International Journal of Economics and Financial

Issues
ISSN: 2146-4138

available at http: www.econjournals.com

International Journal of Economics and Financial Issues, 2018, 8(1), 101-110.

Methodology for the Regulation of Over-the-top (OTT) Services:

The Need of A Multi-dimensional Perspective
Ebru Tekin Bilbil*

Özyeğin University, Istanbul, Turkey. *Email: [email protected]

https://doi.org/10.32479/ijefi.5809

ABSTRACT
Over the past decade, the contemporary literature has addressed the emerging factors influencing the new economy of over-the-internet and over-the-
top (OTT). The growth of the OTT market conveyed the need for the discussion on the best possible and most appropriate regulatory approach that
should be undertaken. This study emphasizes the importance of a multi-dimensional outlook for OTT regulation in order to uncover different types
of OTT services. This outlook includes the diverse forms of relationship between new and current influential factors (i.e., market model, business
impact, infrastructure requirements) and area of regulation. This paper describes a balanced regulatory framework based on a cooperative approach
that is more effective for OTTs. Similarly, the OTT regulation has not been included in the regulatory agenda in Turkey due to low penetration rates
and cooperative approach between OTT service providers and telco companies. As a result, this work proposes a multi-dimensional methodology for
this emerging new area that requires regulation.
Keywords: Over-the-top, Services, Regulation, Market, Network, Policy, Competition, Telecommunications, Internet
JEL Classifications: G28, L86, L96

1. INTRODUCTION This paper categorizes internet service providers (ISPs) as internet

access providers, and connectivity providers as the same groups
The over-the-top (OTT) market has been expected to grow with defined by the Body of European Regulators for Electronic
a significant rate by 17.1% over the next decade, and to reach Communications (BEREC, 2015). The structure of this paper is
approximately USD 3.49 billion by 2025. Figure 1 presents given as follows: First, the different definitions of OTT services,
the growing OTT revenue worldwide, indicating an estimated and as well as their advantages and disadvantages in the telco
80% increase between 2017 and 2022 (Figure  1). Likewise, industry is analyzed. Next, the problem of regulatory imbalance
according to the International Telecommunication Union (ITU) with the emergence of new competitions, namely OTT services, are
telecommunication trends report, with machine-to-machine identified. Then, a summary of literature surveys on OTT services,
communication, cloud systems, and OTT services, the mobile along with explanations on global OTT regulation and regulatory
traffic is expected to grow by 61% from 2013 to 2018 (BTK, approach in Turkey is presented. Finally, in the last section, a multi-
2014). dimensional perspective to study OTT services and their regulation
is proposed. The methodology of this study is based on the case
The regulation and authorization of OTT services by the national
study approach built on content and document analyses as well as
authorities and regulatory bodies are yet to be established, and are
in-depth interviews with experts from information technology and
currently in the discussion phase in many countries (BTK, 2016c).
communication authority and the competition authority.
This review work analyzes the breakthroughs made and constraints
encountered in creating OTT regulation. In addition, the key
factors in this new technological and business area are identified, 2. DEFINING OTT SERVICES
while the diverse regulatory schemes from a cooperative approach
in order to understand Turkey’s position in OTT regulation, are OTT services that generate traffic on fixed and mobile networks
also explained. include: (1) Communication (Skype, Whatsapp, iMessage,

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 Bilbil: Methodology for the Regulation of Over-the-top (OTT) Services: The Need of A Multi-dimensional Perspective

