The African Impact of the Net Neutrality Debate

In a widely anticipated move, US regulator the Federal Communications Commission (FCC) has proposed a repeal of net neutrality rules established during the Obama administration. (See Net Neutrality, Here We Go Again)

In particular, the FCC seeks a reversal of the "common carrier" status applied to broadband providers, a status that has made them the object of utility-type regulation. Under the proposed rules, for example, ISPs would no longer be sanctioned for the practice of traffic prioritization -- essentially, favoring some forms of traffic over others.

African regulators and telcos are paying attention. While African technology regulation does not mimetically follow US market practice, many still take general guidance from observation of American and European regulatory trends.

Net neutrality with an African flavor
Net neutrality has always been the object of tortuous debate, with its myriad implications around broadband network investment, connectivity prices, technology innovation, competition -- even freedom of speech. Those issues apply to the African context as well, with a distinctly local flavor.

More than 98% of African broadband connections use mobile networks, which would be most affected by any regulation around traffic prioritization. In addition, the regulatory approach to so-called Internet over-the-top (OTT) players is a source of persistent tension in African markets. Policy makers are torn between encouraging Internet players on data service access and innovation, while protecting telecom operators (and their considerable tax and investment flows) from a siphoning of their voice and messaging revenue by those same OTTs.

Lower incomes mean that broadband data pricing issues are especially sensitive. Some countries have experienced a spate of #datamustfall campaigns, a grassroots push to force telcos to slash data prices; in others, such as Nigeria and the Democratic Republic of Congo, telcos are lobbying for data price floors as their financial position continues to deteriorate.

The African data monetization challenge is not yet settled; telcos are continuously experimenting, as they seek models that would allow them to strike that delicate balance between data service affordability and preserving investment returns.

The emergence of Africa's tech startup ecosystem is also a factor in the assessment of net neutrality in the local context. African startups are growing fast, disrupting entire verticals and catalyzing economic growth; but they are small, lack the weight of a Netflix or Facebook, and they need unencumbered access to broadband pipes.

Market-altering implications and unintended consequences
A fundamental change in the net neutrality framework as mooted by the FCC would have a direct impact on all the above dynamics. There are several possible implications for African markets, should any US repeal of net neutrality rules materialize:

What India does matters more
Ultimately, a repeal of net neutrality principles in the African context is unlikely, the FCC's actions notwithstanding. In particular, there has been little indication that Europe and Asia have any interest in following the FCC's path, which would carry more weight with African policy makers.

Significantly, at essentially the same time the FCC was announcing its repeal plans, India's Telecom Regulatory Authority of India (TRAI) came out in support of strict net neutrality rules and against any form of discrimination of telecoms networks.

The TRAI's decision has attracted a little less attention (outside of Asia) than the FCC's. But for Africa, it is unquestionably the most significant one.