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Net neutrality & mobile network operators: Are they startup kingmakers?

Last year, when I wrote that we should all be worried about the path we’re going down when mobile operators start to have influence what internet subscribers can have access and no one has a problem with it.

I wrote this because I was (and still am) worried that mobile operators, by making WhatsApp, Facebook and Opera individually priced lower than the regular internet we know, were having huge influence on what internet subscribers can access. Further, they were creating internet silos.

Today, it’s normal for someone to effectively say, “I don’t use that internet (Email, Facebook), please send it via that other internet (WhatsApp).” When I spoke to an executive at Econet about it he said ultimately they are doing a good thing by making a bit of the internet more accessible. He also said it wasn’t them picking what app to bundle up and offer cheap, the market does.

His explanation was that if an app is popular enough or there’s clear demand for it, they find ways to silo it and offer it at a flat monthly price. Like the WhatsApp bundles. This, he said, was the reason they didn’t have WeChat bundles. In short, they were not app Kingmakers; they’d just reward the most demanded one with a bundled service.

My argument to him had been that WeChat has no chance of success in this market if Econet are offering WhatsApp at a much cheaper price. The problem with that of course is that it’s Econet who decides what demand is, and that demand ultimately has to benefit them directly. But still, his indication that there was some meritocracy to it made me think it wasn’t as bad as it initially looked.

A recent development though shows that there’s no such meritocracy. The mobile operator does play the role of Kingmaker, as long as you’re able to convince them there’s money for them too if they bundled your app.

biNu, an app that lost much of its appeal locally to the extent they had lost more than half their subscriber base between 2012 and last year, was zero rated starting in December. Surely, I could count a number of web companies that have more than 53,000 active users.

The biNu business case is that by giving users access to cheaper data (while keeping rich content like videos, and sound files out of reach) Econet’s subscribers would access enough internet to hopefully ignite demand for the heavier expensive internet.

The biNu system, like Opera’s in Opera Mini, is super clever. But in a neutral world, biNu would have to make itself appealing enough to the consumers they’d use it to save their precious data. biNu wouldn’t need to go and beg Econet for a deal to access subscribers.

The precedent that it sets is that the operator becomes the gatekeeper of startup success. They can heavily influence the success or failure of a startup. At the very least they can attempt to be Kingmaker. Whether that succeeds or fails is another thing altogether.

God forbid if they happen to be your competition – say they decide to launch an eCommerce startup (which they have wanted to do for a while), you may have to contend with the reality that Econet’s eCommerce platform will be zero rated while yours will be 15 cents a megabyte for subscribers to reach.

Of course, if Econet only had a third of the mobile market, this wouldn’t be as big a deal as them having the +60% they have.

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Quick NetOne, Econet, And Telecel Airtime Recharge

16 thoughts on “Net neutrality & mobile network operators: Are they startup kingmakers?

  1. It is very dangerous to let MNOs have such great power in the digital age both in human rights terms (freedom of expression, and the right to choose) and economically (the very well reasoned Kingmaker argument above vis free market). You make a solid case for the Regulator to intervene here. having read a summary of the PORTRAZ report for 2014 one is left with a sour taste as it appears they are too engrossed in the stats (important as they are) and not the broader issues that come in the wake of the age of ICTs such as this Kingmaker status of MNOs. Are there any economists at PORTRAZ who look into these issues. Honourable Supa Mandiwanzira the new broom at the Ministry may have something to say after his experience of having to get one of the first commercial broadcasting icences after 32 years of ZBCs monopoly – at the rate things are going and judging by stats in favor of econet, the mno will likely grow and retain its monopoly whilst likewise singlehandedly killing off local start ups. We will obviously never have a local browser, nor local social media or messaging services because Econet has opted to ignore everything local and go international. Frankly the argument that econet takes on what the market wants is poorly reasoned. If econet wanted local start ups to stand a chance they could have easily and still can dictate that we consume local content over their platform. They choose not to. There is a case for a constitutional/legal challenge to this monopolistic and interventionist conduct

  2. Great post. What you’re discussing is just the tip of the iceberg of African operator gatekeeping. I don’t blame them for pursuing their financial interests, but still suspect that long-term positive effects for innovation in (local) digital content, software, and applications are stifled. Local loop unbundling for fixed-line broadband (a regulatory intervention) in Europe and the US was hotly debated and sometimes it was overdone ultimately stifling the operator’s infrastructure investment (eg, arguably in Germany), but by and large it was shown to be an effective means to stimulate distribution, application, and content innovation by increasing consumer choice and forcing down access prices. Econet and other African mobile operators are now in a similar situation to fixed-line operators in Europe before such unbundling regulation: they are deciding over access AND content/application distribution. I’m not saying regulation is the only answer, but operators currently don’t seem to be able to figure out broader collaborative business models together with app and content providers, to the detriment of app variety and the consumer’s choice. I touched upon this in my VC4Africa post:

    1. Great article. That is the fear of every start-up. I think this should be a major concern for Government if we are to have any breakout start-ups in Zimbabwe. I think you should have a net neutrality section on techzim and more information on it. The subject requires more information and needs tobe approached with a balance. Neutrality in its basic meaning is unattainable no matter what we do. However we need to have a balance an the MNO’s need a return on their infrustructure investment ….Got my head spinning now

      1. I think a campaign/petition is in order. Starting with one ECONET Subsidiary that supports startups, ZOL.

        What better place to start than one part of ECONET that wants to grow the tech space (ZOL) whose efforts are otherwise eroded by Econet’s lack of neutrality. Basically creating barriers of entry for local content services (startups)

    2. Liked your article a lot. And I agree that this is not about regulation. Regulation seeks most times to discuss the current cake instead of discussing innovative ways to grow it with win wins. In Zimbabwe operators are already under so much regulation and taxes because telcos are one of the few companies still making anything and therefore target for the taxman. More regulation just becomes spanners that stop things without offering any better models.

