An Overview of the Regulation of Value Added Service (VAS) Aggregators in Nigeria – Bisola Scott

Telecommunications

8th October 2020

Bisola Scott[1]

 

AN OVERVIEW OF THE REGULATION OF VALUE ADDED SERVICE (VAS) AGGREGATORS IN NIGERIA

 

Introduction

The Value Added Service (VAS)[2] industry is a promising sub-sector of the Nigerian telecommunications sector, regulated by the Nigerian Communications Commission (NCC). The market value of the industry was estimated at $200 million per annum in 2016 and is expected to reach $500 million by 2021.[3] According to Wireless Applications Service Providers Association of Nigeria (WASPAN), VAS will be the future of telecommunications prosperity.[4] The NCC also believes that the “VAS industry despite its challenges appears to be a hub for employment opportunities, huge revenue generation and national economic development.[5]  The projected growth of this sector has been attributed to innovations in the provision of telecommunications services.[6]

Prior to the introduction of the current structure of VAS provisioning in Nigeria, VAS providers had to engage network operators directly, and who subsequently transmitted the services to the users.  However, to further strengthen the VAS industry and enable a direct and secured connection for VAS providers to network operators, the NCC recognised VAS aggregators[7] in the value chain of VAS services delivery. This step is in line with one of NCCs objectives of facilitating the provision of easily accessible communications services throughout Nigeria.[8]

With the recognition of VAS aggregators, the current players involved in the provision of VAS services include content/application developers, VAS providers, network operators and VAS aggregators. The presence of VAS aggregators in the value chain obviates the need for and the challenges of connecting with different network operators to transmit VAS services to end users.

The NCC has since the recognition of VAS aggregators, issued Value Added Services – Aggregator licences to companies in Nigeria and designed the Value Added Services and Aggregators Framework (“the Framework”) for the control and regulation of the VAS (Content Service) industry.

  1. Understanding the Role of VAS Aggregators

VAS aggregators are entities licensed by the NCC to provide a concentration point to VAS providers[9] with the aim of reducing the number of devices that will be directly connected to network operators. They provide a single platform through which VAS providers may access the services of network operators. They convey content to and from operators and VAS content service provider systems.[10] They also provide a direct link to the internet or international data access service providers for content and application providers to market their services globally.[11] Additionally, VAS aggregators may provide collocation services, billing and revenue collection services to content and application providers, and intermediation for billing verification between parties in the VAS value chain.[12]

  1. VAS Market Segmentation and Structure

The VAS subsector utilizes the horizontal segmentation system and is divided into four segments[13] consisting of network operators,[14] VAS aggregators, content and application service providers,[15] and developers of content, applications and platforms.[16] VAS aggregators are classified in the second segment while network operators, content and application service providers and developers of content, applications and platforms are classified in the first, third and fourth segments respectively.[17]

Aggregators are restricted from hosting or distributing content and applications, and accessing information transmitted through their concentration point.[18] They are not allowed to perform any data level processing[19] as content and applications service providers are the only members in the value chain that are allowed to pool, host and distribute content and applications utilizing their own in-house software and hardware platforms.[20] According to the Framework, content and applications service providers will not be allowed to connect directly to the network operators and can only transmit their services through aggregators.[21]

  1.  Obligations of VAS Aggregators

The Framework provides the obligations of VAS aggregators in relation to, competition and the market, consumer issues, revenue collection and sharing, advertising and e-marketing, quality of service, personal and corporate messaging, provision of access and quality of service, which are highlighted below.

3.1.      Competition and Market Rules

VAS aggregator service is regarded as a telecommunication service under the Nigerian Communications Act[22] and any company that intends to provide such service must obtain a VAS Aggregator licence issued by the NCC.[23] The Framework exempts mobile network operators, VAS Content and VAS (Special Numbering Service) licensees from applying for the VAS aggregator license.[24] Network operators and content/application providers are also prohibited from having full or partial ownership of VAS aggregator companies in Nigeria.[25]

3.2.      Consumer Issues

In addition to network operators, aggregators are also expected to ensure that no adverts are sent to the telephone numbers of end users on the Do-Not-Disturb (DND) list[26] in accordance with the DND directive of the NCC.[27] However, subscribers in the opt-in database[28] can be sent adverts by any mode of delivery that has not been specifically banned by the NCC and there is no limit to the number of adverts that can be delivered to such subscribers.[29] Subscribers who did not register their numbers in the opt-in or do-not-disturb lists can be sent adverts but only through the specified modes of delivery in the Framework.[30]

3.3.      Revenue Collection and Sharing

The Framework provides a breakdown of the items that make up the product cost and the prices in which VAS is sold to end users including the suggested weighting allocated to each cost component.[31] The proposed cost allocation percentage for aggregation/distribution is 10 percent.[32] The percentage attributed to each cost component can be adjusted when necessary as cost structures vary based on the product.[33] Additional direct or overhead cost can also be captured and factored into the sharing formula based on the mutual agreement of the partners.[34]

