Publications

TOWARDS A BETTER REGULATION OF INTERNET-BASED COMPANIES RENDERING OTT SERVICES TO NIGERIANS

By Allen Uche Amadi

1.0 Background

Sometime in 2018, Mobile Network Operators (MNOs) in Nigeria approached the Nigerian Communication Commission (NCC) to subject to regulation, over the top (OTT) services rendered by some internet-based companies. The reason for this approach was predicated on the loss of revenue of Telecommunication companies to internet calls. These Internet-based companies do not incur running cost in Nigeria similar to the MNOs hence can render internet call services at “no cost”. The NCC declined that request citing the public policy against stifling of technology and the internet neutrality code as reasons.

I do not propose a stifling of technology. I merely argue that the definition of communication services under the Act when properly construed, admit of OTT services. If it is illegal to render communication services without a licence, then OTT service providers not operating in Nigeria should be banned till licenced. A new legislation to amend the Act is not necessary.

Alternatively, should the above position be jettisoned, I am of the firm view that real data protection will be impossible without regulating these OTT service providers. My view is that MNOs should be given a fighting chance by the recognition and consequent regulation of OTT service providers by the NCC. What’s more, the Nigerian State can also earn revenue from tax of OTT services providers given that data is now more valuable than crude oil. For one thing, some OTT service providers make money off Nigerian consumers via collection and resale of data, or collection and use of data for targeted advert and even outright commerce with Nigerian consumers; hence these services are not free to Nigerians.

A school of thought predicts doom for Nigeria if all Internet-based companies should boycott Nigeria hence a relaxed or no regulatory regime over them. To this, my reply is that the world is going “Nationalistic” again. China has successfully implemented the above. The EU has a data legislation to protect her own; same with the United States of America and lately, Indonesia has expressed such intention. Nigeria, having the population and market, should not be an exception.

It should worry us all what would happen if this regulation is not in place. It might defeat the Network Neutrality Code for Internet Service Providers –allegedly it is already happening as internet calls often hardly connect and not without unstable internet signals.

If some of the terms used above are ambiguous, do not leave yet. The definition of terms is under the next heading. To these we now turn.

2.0 Definition of Terms

In the course of this article, certain jargons and terms would recur. For consistency and clarity;

Application Services shall mean “services involving short messages, voice call, electronic mail, online conversation, financial transactions service, commercial transactions, digital platform, data storage and mining, search engine, game, social networking and media, whether these services are offered via the internet based company’s internet, the internet of a telecommunication company in Nigeria or even a software.

Content Services shall mean “the provision of digital information in form of text, sound, image, animation, animation music, video, movie, game, or combination of some and/or all, including streaming or download by utilizing internet access service through telecommunication network operator”

Cookies shall mean “that program that holds your identity when you visit a website with a view to identifying you again when you revisit the same website. It often takes tally of the words you use frequently on search engines and predicts them to you when you type some letters”

Over the Top Services (OTT) shall mean “Application services and/or Content services via the internet. OTT service providers are companies engaged in rendering OTT services whether directly in a country or indirectly through an agent.

Bandwidth Management shall mean “a process conducted by Telecommunication operators to manage internet traffic which includes service traffic quota, priority access for certain service on certain time, and/or other traffic engineering.

3.0 The Nigerian Communication Commission Act

The objectives of the Act include:

• To promote the implementation of the national communications or telecommunications policy as may from time to time be modified and amended;

• To promote a regulatory framework in the Nigerian Communication sector committed to effective, impartial and independent regulatory authority;

• To encourage local and foreign investments in the Nigerian communications industry and the introduction of innovative services and practices in the industry in accordance with international best practices and trends;

• Ensure fair competition in all sectors of the Nigerian Communication industry and also encourage Nigerian participation and ownership, control and management of communications companies and organisations;

• Protect the interest of service providers and consumers within Nigeria

By Section 31(1) of the Act, it is unlawful to operate a communications system or facility or provide a communications service in Nigeria unless authorized to do so under a communications licence or exempted under regulations made by the Commission under this Act.
Section 157 of the Act defines communication service to mean any communication, whether between persons and persons, things and things, or person and things, or persons and things, in the form of sound, data, text, visual image, signals or any other form or any combination of those forms.

Internet messages are stored and transmitted in data units of bits, byte, mega and gigabytes. They are a form of data but translated into text, images and/or signals on the device they are viewed with. The MNOs are conduit pipes for these data transmission but do not generate the content or applications. It is clear enough that OTT service providers providing either the content or applications are the real persons rendering communication service and are already caught up by a combined reading of Sections 31(1) and 157 of the Act.

It is incumbent on MNOs and interested parties to take out a mandamus application to compel the NCC to do the needful.

4.0 Regulation of Internet Based Companies

The popularization of the internet in the late 90’s led to a proliferation of IT and internet-based companies’ often nicknamed “Silicon Valley Hub” companies. These companies earn huge revenues and remit substantial amounts in taxes to their domicile countries.

