Should SMSes be free?

There has been much talk over the past few weeks as to whether over the top (OTT) services such as WhatsApp should be regulated. Network providers like Vodacom and MTN have been campaigning in favour of this. However, Cell C, joined by Microsoft, Google and Facebook are against OTT services being regulated.

The Wi-Fi Forum of South Africa noted: “The Wi-Fi Forum of SA does not foresee nor wish for the regulation of OTT services in South Africa. Essentially any service running on ICT networks are OTT services and not just limited to WhatsApp, Youtube and Skype. For example, how will search using browsers be classified? Hence, there are practical problems of defining what OTT services are in the first place.

“Furthermore, there should not be any differentiation between mobile based networks (e.g. Vodacom) and fixed line networks (e.g. Telkom). So for practical matters such as the definition of what is an OTT service, we do not see how OTT regulation can be successfully introduced in SA.”

Making SMS free

The Wi-Fi Forum of SA argues that SMSes should be offered as a free service to compete with OTT services.

Raj Wanniappa, deputy chair of the Wi-Fi Forum, explained: “SMS is a legacy technology that was developed in the 1980's. Although its use is prevalent especially in the developing world, it has significant limitations. Foremost the amount of data/content that can be contained in a SMS (few kilobytes) is much less than other communication mediums such as email (hundreds of kilobytes) and instant message images (megabytes). Hence from a pure data usage vs. cost perspective, customers having to pay significantly more for an SMS vs. the other communication mediums does not make sense.”

Wanniappa argues that due to the age of SMS technology, the costs should have been written off, therefore allowing service providers the ability to offer it for free.

This technology does also not allow consumers to use functions available with modern technologies such as instant messaging. This includes things such as the ability to know if the recipient is online or typing, sent/receipt status and multi-media.

Competing with OTTs

Karin Fourie, executive head of communications at Cell C, said: “SMS will become less relevant with more smartphones available in the market and the popularity of OTT services on the increase. Cell C believes that OTT players and mobile network providers can find ways to work together to develop partnerships where everyone - especially the consumer - can benefit. Innovation is what drives customer retention and growth. Operators must work with OTTs to find models that work for both parties.”

While it is true that smart phones are becoming more popular in Africa, there are still a significant number of feature phones in use, highlighted Wanniappa. These feature phones are generally incompatible with OTT services, and therefore rely on SMS technology.

Wanniappa highlighted that by making SMS services free, the service providers place pricing on a level playing field. It also “enables a significant part of Africa’s population to still consume services and engage in an equitable and effective manner.”

According to the Wi-Fi Forum of SA, network service providers could recoup the cost of the messages through advertising. This is normally attached to the bottom on an SMS. However, Fourie stated that making SMS services free is not a financially viable option for network providers.

The changing industry

According to Fourie, the industry is changing rapidly, and OTT services are becoming increasingly popular. Without innovation around these services and bringing the value to customers, Fourie warned that network providers run the risk of being left behind.

With consumers using more data through increasing use of OTT services. Fourie pointed out that operators will need to find other revenue streams, such as through data costs.

Fourie added: “Contrary to our competitors, Cell C has been embracing the services offered by OTTs. We believe that the OTT services add real value to our customers and we have partnered with both WhatsApp and Facebook to ensure that these types of services remain affordable. Cell C continues to be the only operator in SA to offer its customers free access to Facebook and basic Internet services through its Free Basics and unlimited WhatsApp at a mere cost of R5 per month.”

MTN and Vodacom were contacted for comment, but had not responded at the time of publication.