contact: Martin Koyabe m.koyabe@cto.int Tel: +44 (0) (Off) +44 (0) / (Mob) 48
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