Figure 1: Over-the-top revenue worldwide (2010–2022) (billion $) service such as Comcast and Time Warner Cable” (Research
and Markets, 2016a)
• The term that “encompasses an overtly broad category
of services. Any service delivered over IP can fall in that
category, despite having very different characteristics”
(Digital Europe, 2017, p. 1)
• “The modular architecture of broadband GNPs has enabled
new market (non-network owners) players to carry out
“permission-less innovation” to provide voice, video, and
applications. This also created a new value chain including
manufacturers, operating systems, network providers,
advertising intermediaries and OTTs. Below is a brief
discussion of such innovations and their effects” (OECD,
2016)
Source: Digital TV Research, Statista, 2017 • “Services as content, a service or an application that is
provided to the end user over the open Internet” (BEREC,
Facetime), (2) real-time entertainment Netflix, Hulu, YouTube, 2015).
Spotify), (3) social networking (Facebook, Twitter, LinkedIn,
Instagram), (4) market places for downloads (Apple iTunes, The debate on OTT services have mostly originated from the
Google Android Marketplace, Amazon), (5) file sharing following studies: (ITU, 2017; Kodatku, 2014; Liu and Chuang,
(BitTorrent, eDonkey, Gnutella), (6) storage (Dropbox, Google, 2015; Research and Markets, 2016a; OECD, 2016; ITU, 2017;
Apple, Microsoft), (7) video and computer gaming, and (8) web CTO, 2016a). The Table  1 summarizes the advantages and
browsing (HTTP, WAP browsing) (Peitz and Valletti, 2015). Given disadvantages of the emergence of OTTs in the telco industry.
that there is currently no universally accepted definition of OTT,
the following list summarizes the diverse definitions of the concept 3. THE PROBLEM OF “REGULATORY
that have since been introduced:
• “Newcomers in the fields of broadcasting and content delivery, IMBALANCE”
OTT content means online delivery of video and audio without
the ISP being involved in the control or distribution of the content OTT services are among the most popular communication services
itself. The traffic is not managed (Busson et al., 2016, p. 17)” that have created a long-lasting debate in scholarly articles, reports,
• “Internet application that may substitute or supplement and policy documentation processes. Several literature works
traditional telecommunication services, from voice calls and have discussed the different aspects of OTT services including
text messaging to video and broadcast services” (ITU, 2017) economic impacts, competitive effects on the telco industry, and
• Services “… generally do not own an extensive infrastructure, as well as their regulatory frameworks with regards to future media
but rather use the existing infrastructure of traditional regulation that covers both new media and influential elements
telecommunications service providers (telcos) has led to (i.e.,  search engines, social networks and manufacturers). The
disruptions in the traditional internet ecosystem (Kraemer availability of more revenue has increasingly made regulatory
and Wohlfarth, 2015, p. 71) intervention inevitable (Table 2). Some examples of this include
• “A service platform built on the Internet that provides video taxation and unfair competition, as well as a biased playing field,
streaming (e.g., Netflix) or communication service (e.g., line). thus giving the OTT services an unjustified advantage over their
For OTT TV as an example, the audience enjoys video traditional counterparts (Nakajima, 2015). OTT services are also
application service through the Internet, which makes OTT likely to be treated as a direct competition due to the free services
TV a broadcasting platform independent of traditional means. they offer. General competition exists among different pre-paid
Hence, OTT TV is a substitute for cable TV and vice versa, TV operators, and Telco operators that provide non-linear video
and its boom or bust has effects on the number of cable TV services. As such, this competition factor usually and directly
subscribers and thus revenue” (Liu and Chuang, 2015, p. 989) triggers a fall in market prices (BTK, 2011).
• “OTT services consist of a variety of services, including
electronic communication and publishing, through which The OTT regulation is a new area of interest in media distribution,
content is delivered to end users over the Internet. Radio and is presented in this literature review from different viewpoints.
or other music content that can be listened to over the The literature survey focuses on the overarching regulation of OTT
Internet, voice and messaging services that do not require the services, such as, the regulation of the cloud storage/computing
infrastructure of any telecommunication operator; to various platform in emerging online media systems including traditional
video content (video content created by movies, series or public service TV providers (BBC), technological companies
users) through catch-up and over-the-air devices and on- (Google, Apple), and hybrid technological-media businesses
demand viewing (catch-up) of TV programs” (Netflix, Amazon) (Noam, 2014). There is a general consensus
• “Medium used for delivering diverse media content using among the studies conducted on the new regulation of these
the Internet. It is different from video-on-demand where the technologies to provide “a-la-carte offering of service elements”
users need not subscribe to the traditional satellite or cable (Noam, 2014). Although the question of “what to regulate” has

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 Bilbil: Methodology for the Regulation of Over-the-top (OTT) Services: The Need of A Multi-dimensional Perspective

