Facebook's Internet.org offering will inevitably come to SA because of the country's low penetration rate - but operators should rather embrace the over-the-top offering and not see it as a disruptive threat to current business models.
Yesterday, the project - a partnership that aims to make affordable Internet access available to the two-thirds of the world not yet connected - launched in Tanzania, in partnership with Tigo. This move follows a launch in Zambia in conjunction with Airtel.
Although Facebook has not confirmed plans to go live in SA, analysts believe this is inevitable, given the low penetration rate. Facebook says it would like to bring the Internet.org app to more countries later this year, but has no specifics to share.
The bulk of mobile operators have come out against over-the-top (OTT) players, seeing them as cannibalising their networks for profit. So far, only Cell C has accepted that OTT is inevitable, moving to embrace the communication evolution rather than push back, while Vodacom and Telkom have chosen to portray it as a threat to their core business.
Ovum analyst Richard Hurst says there will be a lot more disruptive players entering the market, and it is not a nice time for the big cellular operators. He notes they are under increasing pressure as voice revenue is eroded - replaced by lower-margin data - and regulators clamp down on costs.
Hurst notes it makes sense for Facebook to enter SA, but the social media network is more likely to partner with a smaller network. "Cell C springs to mind," he says, given the operator's open approach to OTT players. "The 800-pound gorillas won't want this petty fly buzzing around them."
World Wide Worx MD Arthur Goldstuck notes, with SA's overall 33% Internet penetration rate, there is no question Facebook will land on SA's shores, although it is currently focusing on economies with the greatest need. He says it makes more sense for it to partner with a network with the biggest infrastructure, but if no one else will sign up, Cell C would be an option.
Not wanted
Cell C - SA's third operator - has made the data cost of using WhatsApp free on a promotional basis, although this could be extended. Executive marketing head Doug Mattheus also indicated the operator was open to future partnerships with other OTT players, which includes voice over IP (VOIP) services.
The operator's move is in sharp contrast to the stance taken by Vodacom - SA's biggest mobile company with 34 million subscribers. The operator's head of innovation, Jannie van Zyl, has said OTT services are becoming increasingly data-hungry, which could impact its revenue stream and ability to invest. "At some point, these networks have to be paid for."
Van Zyl noted OTT disrupts networks at both the core and services level, with companies like Facebook and Google looking to provide connectivity in unregulated environments, while operators can only work with OTT players that offer paid services. "OTT players are using our own services to cannibalise our own services."
Richard Majoor, Telkom's head of regulatory affairs and public policy, has called for the Independent Communications Authority of SA to regulate OTT players. Telkom points out smartphone use is growing, and OTT players are spilling over into voice offerings, with WhatsApp, which is well established in SA, having announced plans to offer voice calling, and Google Hangout VOIP already available.
Inevitable
Hurst notes Facebook is losing popularity among young users, and it makes sense for the company to expand its reach in emerging markets such as Africa and Latin America. Its app will provide more content to current users, and draw in new subscribers, making it a win-win situation, he adds.
However, Goldstuck says networks should not view apps as disruptive, but should rather provide effective data services, as the only time such players disrupt is when they take away voice revenue. "The whole point of their networks is to have data flow over it."
Facebook's app will boost the pool of people online, and give those with smartphones - but not enough cash for data - something to do with their phones, notes Goldstuck. He explains offerings such as SuperSport are there to entice people online.
Goldstuck does not anticipate more such providers coming into SA because Facebook has a "powerful vision" with Internet.org to expand the reach of the Internet.
Neither Vodacom nor Cell C responded to a request for comment, but Mike Fairon, MTN SA's GM of products and solutions, says it is not in talks with Facebook around the app.
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