The agreed revenue shares are required to align with the guide provided in the Framework as much as is feasible.[35] The commercial agreements which relate to the sharing of revenue between parties in the chain are required to be submitted to the NCC[36]  and the NCC may make necessary adjustments to the agreement in line with the guideline provided in the Framework.[37]

To collect revenue from subscribers, content owners may engage aggregators or the network operators through the customer’s prepaid/postpaid account or any other mechanism that may be provided by the network operator.[38] The content owner may also choose to engage the aggregator to collect the VAS product cost directly using other methods, in addition to the traditional deductions from subscriber airtime.[39] The aggregator will thereafter give the network operator and the developer their own share of the revenue received.[40]

3.4.    Tele-Advertising and E-Marketing

Transmission of advertisement and e-marketing content[41] to subscribers are permitted by the NCC subject to compliance with its Do-Not-Disturb (DND) directive. For mobile network users that have not registered their details in the do-not-disturb list and opt-in list, advertisements can be conveyed to them through any of the following means:

  1. In-call attachment in the form of audio or text messages during ringing or holding period;
  2. end-of-call attachment SMS or graphic messages sent at the end of a call; and
  3. Video or text attachment during a multimedia or video messaging session, internet access or VAS access.[42]

These modes of conveying content above do not require the content to reflect the caller’s identity.[43]

3.5     Personal and Corporate Messages

SMS messages can be sent to all categories of subscribers, however, marketing messages sent through an SMS platform can only be delivered to those on the opt-in list.[44] Bulk SMS can also be used to deliver marketing messages to those in the opt-in list, as long as the registered MSISDN number of the sender accompanies the message.[45]

Aggregators and network operators are not allowed to have access to the content of one-to-one or corporate messages as they are usually confidential. Aggregators are therefore exempted from liability for obscene, subversive or illegal one-to-one or corporate messages transmitted to subscribers.[46] Moreover, VAS aggregators are allowed access to the content of bulk SMS messages sent through their platform and will be held liable for messages sent without a valid sender’s numeric identity.[47]

3.6     Provision of Access

In providing VAS to end users, each player in the value chain would inevitably interface with players in the adjacent segments and the provision of access by these players is essential to the provision of VAS to end-users.[48] Aggregators that have been licensed by the NCC have the right to access VAS provisioning facility of other licensees in the VAS value chain or licensees whose services are required in order to complete a service already initiated by another licensee.[49] Content service and application providers are also required to have access to aggregators transmission facilities.[50]

VAS Aggregators have a right to be interconnected with all other telecommunications licensees and are the only player currently allowed to have direct physical connection to local network operators.[51] The Framework mandates that market players granting access or exchanging access with other licensees must sign an agreement which should be submitted to the NCC for comments prior to it coming into effect.[52] Any market player whose request for access to VAS provisioning facility of other licensees is denied or delayed for more than Sixty (60) days has the right to appeal to the NCC for intervention.[53]

3.7     Quality of Service

Each service provider in the VAS value chain including a VAS aggregator, is responsible for quality of service in its own segment of the network and is required to monitor network performance data at the interface points.[54]

 

Conclusion

The introduction and regulation of VAS aggregators in the VAS value chain is paramount to ensuring operational efficiency, quality service delivery and satisfactory customer experience which are essential considering the relevance of VAS in the Nigerian telecommunications industry. The regulation of this player may also prevent anti-competitive practices and enable a level playing field for aggregators in Nigeria. These benefits arising from such regulation may further strengthen and maintain stability in the VAS market.

 

 

_______________________________________________________________

For further information on this article and area of law,

please contact Bisola Scott at S. P. A. Ajibade & Co., Lagos by

Telephone (+234.1.270.3009; +234.1.460.5091) Fax (+234 1 4605092)

Mobile (+234.811.389.8102, +234.817.939.0319)

Email: bscott@spaajibade.com

www.spaajibade.com

[1]      Bisola Scott, Associate Intellectual Property Department, SPA Ajibade & Co., Lagos, NIGERIA.

[2]       VAS is a popular telecommunications industry term for non-core services, or in short, all services beyond standard voice calls and faxes transmissions. See, The Communicator, NCC Plans Regulatory Framework For $200 Million VAS Market, available at: https://www.ncc.gov.ng/thecommunicator/index.php? option=com_content&view=article&id=690:ncc-plans-regulatory-framework-for-200-million-vas-market&catid=32&Itemid=179, accessed on 5th September 2020.VAS involves the provision of value added mobile/fixed services including premium rates services which are centered on entertainment, marketing, advertising, and commerce. Examples of these services include text messages, picture messages, ring tones, graphics, games, multimedia, call center and call directory. See, The NCC,  License Framework for Value Added Service, available at:  https://www.ncc.gov.ng/docman-main/licensing-documents/licensing-frameworks/194-value-added-services/file, accessed on 5th September 2020.