Table 1: Advantages and disadvantages of OTT services

Advantages Disadvantages
High adoption rate of OTT services by end‑users Low customer retention
Benefits from worldwide coverage via the Internet, and also Lack of a reliable and high‑speed network
quick to deploy Declining demand for traditional voice and text messaging services
Exploits different economical scales, and cheaper with Increasing traffic load
increased usage Increasing the investment need of ISPs and operators to meet increasing
Broadband connectivity support, and pushes the demand for data demand
broadband (data usage) services Despite the discussions on increasing competition with new competitors
Benefits from publicity revenues, and offers cost‑efficient coming into the market, there is also another debate as to whether OTT
ways to market a product/business services and network operators can jointly operate within the same market
High negotiation power with suppliers in terms of generating Difficulties in assuring end‑to‑end quality control, and in maintaining QoS
revenues across different domains
Increasing demand for data Proximity issues, and consumer experience related requirements
Increasing data revenue for operators Lower capability for national dependent services, and inability to contain an
Dynamic customer base operational model within a jurisdiction
Low switching costs Lack of contribution to the USF, and difficulty in generating OTT revenue
Rise in consumer interest in online media contents accessible towards USF
over multi‑screen platforms Revenue loss in voice and messaging services despite adoption of mobile
handsets and SIM cards
Problem of OTT tax evasion in non‑domicile jurisdictions
Personal data protection and privacy issues hardly addressable by national
regulation
Security concerns, as users have no control over data collected
The lack of direct and clear regulation on OTT
Source: Combined by the author from various sources. OTT: Over‑the‑top

Table 2: The comparison of the regulation area between OTT and telcos services
Regulation area Telco industries OTT services
Bank‑to‑government guarantee Yes No
Fees Customer fees support the financial costs to back Services offered without any relationship to the
the network underlying cost of the network
Infrastructure/network Investing in networks to deliver services to end No investments in networks that reach end users;
users; Available technologies to use resources telcos are obligated to deliver competitive services
efficiently (e.g.,, multicasting) regardless of the impact on their networks
Interconnection Yes, required as part of stipulated regulations. No such interconnection required as they are
Requirement to interconnect involves financial “OTT” networks
incentives
Licensing Yes, different licenses and their associated costs No licensing or related fees required
including licensing fee
Net neutrality Must offer best effort in data transport without No obligations (control over content and freedom
discrimination, and independent of source or of choice concerning customers)
nature of data
Number portability Obligation to offer number portability between OTT services are independent of mobile numbers
providers
Operating area Only serves customers within the regulated Serves any user globally
jurisdiction
Price changes The approval of regulators is needed in advance No need for authorization; Loose agreement is
offered which is subject to change at any time
Content and Privacy Strict data protection and privacy requirements Practiced on a limited and generally voluntary
for users basis
Proper record keeping including Required Required through other acts
methodology
Public safety services Mandatory No such obligations
QoS Licenses include requirements for SLAs No QoS guarantee; QoS issues blamed on network
provider
Space related charges Needs to handle the costs No such costs
Spectrum allotment and use Needs to bear the cost burden and adhere to rules No such costs
Spectrum related charges Needs to handle the costs No such costs
Taxes Local and national taxes Locating operators in low‑cost locations and tax
havens
Source: Combined by the author from various sources. QoS: Quality of service, OTT: Over‑the‑top

