Malaysia Tech Week 2019: Telcos call for regulation of OTT players

• Both consumers and OTT players should be taxed
• Regulation timing is key so innovation is not stifled

FOR better or for worse, over-the-top (OTT) players such as Skype, iflix, Netflix and WhatsApp are here to stay, if the players and consumers have their way.

Malaysian telco chiefs however, believe that it is time these players are privy to regulations, similar to how telcos are regulated in every country.

Recent media reports point to Spain and India indicating that they will regulate OTT players, however no such move has been made by regulators in the Southeast Asian region.

In a panel session titled ‘Cracking the Over-The-Top Code and Going Beyond’ at Malaysia Tech Week 2019 from June 17 to June 21 yesterday, moderator and iflix CEO Mark Britt asked the panel of Malaysian telco chiefs if Malaysia should follow other countries in the regulation of OTT players.

Time dotCom Bhd chief executive officer Afzal Adbul Rahim replied: “The answer is ‘yes’. Should a country have consumption tax? If there is a consumption tax, both the consumer and provider should be taxed for it, I think OTTs have had it good for too long.”

Maxis Bhd CEO Gökhan Ogut concurred. He believes that while technology and innovation in the OTT space have leapt forward as in any other industry, this space has reached a maturity level and therefore requires regulation.

Celcom Axiata Bhd CEO Idham Nawawi held a slightly different view, although he did not dispute their point.

“Too much regulation stifles innovation,” he said, adding that at the same time, as a telco providing data, voice and messaging services is regulated, a provider providing similar services should be subject to the same regulations. The challenge, he said, is striking the fine balance of introducing regulations at the right time, so as not to stifle innovation.

Earlier, the telco CEOs spoke about what keeps them awake at night, what with industry revenues declining and consumer demands increasing.

Idham noted that globally, the telco industry growth has flattened. “But while this has happened, it is an industry that has to continue investing, which is a conundrum that all of us face.

“The industry in the past few years has been out-innovated by OTT players. We have seen our share of the pie such as SMS which was once in the billions and is now nothing. The whole industry has changed. Demand is growing but the price is going down. How do we make this industry more sustainable? How do we continue being a part of the society and have a win-win for the industry, consumers and regulators?”

He added that what keeps him awake is whether they are making enough investments at the right time in innovations so that they are not out-innovated by the OTT players.

Time’s Afzal believes that the tech industry has brought about the greatest scams. “Remember Y2k, where all computers would die in the year 2000? 5G is the latest. The real innovation happens not with telcos but with switch manufacturers and providers, they’re the ones. The real innovation happens there.”

He highlighted that Time is a fixed-line provider, where the telcos profits are greater than their revenue. “My view is that we should stick to what we know, give the best Internet experience. We shouldn’t get involved in digital and OTT and should just focus on doing what we do, building a pipe,” he asserted.

Digi.Com Bhd chief executive officer Albern Murty says their vision is simply connecting customers to what matter most to them. “Our responsibility is to provide that connectivity. What keeps us up at night is our own potential complacency and performance.

“We can’t control everything else, the world is moving in different directions. It’s up to individuals and organisations to continue to innovate and that’s what keeps me up at night,” he shared.

The future role of telcos

Yet moderator Britt pointed out that there is a fear of telcos becoming a dumb pipe, with prices decreasing and investments increasing, whereas OTTs have low capital expenditure and investment and very few regulatory constraints.

Afzal shared that five years ago, Time and iflix wanted to collaborate on an OTT service. However, he soon realised that iflix founders Britt and Patrick Grove were the digital natives and not a company like Time. “We had to write off RM20 million worth of investments,” he said, saying to Britt that “people like you are causing the problem”.

Having said that, he added that his lesson learned from that experience was not to be something you are not. “We are quite happy being a dumb pipe provider,” he said.

Maxis’ Gökhan said however, that there is a still a lot of room to grow for telcos, and that the pipe is not yet complete.

