The rationale to regulate may be there but the effort and cost is too high, with few prospects of success.
Pay TV service MultiChoice has called for the regulation of Netflix, the video streaming service delivered over the internet. MultiChoice claims to have lost over 100,000 in recent times – and it attributes the loss to Netflix’s entry into the African market without a license.
The basic argument is that as a regulated broadcaster, MultiChoice has to pay licence fees, build and roll out infrastructure and employ local citizens in each of the host nations where it sets up its operations.
On the other hand, Netflix does not need to incur any of these costs and simply comes into your living room or mobile phone, courtesy of any internet link from internet service providers (ISPs).
The costs incurred by MultiChoice are obviously going to be reflected in higher prices for its services compared with Netflix. Essentially, if and when it comes to price wars, MultiChoice will never win against Netflix, given these overheads.
NOT AS REASONABLE AS IT SOUNDS
Hence, the “SOS” call for the regulator to bring Netflix under its ambit and hopefully extract or enforce similar licensing conditions in an effort to level the marketplace for all the players.
This sounds fair and reasonable. Except that it is not.
It is not possible to regulate Netflix in the same way traditional broadcasters are regulated, simply because Netflix belongs to a branch of services known as Over-the-Top (OTT) services.
OTT services ride on the internet to deliver experiences that are similar to those of traditional services. The list of OTT services is huge and continues to grow daily. The include Skype calls, WhatsApp, email, and taxi apps.
Calling upon regulators to police Netflix is as good as calling them to regulate email, Skype, WhatsApp or taxi apps. The rationale may be there, but the effort and cost of regulating such services is simply too high, with few prospects of success.
This is because the internet is by design driven by a censor-resistance protocol – meaning that for every single attempt to block or disable it, there will be ten or more mechanisms to overcome such an attempt.
GOOD MONEY AFTER BAD
Of course if you are a dictatorship with a huge supply of resources, you could embark on blocking or censoring internet services, with some limited success.
But for smaller economies, trying to regulate OTT services – such as what Uganda is currently trying to do – is simply throwing good money after bad. You end up losing more value than what you hope to gain.
A better approach would be to create an enabling environment for Kenyans to come up with their own versions of Netflix, WhatsApp, Skype, taxi apps or whatever else that is going to disrupt traditional services.
This indeed has become the new role of regulatory authorities in the more developed economies. They do not try to block competition but to grow the next big competitor or disrupter.
Regulation is increasingly more about disrupting the playing field rather than levelling it. And the simple reason is that the competitive field keeps changing and no one even knows which field is currently being played on because of convergence in technologies.
THE EXPERIENCE OF BANKS
Ten years ago, banks were where MultiChoice is now. They complained bitterly against telecoms, which they perceived as having sneaked into their market space through mobile money transfers.
They called upon the Central Bank of Kenya to put the telcos under the traditional stringent banking regulations in the spirit of levelling the playing field.
It was a good thing the CBK ignored that call and subsequently the banks learnt the hard way that it was better to collaborate with mobile-money operators than to try and block them.
Perhaps MultiChoice can learn a thing or two from that past experience.
Mr Walubengo is a lecturer at Multimedia University of Kenya, Faculty of Computing and IT. Email: email@example.com, Twitter: @Jwalu