26 January 2016

1. Policy and Regulatory Options for Over-the-Top ServicesPresentation to the Portfolio Committee on Telecommunications and Postal services 26 January 2016

2. POLICY REVIEW PROCESS (4 STAGES) FRAMING PAPER GAZETTED DISCUSSION PAPER GAZETTED GREEN PAPER GAZETTED WHITE PAPER April 2013 November 2014 January 2014 March 2016 * UNDERPINNED BY INVITATION TO STAKEHOLDERS TO PARTICIPATE * WHOLE OF GOVERNMENT APPROACH

3. Core approach

4. Objectives

5. Over-the-Top Services (OTT) • Open Internet (Net Neutrality) - OTT; • Several submissions received on Net Neutrality/OTT during the Green Paper and Discussion paper consultation process; • Stakeholders raised various policy and regulatory issues pertaining to Net Neutrality/OTT.

6. Definition of Over-the-Top Services • What is OTT services: OTT refers to services provided over the Internet rather than solely over the provider’s own managed network. • The user’s ISP/telco is not involved in the supply of an OTT service • Examples of OTT Services include: Chat applications (WhatsApp, WeChat, Facebook Messenger); Streaming video services (Netflix, Amazon Prime, YouTube); Voice Calling and Video chatting services (e.g. Skype, Facetime) • OTT players which rely on IP based networks to reach their customers do not make any direct contribution towards the cost of providing it;

7. Over-the-Top Services • The following points about OTT services, which have been put forward by the ITU (ICT Regulation Toolkit: Regulating ‘Over-the-Top’ services): • Proliferation of content and applications services is to be welcomed (add utility for users). • Change is inevitable. As network operators migrate to next generation networks, voice services will become software applications riding over the network. During this transition, policy-makers are finding different paths to balancing innovation, investment and competition. • Regulators cannot hold back the tides of change to maintain the status quo. • These changes are disruptive and inconvenient for those with a stake in existing arrangements, but the benefits of change outweigh the costs. • Regulators generally support innovation. They prevent fixed and mobile operators from blocking or degrading competing services.

8. Net Neutrality Defined • OTT discussions: broader policy issues of Net Neutrality and Open Internet; • The European Parliament defines a net neutrality policy as a set of rules that ensure Internet traffic is: “treated equally, without discrimination, restriction or interference, independent of the sender, receiver, type, content, device, service or application”; • Such a policy could also specify that no preferential treatment should be given to any data and include requirements relating to equal charges regardless of user, content, site, platform, or mode of communication. • Key Policy Issue for South Africa is: Should OTT be regulated or Not? Should we put in a place a Net Neutrality Policy?

9. International Benchmarking on OTT regulation A number of jurisdictions have introduced net neutrality policies, including Chile, USA, the European Union, Brazil and the Netherlands etc. Chile • In 2010, Chile introduced net neutrality principles in its National Telecommunications Act; • Telecommunications Act states: “No [ISP] can block, interfere with, discriminate, hinder, nor restrict the right of any Internet user of using, send, receive, or offer any content, application, or legitimate service through the Internet, as well as any activity or legitimate use conducted through the Internet.” • Chile further banned “zero-rating” in May 2014.

10. International Benchmarking on OTT regulation Netherlands • In 2011, The Netherlands became the second country globally to introduce net neutrality principles into a law; • The law prevents mobile operators from blocking or charging consumers over and above the regular data charges, for using VoIP based apps and other internet-based communication services. • Zero-rating access deals are also outlawed in the Netherlands.