“We’ve just been able to connect handsets but there are still millions still not connected in Malaysia, we haven’t connected cars, the agriculture industry and it’s us the telcos who will be building the pipe. 5G will be the enabler to connect everything,” he added.

“OTTs and telcos are different, we can try to become OTTs but again, there is room for telcos to help OTTs so consumers can have a better OTT experience. The numbers and choices of OTTs are also increasing and consumers need help to choose and us to deliver the best experience to them,” Gökhan pointed out.

Celcom’s Idham highlighted that the way consumers are using mobile networks has changed. “The network cannot be so dumb, so there has to be some evolution,” he said, pointing out also that telcos have moved from a network supporting voice to video.

“More than half of our network is being consumed for video. Therefore, our network has to evolve in that direction. Does it mean we continue to be as we are today? We need to be smarter to adapt to the demand of consumers. There is a lot that needs to be done, but I don’t fully subscribe that we are a dumb pipe, there has to be some evolution as applications are changing.”

Albern of Digi noted that innovation has actually driven the telco industry and that there is still lot to do in terms of digitisation surrounding the customer experience.

“One way is to get customers to appreciate being connected to apps, services and OTT services. Improving the experience of customers has to take place via digital means. Ease of experience will guarantee you the loyalty of your customer base,” he explained.

He also pointed out that the monetisation of data is challenging, with the content and OTT players. “That’s where the competition will be more intense and there will be a lot more competitors in this space. And regulations will catch up in that space as well.”

“That’s where innovation will return and as long as we continue to drive innovation, we will continue to grow. I think we’re so caught up in terms—OTT, dumb pipe—I think we are all Internet service providers. We provide the Internet, and there’re layers of services on top that customers can subscribe to.”

Telcos playing in the OTT space

Despite him repeatedly saying that telcos should do what they are best at, Afzal conceded that some telcos have successfully set up an OTT arm, referring to Axiata Group’s foray into the space via its subsidiary Axiata Digital Services.

“Personally, I once thought that Boost was a waste of time. Recently, Boost has been valued at RM1.4 billion,” he said, referring to one of the company’s successes.

“Actually, what is the next role of the telco? Can it be a venture capital fund like Axiata Digital -- can an OTT authentically be borne out of an operator although their priorities are very different?” Afzal asked his fellow panel members.

Celcom’s Idham reminded the audience that Celcom’s former personal entertainment platform Escape didn’t work out for them in the end. However, when their parent company Axiata Group created Axiata Digital Services as a separate entity, it produced three unicorns from FSI [financial services institution], advertising and API services.

Maxis’ Gökhan however, believes that it is “better to keep OTT players and telcos separate and let everybody do what they do best,” he opined.

Telcos split on 5G views

The telcos were also asked for their views on 5G and its outlook. Britt posed this question to them: “Is 5G the biggest scam in history or the next transformational moment to bring sustainability back to telcos?”

Digi’s Albern believes that timing is important. “With the 5G launch in Malaysia recently, we were able to see the potential and what’s to come. However, consumers need to realise that it won’t be available immediately, it will be progressive.”

Afzal adopted a different view. “5G is a scam, 3G and 4G couldn’t deliver but we will deliver and may charge you more for it, is what the telcos are saying. There is a spectrum war and so they are taking all these positions and that is why GSMA is pushing for it globally. It is a spectrum fight with the government.”

Celcom’s Idham however, while acknowledging that 5G is hyped, believes that it will eventually arrive. “What’s important is not just building network and getting spectrum. Industries will get involved, they have to be ready to use the network. If businesses and consumers are not ready, the last thing we want is for merely faster downloads. Education is important; 5G will come and it is a matter of time.”

Maxis’ Gökhan was equally optimistic. “We have seen 3G and 4G; the latter made social media more widespread. I am optimistic that 5G will be the greatest thing that ever happened, but it will take time. We should not be late in the race,” he concluded.