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been identified, the query of “how” remains in discussion, and is policy considerations on the OTT regulation include authorization,
a perplexing one. personal data processing, security, taxation, network neutrality,
competition rules, privacy, platforms, traffic management, and
4. REVIEW OF OTT GLOBAL network discrimination. The network discrimination may include
blocking of applications and services, slowing or “throttling”
REGULATION internet speeds, blocking websites, preferential treatment of
services and platforms, best efforts internet access, prioritization of
The telecommunication industry is widely recognized as a certain traffic (Hazlett and Wright, 2017; Federal Communications
heavily regulated market, and corporate strategies can be mostly Commission [FCC], 2015).
based on non-market actions like political strategies (Sutherland,
2014) and non-economic considerations (Brennan, 2017). On the According to a report published by OECD, groundbreaking
contrary, OTT business models are depicted as mechanisms for innovations have turned into “disruptive innovation,” where the
escaping “politico-regulatory games and trade-offs” (Sutherland, introduction of new applications and services diminishes, and in
2014, p. 13). Çalışır (2015) identified the supporters of the global some cases, eventually displaces the market share of seasoned and
IPTV industry within the telecom sector (operators), TV business existing stakeholders. One of such example is the OTT’s provision
(publishers, content producers, advertisers), device manufacturers of voice, video, and data services over fixed and mobile networks
(TV screens, set-top box devices, network devices), and state (OECD, 2016). OTT providers have become a major competitor
(primary and secondary regulatory authorities). to existing operators. However, most, if not all OTT services are
provided over the networks of these operators, thus indicating that
Literature surveys on the telecom industry regulations have studied OTT services rely on third-party infrastructures to some extent
the processes of regulation, deregulation and re-deregulation (p.  11). In a similar view that can be interpreted as disruptive,
from different aspects (Kelly and Ying, 2014), including prices Elert (2016) defined OTT platforms as “a radical, widely applied
(Anstine, 2004); internet governance with the layers of control, innovation that transformed the internet landscape, yet its founders
access, networks, transport, and content (Collins, 2006); the became convicted criminals because of it” (p.  176). Peitz and
competition between private operators and national monopolist Valletti (2015) claimed that the increasing role of OTT supporters
that characterizes asymmetric duopoly in local networks and in providing services over networks requires the introduction of
technology competition in mobile networks (Dornisch, 2001); new market definitions and reassessment of market power (p. 910).
and the roaming regulation in the European Union (EU) (Falch
and Tadayoni, 2014) (Herrera-González and Castejón-Martín, The inconsistency in OTT regulation is based on the disparity
2009) and (Hills and Michalis, 1997; 2000; Tardiff, 2007) focused between one-sided infrastructure and two-sided content markets.
on asymmetrical regulation, and technological convergence The telco industry embraces the one-sided business model for
and fragmented regulation, respectively. The lack of regulatory offering internet service, while many other OTT service providers,
certainty in the EU was addressed by (Huigen and Cave, 2008), such as, Facebook, Google Search, eBay, YouTube support the
while (Howard, 2008) studied regulatory inconsistencies. two-sided business model, and therefore becoming a separate
Studies on the potential growth of the telecom industry with new technological business faction. Substitution as a business model
competitions were conducted by (Kelly and Ying, 2014), and the is assumed to alleviate the monopolistic grip of ISPs. The market
different regulatory types (statutory regulation, co-regulation, self- share and the competition for customers is also leveled for ISPs
regulation) by (Marsden, 2008). (Onwurah, 2009) reviewed the and OTT services. Based on the competition between current and
effects of innovation and network systems, and the investigation new market shareholders, the need for “regulatory rebalancing”
of policy recommendations that guarantee open access, enforces was identified as “asymmetric” with an “unequal regulatory
reasonable pricing plans, and encourages innovative content was regime” to create competitive disadvantage for the existing
carried out by (Papacharissi and Zaks, 2006) (Prüfer and Jahn, market shareholders due to new competition (Busson et  al.,
2007) reported on capacity paradox and policy-based remedies, 2016, p. 23) (i.e., telco players - such as Turk Telekom, Orange,
while details of world-class governance systems was provided Telefonica - versus OTTs - such as Amazon, Facebook, Google,
in (Sutherland, 2017). Political–cultural dynamics, network Netflix, WhatsApp, Twitter). Such a balancing approach can be
interconnection, digital divide, next generation technologies, exemplified via the Single Market Communication released by
and consumer aspects were described by (Yang, 2007), (Yan, the EU in October 2015, in order to encourage innovation, while
2001), (Connolly et al., 2017), (Yaman, 2017; Kushida, 2013), also ensuring that consumer protection rules were being observed
and (Stocker and Whalley, 2017), respectively. However, in (i.e., General Data Protection Regulation; Digital Europe, 2017).
spite of these recent comprehensive literatures, there remains a
fundamental need to create an absolute approach in understanding A balance approach has been proposed for the global OTT
the complex nature of the OTT market, and consequently regulation with shared responsibilities between OTT and telco
establishing a multi-dimensional regulatory perspective. service providers, and a consistent regulatory framework that
would bring confidence and stability to companies. This initiative
Literature reviews on OTT services have mostly focused on the presented an opportunity for deliberations between these
areas of growth, market penetration, impact on the telco industry companies through a conference on classic telecommunication
(Kim et al., 2017; Kim et al., 2016), the development of new models network operators and the role of OTT providers that was
(Han, 2014), and user motivations (Kim et al., 2016). The main organized by BNetzA and held on October 27, 2015. Several

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 Bilbil: Methodology for the Regulation of Over-the-top (OTT) Services: The Need of A Multi-dimensional Perspective

representatives from the industry, politicians, scientists, and Wright, 2017, p. 488; FCC, 2015). This drastic shift was labelled
regulatory authorities were invited to attend and make appropriate as uncompelling and inefficient for the growth of the industry. This
contributions. The balance approach requires a clear separation was viewed as indicative of the future internet regulation, largely
between traditional regulations on access and price regulations as owing to the fact that the FCC is treated as a single authority
well as data protection, data security, transparency and consumer with the power to legally regulate existing internet networks, and
protection (BTK, 2015a). hence, greatly capable of influencing the development of the global
Internet industry (i.e., the minimum price set by FCC turns out
5. AN OVERVIEW OF GLOBAL OTT to be the new market equilibrium price) (Prüfer and Jahn, 2007).