[3]       Punch News, Nigeria’s VAS market set to hit $500m – NCC, available at https://punchng.com/nigerias-vas-market-set-hit-500m-ncc/, accessed on 29th August 2020.

[4]       Peter Oluka, TechEconomy.ng, VAS is the future of telecoms prosperity, WASPAN predicts, available at: https://techeconomy.ng/2018/10/vas-is-the-future-of-telecoms-prosperity-waspan-predicts/, accessed on 25th August 2020.

[5]       Nigerian Communications Commission, The Nigerian Communications Commission hosts a Consultative Forum on VAS Aggregator Framework, available at: https://www.ncc.gov.ng/media-centre/news-headlines/314-the-nigerian-communications-commission- accessed on 25th August 2020.

[6]       Supra, note 2.

[7]       VAS aggregators are entities that provide a single platform through which VAS providers may access the services of network operators.

[8]       Section 1(c), Nigerian Communications Act 2003., available at: htps://www.ncc.gov.ng/accessible/ documents/128-nigerian-communications-act-2003/file, accessed on 15th August 2020.

[9]       Para. 1.1b of the Framework.

[10]     Para. 1.5(c).

[11]     Para. 1.5(b).

[12]     Para. 1.5(i)-(iii).

[13]    Para 1.1(a).

[14]     Network operators will provide final link to the subscriber for the purpose of delivering value added service to the end user. The operators will not be allowed to host or distribute VAS to their subscribers directly.

[15]     They are VAS licensees and the only players that will be allowed to pool, host and distribute content and applications using their own in-house software and hardware platforms.

[16]     Developers are unlicensed, freelance creators of content and applications or those who have franchise on such value added services. They are not licensed to distribute such services and do not need a license from the Commission to market their products, other than simple registration.

[17]     Supra, note 9.

[18]     Para. 1.1(b).

[19]     Ibid.

[20]     Ibid.

[21]     Ibid.

[22]     Para. 7.2(c).

[23]     Para. 2.3.

[24]     Para 2.2. See NCC, Value Added Aggregator Service License, available at:

www.ncc.gov.ng/media-centre/public-notices/297-value-added-service-aggregator-license, accessed on 10th September 2020.

[25]     Supra, note 23.

[26]     Network operators are required to have a central database where subscribers can register their phone numbers if they do not want to receive any form of advertisement. This database is referred to as Do-Not-Disturb (DND) list which was introduced by the NCC due to complaints from subscribers over unsolicited text messages and charges for VAS not subscribed to. It gives subscribers the freedom to choose what messages to receive from the various networks With the DND Direction, operators have been mandated to dedicate a common Short Code (2442) which will enable subscribers take informed decisions. and allows them to opt-out of receiving any unsolicited messages. See, The Communicator, NCC Enforces 2442, Do Not Disturb Shortcode , available at: https://www.ncc.gov.ng/thecommunicator/ index.php?option=com_content&view=article&id=1363:ncc-enforces-2442-qdo-not-disturbq-shortcode&catid=25&Itemid=179#:~:text=Following%20a%20Direction%20to%20the,receive%20from%20the%20various%20networks, accessed on 15th September 2020.

[27]     Para 3.1.

[28]     Para 3.2. Network operators and content service providers may create an opt-in database for subscribers

which allows the register their telephone numbers if they are willing to receive advertisements.

[29]     Ibid.

[30]     These modes are contained in Para 5.2 and include in-call attachment in the form of audio or text messages during ringing or holding period, end-of-call attachment SMS or graphic messages sent at the end of a call; and video or text attachment during a multimedia or video messaging session, internet access or VAS access.

[31]     Para 4.1(a).

[32]     Ibid.

[33]     Para 4.1(c).

[34]     Ibid.

[35]     Para 4.1(e).

[36]     Para 4.1(f).

[37]     Ibid.

[38]     Para 4.2.

[39]     Ibid.

[40]     Ibid.

[41]     Mobile operators will be held liable for transmission of indecent, subversive, obscene messages or any material contrary to the provision of the law because they are allowed to access the contents of the adverts. See para 5.3.

[42]     Para. 5.2.

[43]     Para. 5.3.

[44]     Para 6.3(a).

[45]     Ibid.

[46]     Ibid.

[47]     Ibid.

[48]     Para 7.2.

[49]     Ibid.

[50]     Para 7.2(b) and 9(c).

[51]     Para 7.3.

[52]     However, not all agreement made with other licensees need to pass through the Commission before being executed. See Para 7.6.

[53]     Para 7.8.

[54]     Para 4.1. of the Annex 1, Technical Framework for Value Added Service, of the Framework.

 

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