11. International Benchmarking on OTT/Net Neutrality policies United States • In the USA, for example, network carriers have reacted to OTT; • When Apple’s iPhone was released, AT&T imposed a restriction on VoIP services over its 3G network; • However, due to pressure from users and the US regulator, the restriction was finally lifted; • It is understood that US providers have realised they can’t fight that battle, and that they should content themselves with reaping the benefits of offering good 3G and 4G connectivity for those who use OTT services;

12. International Benchmarking on OTT/Net Neutrality policies United States cont.. • Some network service providers even have their own OTT service (which is finally not really OTT, but rather an alternative to it), with favourable rates to its customers; • In March 2015, the FCC released new internet rules on which further strengthens the network neutrality concept in the US. These rules, called as bright-line rules are: • No Blocking: broadband providers may not block access to legal content, applications, services, or non-harmful devices; • No Throttling: broadband providers may not impair or degrade lawful internet traffic on the basis of content, applications, services, or non-harmful devices. • No Paid Prioritization: broadband providers may not favour some lawful internet traffic over other lawful traffic in exchange for consideration of any kind—in other words, no "fast lanes.“ (Not yet incorporated as law though)

13. International Benchmarking on OTT/Net Neutrality policies India • The Telecom Regulatory Authority of India (TRAI) took a decision in August 2014 not to regulate OTT; • TRAI’s argument was that the mobile operators recover their losses through increased data revenue; • Mobile operators had claimed that the use of applications such as Skype and WhatsApp would annually cost them over US$822 million in lost revenue;

14. Written Submissions on Net Neutrality/OTT • Inputs from ICT Policy Review stakeholder consultation on Net Neutrality and OTT include: • Stakeholders that proposed a net neutrality policy raised concerns that if the policy framework does not enforce this, broadband providers might act as gatekeepers of content and use their last mile infrastructure to block internet applications, content (websites, services, protocols) and competitors by, for example, using deep packet inspection to discriminate between over the top content, services or applications • Others argued that this is a particular concern given convergence as, for example, network providers could themselves provide or partner with content services and limit access by audiences to competitors.

15. Written Submissions on Net Neutrality/OTT • Others expressed concern that “access tiering” would be introduced by broadband providers if a net neutrality policy is not developed. • This could result in a ’fast-lane’ for rich and powerful creators, and a ‘slow lane’ for less powerful users”. • Some proposed that South Africa follow the Netherlands model for full network neutrality; • Other stakeholders suggested that we adopt a slightly different approach, proposing that a net neutrality policy should require broadband providers to be transparent about their network management policies, thus suggesting that fair traffic management should be permitted; • The focus is on the need for transparency of traffic management policies and that providers should be upfront if they limited streaming from any media source.

16. Written Submissions on Net Neutrality/OTT • Others stated that service providers should “probably be prevented” from manipulating access to specifically harm a competitor but should not be stopped from providing more choice to customers. • All these written inputs have been earnestly considered in the process of drafting a National Integrated ICT Policy White Paper.

17. Policy and Regulatory Issues on OTT Consumer aspects: • Protection of rights; • Internet should be free and open; • Data protection and privacy Competition aspects: • Promote service-based competition (greater consumer choice); • Better pricing of services • To regulate or not to regulate ECS providers? Regulation of services and/or content and not entities? • Two licenses: ECNS (regulated) and ECS (not regulated), • Implication for vertically integrated players? • What is the real issue? Stimulate innovation or stifle it?

18. What are the Regulatory Issues pertaining to OTT/Net Neutrality • Economic aspects: who should pay, and for what? Consumers currently pay for: bandwidth, IP no’s and equipment's. Cost of communications • Technical and regulatory Issues: transparency, non-blocking, throttling, reasonable speed, traffic management for congestion. Where is the dividing line for traffic management? In what instances might regulators interventions be justifiable? • Technological aspect: embrace technological developments and encourage more innovation

19. Policy making • Facilitate the availability, accessibility and affordability of ICT services • Consumer protection • Embrace market developments and digital opportunities • Create a competitive and enabling policy environment • Promote investment and innovation • Policy need balance innovation, investment and competition • Consider the benefits of change vs. costs

20. Thank you… Making South Africa a Global Leader in Harnessing ICTs for Socio-economic Development