whatsappOver the past several months, South Africa’s two largest cellular network providers, Vodacom and MTN, have called for services such as WhatsApp and Facebook to be ‘regulated’ by the Independent Communications Authority of South Africa (ICASA). The Portfolio Committee on Telecommunications and Postal Services will host a hearing on 26 January to determine whether these over-the-top (OTT) applications should fall under ICASA’s regulatory jurisdiction.

The root of the term ‘regulation’ is, of course, ‘regulate’: to control or maintain something so as to ensure it functions properly. It is curious that some believe applications like WhatsApp require regulation – after all, these applications work just fine, so what is the problem?

The clue to answering this lies in the words of the two networks’ CEOs. According to the CEO of MTN, “You have these players which are getting huge benefit out of an industry without making any investment. How do we level the playing fields?” Stated somewhat differently (and more humorously), the CEO of Vodacom Group claims that, “A lot of your data growth is driven by the same people who are trying to cannibalise you.”

Increasingly, cellphone users want to receive internet-based content over mobile networks. As a result, MTN and Vodacom have rolled out billions of Rands’ worth of network infrastructure over the last couple of years. They now seem frustrated that the content-providing OTTs are ‘exploiting’ their platform. One wonders just how unfair and exploitative the presence of OTTs is, when the most recently-reported after-tax profits of Vodacom and MTN were R12.5bn and R37.7bn respectively.

Nonetheless, mobile networks calling for the regulation of WhatsApp and other services are akin to paper mills seeking the regulation of newspapers and magazines. The business of the networks – and indeed, the agreement they enter into with customers – is to provide connectivity. Exactly what such connectivity is used for, unless moderated by the contract between the network and the customer, is none of the network’s business (so to speak).

Market competition – if you could call the relationship between network providers and OTT applications that – is not about finding arrangements that are beneficial for all parties or ‘levelling playing fields’. Rather, it is about allowing the market mechanism to select the firms that serve the interests of as many consumers as possible to the greatest extent possible, while weeding out those which fail to do so.

WhatsApp in particular is the most popular instant messaging service amongst South African smart phone users; around 80% of them use WhatsApp regularly. While other services like MXit and BBM preceded WhatsApp, its design has been so favoured by the cellphone-using public that it has captured significant market share from its competitors. It works on multiple platforms, is able to transfer photos, facilitates IM group chats and, more recently, allows for the transfer of voice recordings and calls. It truly is an excellent, user-friendly application that maximises the utility of cellphone users’ mobile connections.

Regulation arbitrarily restricts the process of maximising benefit to the consumer. When Big Business calls for ‘regulation’ in the ‘public interest’, what they really seek to do is place large burdens – mostly the cost of compliance – on competitors. In the context of this proposal, the motives seem almost punitive. The exact form of the regulation sought by these large networks is not immediately clear, but based on their comments, they want OTT services to contribute to the cost of network infrastructure. It is reasonable to assume that such contributions would be levied through licensing and other fees.

The self-interest of all people – those running businesses included – is a given. The danger of Big Government is its ability to designate and enforce rules selectively, according to the whims of Big Business. Rather than advance the ‘public interest’, this power is invariably used to promote special interests.

It is worth mentioning that not all mobile networks want to leverage the power of government to work in their favour, though. In response to its competitors’ requests, Cell C has laudably rejected the idea of regulating OTTs. In CEO Jose dos Santos’ own words, “Contrary to [their] competitors, Cell C has been embracing the services offered by OTTs.” Moreover, he states that Cell C “strongly [believes] that [OTT regulation] could be to the detriment of the industry and consumer at large.” Cell C’s perception of OTT content as a business opportunity, rather than a threat, is why they tailor their services around these applications instead of lamenting their existence.

What the parliamentary committee will decide remains to be seen. The natural inclination of government and those in power, however, is to extend their influence and oversight as far as possible. We can only hope that the unholy alliance of Big Government and Big Business will not be strengthened in the coming months.

An ardent supporter of personal responsibility and freedom, Nic enjoys thinking and writing about all sorts of things: economics, Critical Theory, culture, and current affairs. He is a fourth-year actuarial science student at the University of Cape Town.
Favourite economist: Mises or Rothbard.
Favourite political philosopher: Thomas Sowell