The traditional service that telecommunications operators are meant to provide is voice communications. However, there has been increased demand for value added service which is secondary focus of operators that has turned to be a strong source of revenue.
A value-added service (vas) is term for non-core services or, in short, all services beyond standard voice calls and fax transmissions but, it can be used in any service industry for the services providers provide at no cost to promote their main service business. In telecommunication industry on a conceptual level, value-added services add value to the standard service offering, spurring the subscriber to use their phone more and allowing the operator to drive up their average revenue per user (ARPU). For mobile phones, while technologies like SMS, MMS and GPRS are usually considered value-added services, a distinction may also be made between standard (peer-to-peer) content and premium-charged content.
There are about 10 billion mobile subscribers worldwide, out of which 95 million mobile subscribers are Nigerian. Over 350 billion text messages are exchanged across the world every month.
Value-added services are supplied either in-house by the mobile network operator themselves or by a third-party value-added service provider (VASP), also known as a content provider (CP). VASPs typically connect to the operator using protocols like Short message peer-to-peer protocol (SMPP), connecting either directly to the short message service centre (SMSC) or, increasingly, to a messaging gateway that allows the operator to control and charge for the content better.
In the mobile phone market, new models are being rolled out with features targeted at specific user groups.
Encouraging VAS
In Nigeria the list of content providers and platforms are growing by the day, some of the major providers include, MTech, Cellcast, TaviaTxt, SaveMyContacts, Textnigeria, Entegration Solutions, Cellulant, CellTrust, 3G Reality Centre and A3&O among others, which generate mobile content to deliver value-added services via the GSM network operators. The mobile operators share the revenues equally with these private VAS companies.
The main players in the Mobile value added service chain in Nigeria apart from the National mobile operators are the content aggregators. They provide content to mobile operators; perform in-house content development and aggregating contents from other small players. They own the short codes and they have a tie up with multiple operators to ensure subscribers of all operators can access same short codes. Revenue sharing in percentage will either encourage more independent developers or discourage them from rolling out innovative services that will promote the service.
Nigeria CommunicationsWeek investigations revealed that sharing formula has changed from 60% for the mobile operator and 40% for VAS operators to present 70% for mobile network operators while VAS providers take 30%. Wireless Application Service Providers Association of Nigeria (Waspan), the umbrella body of VAS providers has argued that the present sharing formula and none payment of money that accrue to providers is adversely affecting their effort to develop the market.
Growth is stifled in the vas market in Nigeria because National mobile operators are playing safe and concentrating only on mass services for which content is readily available and chances of failure less. For instance, entertainment value added service despite the fact that its practical value is minimal, is popular because of its mass appeal especially to youth segment and it is promoted over mobile commerce and infotainment which has the capacity to create real value for subscribers.
According to Simon Aderinlola, coordinator, Waspan, said, they have made effort to formalize the operation of VAS in the country by seeking license from Nigerian Communications Commission (NCC) which was granted last year. They also seek intervention of NCC to harmonize their relationship with mobile network operators.
Against this backdrop thatDr. Eugene Juwah, Executive Vice-Chairman of Nigerian Communications Commission, pledged to address complaints by companies that provide value added service using mobile networks over unfair treatment by network operators.
Juwah noted that VAS is a licensable set of services that run on mobile networks but added that NCC was yet to develop requisite regulation for such services. He noted that given that complaints about their relationship was now in the public, NCC could then convey a VAS stakeholder conference.
Wireless Application Service Providers ofNigeria, recently rejected a proposal an operator for a change of VAS revenue sharing formula from 70:30 to 75:25 between operators and VAS companies respectively.
According to Waspan, the proposal seeking a change of the current revenue sharing formula was not in the best interest of VAS companies.
According to Eunice Benjamin-Ade Head, Business Development, Waspan, companies that are affected by the proposal have already contacted their lawyers to seek possible legal redress of the matter if other steps taken to redress the matter fail.
Benjamin- Ade said Wireless Application Service Providers are legally-registered businesses in Nigeria that operate based on laid down business laws and have helped develop various offerings in the telecommunications sector since inception until now.
She added that VAS providers have consistently allowed a change of revenue share over the years in favour of operators and will not agree to any further shift that will reduce revenue that accrue to VAS companies.
“We believe that the recent moves by various operators to continue to change the revenue sharing ratio in their favour will not only set the stage to run down businesses of many wireless providers, but one that could eventually destroy the entire industry,” she said.
The new development represents yet another twist in the battle between mobile network operators and Value Added service providers over the sharing of revenue generated in wireless application services.
The move by NCC to call stakeholders forum to address issues arising from relationship between mobile operators and vas providers is a welcome development that will harmonize the market for development in that segment.