4.1 The Indonesian Approach

Indonesia embarked on an expression of intention to regulate Over the Top services not domiciled in Indonesia. We shall examine their strategies with a view to adopting some. The proposed regulation would be made to provide legal certainty, foster healthy competition, protect the consumers and preserve the sovereignty of the country. We need a comprehensive Data Protection Law, fair playing field between Telecoms companies and Internet -based companies as well as a robust Antitrust law between players in the sector. Given that a huge amount of data gets exchanged on this internet based companies, it has become inevitable to regulate them.

Interestingly, the Proposed Indonesian Regulation states that recognition shall only be given to OTT service rendered either by individuals, business and public institution in Indonesia. By this provision, any entity desirous of having its OTT services operate in Indonesia must be an Indonesian or an Indonesia registered business or company. The same goes for OTT service providers, whether foreign or National. The provision of OTT services in Indonesia is preceded by a registration. Some of the documents accompanying a registration include a Tax Identification Number, a list of the types of OTT services rendered as we as well as an information call center.

The obligations imposed on the OTT service provider would, if enacted in Nigeria, midwife the solution to a lot of National problems. It reads:

Article 5

(1) OTT Service Provider shall:
a. complies to rule of regulation in:

i. prohibition of monopoly practice and unhealthy business competition;
ii. trade;
iii. consumers protection;
iv. intellectual property right;
v. broadcasting;
vi. film;
vii. advertisement;
viii. anti-pornography;
ix. anti-terrorism;
x. tax;
xi. transportation and logistics;
xii. tourism and hospitality;
xiii. finance;
xiv. health; and/or
xv. other rule of regulations.

b. conducts data protection and data privacy;
c. conducts content filtering and censor mechanism;
d. utilizes national payment gateway, particularly for paid OTT Service;
e. guarantees access for lawful information interception and evidence collection for investigation or inquiry needs for criminal case by law enforcement;
f. lists information and/or guidance of service in Bahasa Indonesia; and
g. gives statement letter/information/data in Provision of OTT Service upon request from the Minister.

(2) Obligations as intended in paragraph (1) letter b through letter f shall follow rules of regulation.

Interestingly, OTT service providers will be mandated to operate a bank account with a bank in Indonesia where the sales and delivery proceeds from their operations in Indonesia are held as well as maintain the services of Indonesian lawyers. With regard to data storage, the regulation will mandate OTT service providers to keep a transaction of records of data and traffic of OTT services of the preceding 3 months and whenever a law enforcement request for trial process is made, the OTT service provider shall keep records of data that is directly relevant to the request until trial process is ended and/or court decision has permanent legal power.

OTT service providers can enter a Joint Venture with a Telecommunication Operator in organizing provision of OTT services. Interestingly, Indonesians could claim damages from OTT service operators for loss suffered by users for failure and/or negligence of OTT service provider. I wish to point out here that I do not subscribe to the over-involvement of the Indonesian government in the regulation of the OTT service sector. I believe market forces should determine the tariff.

As a positivist, I believe that law without the pain of sanction is something short of law –perhaps quasi morality. Article 18 of the regulation provides for sanctions. The veritable tool for sanction is Bandwidth Management Sanction. When an OTT service provider violates the regulation, the Minister may impose bandwidth management sanction, or the Telecommunication operator involved in a Joint Partnership with the OTT service provider may impose the sanction. The OTT service provider affected can appeal to the Minister in writing within a stated period. With due respect, I do not subscribe to this approach. The Minister is too powerful to administer and also adjudicate on compliance of requirements under the Act. If I were to suggest to Nigeria, I would suggest that a special tribunal be set up or that the Federal High Court be vested with the only and final power to adjudicate on Bandwidth sanctions.

5.0 Way forward

An Originating summons at the instance of the MNOs should be filed before the Federal High Court seeking interpretation of the NCC Act along the lines of the argument canvassed in this article. An expert opinion should be led to show that Over the Top Services are Communication services. It should be strongly canvassed that if they are to be rendered to Nigerians within Nigeria, then the OTT service providers should either have a Permanent Establishment or a Service Contract with the MNOs as doing otherwise would be illegal. The “same service, same licensing” principle should ensure that OTT service providers be regulated as MNOs incur costs providing machinery in Nigeria, employment, tax revenue to the government as well as Corporate Social Responsibilities. The solution lies in recognizing OTT companies as Telecom companies and insisting they get Nigerian licenses to operate in Nigeria. In the alternative, MNOs can be given the freehand to bill OTT services as regular calls or video messages or place a higher tariff to data. Further, OTT companies might be mandated to sign a revenue sharing agreement with MNOs in Nigeria for interconnectivity. MNOs are also encouraged to descend into the OTT arena and render combined voice, short message, video as well as IPTV services at competitive prices for sustainability.

Leave a Reply

Your email address will not be published. Required fields are marked *