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WhatsApp and Netflix, should they be regulated as telecommunications companies?

Technology is advancing by leaps and bounds and, with it, technology companies are beginning to blur the boundaries of services offered by big tech calls such as Netflix, Whatsapp and Spotify, compared to telecommunications companies such as Telcel, AT&T, Dish, Megacable, among others. others.

This situation can be seen in content and messaging services, where video and audio streaming platforms, such as Netflix and Spotify, and messaging platforms, such as WhatsApp, already interact in the markets of cable and mobile phone companies, creating competitive pressure. This situation becomes more relevant due to the changes in consumption habits that consumers are presenting.

Maryleana Méndez Jiménez, general secretary of the Inter-American Association of Telecommunications Companies (ASIET), revealed that from 2012 to 2017 the business and service models of technology companies began to show signs of a substitution of services.

For example, international calls via telephone decreased 17% while those made through digital platforms increased 354%; meanwhile, the category of messaging through traditional SMS decreased 17% while in apps such as Whatsapp they increased 967%.

In this sense, the expert assures that although it is data from several years ago, it is likely that with the pandemic the use of communication services by technology companies has increased and that of mobile phone companies has decreased.

“In Brazil, 61% of its inhabitants prefer to make calls through WhatsApp instead of the mobile service and only 39% prefer the mobile call; that is, those service frontiers are starting to fade ,” he warns.

Regulatory experts agree that it is necessary to review the regulation of both actors , since messaging technology companies such as video on demand operate without clear rules while telecommunications companies such as mobile telephony and pay TV are governed by rules to avoid practices anticompetitive.

Currently, telecommunications companies are subject to regulations that include taxes for the right and use of the spectrum, fines for non-compliance, consumer protection in terms of privacy and quality of services, while OTT (or free transmission service ) are only subject to payment of Value Added Tax (VAT) and Income Tax (ISR), but both are charged to users.

“A symbiotic relationship is developing between OTT operators and telecom operators. The idea for the topic of voice and messaging is to level the playing field between both actors, either by regulating OTTs or deregulating operators with fewer obligations in order to level the game”, assured Javier Morales Fhon, consultant in trends at market in America and at a global level in Cullen International.

For Martin Peitz, Professor of Economics at the University of Manheim and director of the Center for Competence and Innovation in Mannheim, Germany, he assured that the replacement of traditional telecommunications services with respect to technological ones will depend on the access and technological skills of the nations ; however, as more and more people enter the digital world, regulators need to explore options so that telecom companies are not reduced to ‘pipelines for digital services’.

Pay television and telecommunications companies, in order to face the new technological competitors, have decided to ally themselves with them through their bundling strategies in order to retain their users and not lose relevance within their markets.

Miguel Flores Bernés, Lawyer at the law firm Greenberg Traurig, LLPl, recognizes that video and audio platforms are growing rapidly and breaking through borders, which generates a regulatory imbalance, but, due to the fact that technological markets change constantly, it is complicated to generate a regulation.

“It seems to me that in Mexico we are not yet ready to prepare a regulatory framework, but we do have instruments such as market research to identify barriers to competition or the existence of essential supplies and we must take advantage of those mechanisms that we have,” says Flores.

What are other nations doing?

Undoubtedly, the development of the services of technology companies is forcing the world’s regulators to rethink the rules of the game, but it is complex because new business models quickly emerge that do not allow us to glimpse if they can become a barrier in the future to the competition.

However, what antitrust entities worldwide are analyzing is to achieve a level playing field between telecommunications companies and OTTs.

For example, in 2020, the Indian regulator assured that it was not necessary to regulate the platforms, but due to their development and use in the markets, it has recently published a public consultation to establish a new telecommunications law to regulate OTTs as telecom services , which would subject them to the same licensing and legal establishment requirements, end user verification and consumer data collection, one of the main assets of these companies that allows them to develop new business models.

While in Korea, it has forced its platform called Kakao to pay double the use of telecom operators’ networks, that is, both companies and the government. This also happens with Netflix and Google.

Telecomm its history and transformations

In 1986, Telégrafos Nacionales was created, whose origin dates back to 1851, the year in which the first telegraph line between Mexico City and Nopalucan, Puebla, was inaugurated.