It’s Time For OTT’s To Pay Their Way (Denis O’Brien, Chairman and Founder, Digicel)

The build-out of new networks needs everyone to contribute.

When you look at regulation around the world, little has altered in the last 25 years. Yet there has been a profound change in communications technologies and people’s means of accessing them.

Smaller countries need lighter touch regimes, particularly when faced with ‘over-the-top’ providers that compete in similar services, such as voice and video-calling, but who are not currently subject to regulatory oversight.

As the largest network operator in the Caribbean we pay regulatory fees and taxes of up to 30% of revenues.

In Haiti there are 5 million Facebook users in a population of 11 million. Facebook pays no regulatory fees, no taxes and employs no one in Haiti. My company, Digicel, has a staff of 1200, supports thousands in the supply chain and pays tens of millions of dollars into Haiti’s exchequer. We are happy to do so as Haiti needs this money. For example, the Haitian government’s total spend on healthcare for 11 million people was US$73m in 2020.

Communications Networks have to be constantly upgraded and expanded but we are paying for these networks to be used by content providers such as Netflix which is costing us a small fortune.

Many countries are constrained with outdated rules on net neutrality that prohibit differentiation and therefore charging wholesale level network users.

We have already seen a South Korean operator, SK Broadband, suing Netflix to recover costs from their network traffic.?In the US, which is moving away from net neutrality, networks have the scale to self-fund in a way that isn’t possible for much of the world. The US economy is wealthy whereas in the developing world, economies are challenged and telecoms network providers have a never ending spend on capex.?The Telecoms industry has new and tighter investment cycles as never before – i.e. 3G to 4G to 5G in the space of five years. For networks to be spending 20 per cent of their revenues on technology roll-outs is not sustainable.

In Africa alone an estimated $450 billion investment is needed in order to bring internet connectivity to unserved and underserved regions. ?There is now a coalition of like-minded people who have concluded that content and services companies need to be brought into a framework where they pay in the same way as everyone else.

Our proposal is in two parts. At the heart of it is the need to create the infrastructure budgets that are required. Firstly, we need to move away from spectrum auctions. These reduce build-out budgets and are, in effect, a tax on new infrastructure which hits less well-off economic geographies the hardest. It is counter intuitive.?Instead, spectrum should be allocated based on roll-out commitments, with failure resulting in fines.

Secondly, content companies that use networks should have to contribute a proportion of their revenues to an infrastructure fund.

Regulators would require the companies to register in the country of operation, open an office, register for tax and freely provide data on user numbers and revenues. This information would then be used to calculate an appropriate contribution.

One objection from the OTT platforms will be that they are already spending money on infrastructure. However, this is entirely directed at building and connecting their own datacentres rather than enhancing local networks for consumers.

These ground breaking proposals are set out in a new Report adopted by the ITU/Unesco Broadband Commission for Sustainable Development on ‘21st Century Financing Models for Bridging Broadband Connectivity Gaps’.

We have consistently argued that a virtuous circle will be created by everybody contributing funding. As the network grows, content providers will have access to more customers, citizens will enjoy better services, and costs and revenues will be more fairly shared. As a next step a working group of regulators, network providers and content providers, should be convened by organisations such as the African union and organisations in other regions of the world to work out a new structure of regulations.

Most people accept that connectivity should be viewed as a human right, as we do running water. The clock is ticking on the broadband deficit. ?If it is to be closed we need to let go of ideas based on the past and embrace thinking that looks forward to the next twenty years.

Over 3.5 billion people still have no access to the Internet and are excluded from the digital world.?This cannot be allowed to continue.?The global community must collectively prioritise closing the digital divide just as it is acting together to address climate change. ?