      1. Hmm… not sure I agree with the implicit notion that regulation=taxes and that regulation has to be about dividing the cake. Taxes are usually short-term budget oriented, yes, and I don’t know of many examples where taxes have been a meaningful tool to reign anyone in FOR EVERYONE’S BENEFIT. But regulation has many more tools than that. I don’t know anything about the capacity of regulatory bodies in Zim or any other African countries, but generally there is “dumb” regulation (politically motivated, short-term oriented) and smart regulation (future-oriented, considering all stakeholders, understanding the market). In a way, the whole point of regulation in Telecoms is to protect consumers and competitors of incumbents from “natural monopolies / oligopolies” that form in infrastructure markets at different value chain levels, for the sake of FUTURE returns for everyone (innovation, competition, choice, lower prices, etc.). See the whole open-access discussion: So I wouldn’t outright dismiss regulation, just the wrong kind of regulation, and even smart regulation needs to be complemented by other’s efforts.

        1. Wasn’t implying that regulation = taxes. Just saying right now they are working together here to make it harder for operators to recoup investment) The government is increasing taxes for the telecoms sector thereby reducing the operator’s profits (and increasing time to pay back infrastructure investment). So if the regulator (who is also government) is also stifling business by putting in new rules that may stop possible revenue streams without a proper case of what is this situation hurting right now and who may be hurt in the future, they they’re just stopping the business from innovating while taxing it more.

          it would help the regulator to understand deeply the issues before regulating, and that’s why I caution against it. Smart regulation is a whole discussion on its own

  3. Correct me if am wrong, is that a suggestion on how Econet should do business? Just yesterday POTRAZ slashed tariffs and we lost bundles of joy; now we want POTRAZ to step in on net neutrality and eventually it will be goodbye Whatsapp, Facebook and Opera-mini bundles. But all this to what end, for whose benefit? Anything good is so if it is for the greater good (hence majority rules) not for a minority. The big question which start ups should ask is what did these BiNu guys do to land that deal. Econet had its name tainted because of Namibian “start up” (as joyfully applied) called Trustco in an Ecolife deal that got sour. The logical thing for them to do is to ditch African go international with reputable names. Remember these guys are here to make money, they are neither parastatals nor NGOs for that matter.

    1. I’m going to assume you’re writing this from Econet.

      Correct me if am wrong, is that a suggestion on how Econet should do business?

      it is a suggestion on how Econet should do business. I see nothing wrong with that. That’s the only way we can grow a bigger and healthier environment for business for Econet itself and businesses around it. It is a good thing if someone would suggest to us how to do our business. Not all suggestions are good suggestions but that’s the nature of suggesting. It’d be up to us to take this into consideration or not.

      This is not a call for more regulation even though I do feel if it continues down that path and real startups start hurting from such moves then maybe when we come to that bridge, regulation may be one of the options. Which is why i talk about this being a path we’re going down. I believe we’re not there yet and that no startups are right now feeling Econet is unfairly restricting them access to customers. The banks will say that ofcourse, but they are the establishment and and have the muscle to fight it themselves. ( )

      now we want POTRAZ to step in on net neutrality and eventually it will be goodbye Whatsapp, Facebook and Opera-mini bundles

      This is not a call for POTRAZ to regulate net neutrality, even though it would help for them to start thinking about it so then should they need to regulate in future, they understand what they are regulating and not just moving to stifle business.

      Econet had its name tainted because of Namibian “start up” (as joyfully applied) called Trustco in an Ecolife deal that got sour

      I’m surprised you brought Trustco up. The company is listed on the JSE. It was a deal gone bad like deals do world over. Trustco are actually bigger than biNu so i don’t see how you consider biNu an international reputable name while implying a JSE listed company is a shady startup. Plus even if Econet would get burned by a local startup, would that be basis for “…the logical thing for them to do is to ditch African go international with reputable names”. It is disturbing that you are African, are part of a company with so much impact (historical and potential) and find it ok to say this.

      Remember these guys are here to make money, they are neither parastatals nor NGOs for that matter.

      It is very possible to be neutral with network/subscriber access and still make a lot of money.

  4. @Ini stop blaming potraz for the loss of ‘bundles of joy’ , econet did that bcoz they didn’t know anywhere else to direct their spite for potraz. If econet possessed even just a ¼ of the values they claim guide them they wouldn’t go leeching on the customer everytime that regulation affected their pockets. It’s always win lose with them, praying for that day when the playing field becomes level.

  5. Picking and choosing who gets access to what and how fast really sucks!… I should decide what i want and how i want it. Everyone should have freedom yet at a lower price!.

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