REGULATION In the EU, discussions on OTT is mainly based on the protection of

personal data in relation to the US OTT services, which controls the
Palfrey (2010) described four phases of internet regulation, “open largest share of the global market and “dominates” the European
internet” up until 2000, “access denied” present until 2005, market (Ciriani, 2015, p. 44). The EU approved rules in April 2014,
“access controlled” which was valid till 2010; and most recently, to ensure equal access of firms and individuals to online services,
“access contested” due to the “hybrid” environment including and also harmonized rules across national borders to create a
both public and private domains (p. 991). The underlying problem unified European market. European countries like France and Spain
is not whether the internet can be regulated, but rather, how, and have blocked OTT providers when offering voice services that
the effective implementation of the regulation. This therefore connect to the public switched telephone network (ITU, 2016). On
introduces competing forms and standards of regulation (p. 994). August 6, 2015, in France, a new law extended the authority of the
The ITU proposed that governments could play a significant role Regulatory Authority for Electronic Communications and Postal
in encouraging the transition to new technologies by “creating Services to authorize operators as an electronic communication
an enabling environment for the deployment of data networks, network and/or service provider (BTK, 2015b). In the UK, the
ensuring an appropriate level of regulation and applying measures government’s priority concerning the regulatory framework is to
that enable competition on a level playing field with a view to base any regulatory change on an economic reason (CTO, 2016a).
brokering the international agreement of standards able to assist On December 29, 2003, the Office of Communications (Ofcom)
the creation of a win-win situation for network operators and OTT - the UK’s single communications regulator - officially replaced
players” (ITU, 2017, p. 1). In light of this, the ITU aims to develop five separate broadcasting and telecommunications regulators: The
“standards that promote fair competition, consumer protection, Independent Television Commission, the Broadcasting Standards
dynamic innovation, sustainable investment and infrastructure Commission, the Radio Authority, the Radiocommunications
development, and accessible and affordable international Agency, and the Office of Telecommunications (Önen and
services” (p. 1). Tanyıldızı, 2010), in order to converge regulatory policies of
television, telecommunications, and computing technologies,
In 1997, the WTO basic telecommunications agreement was facilitated by digitalization (Smith, 2006). However, such
signed by sixty-nine nations in order to foster liberalization and technological convergence needs to be regulated in the “same
eliminate telco’s monopolistic structure (Chong and Chow, 1999). (minimal) fashion” for all services (Storsul and Syvertsen, 2007).
In the USA, the regulation of the telecommunication industry is Therefore, the creation of a single regulatory body cannot ensure
conducted in a unique way by employing a “joint jurisdictional the regulatory convergence (Doyle and Vick, 2005).
model” (Gasparini, 2014, p. 125), with the federal government
handling the regulation, as opposed to a central figure of authority. Mergers and acquisitions are some of the solutions for overcoming
By virtue of the 1934 communication act, the FCC was established the decreasing revenue base of voice and messaging services due
with a broad mandate to regulate interstate traffic. In 1989, to OTT services and in the process, eliminates customs taxes,
following the segregation of AT and T, a new era of competition and interconnection price controls (e.g., the agreement between
that departed from the customary monopoly model was ushered Telefonica and E-plus). While such strategies aid companies
in. With the 1996 act, the “layers model” (p. 126) was adopted for in providing new opportunities, in the long run, more effective
network design and regulation, whereby competition could exist at and perennial strategies such as the adoption of next-generation
multiple levels and subdivisions within the industry. These policies technologies, are recommended (BTK, 2013b). Based on a study
that promoted competition propelled the fiber and wireless network that compared the taxation regulation for telco companies and the
technologies, and generally established growth in the industry. tax optimization for OTT companies, it was revealed that OTT
Such deregulatory efforts also allowed mergers and acquisitions service providers, such as, Amazon, Apple, Facebook, Google,
to strengthen both old and new medium of the internet (e.g., the and Microsoft, paid €37.5 million in tax fees, and that if these
merger of CBS and Viacom) (Levi, 1999). In 2015, however, companies were based in France, this would only amount to 22%
the Open Internet Order initiated by FCC was characterized as of the total sum paid (BTK, 2013c).
a “sharp” return to deregulation (Figure 2), as it prohibited paid
prioritization1; ‘‘blocking’’ access for end users (restricting the
content of certain websites) and ‘‘throttling’’ access for end users 6. OTT REGULATION IN TURKEY
(partially restricting the content of certain websites) (Hazlett and
In 2016, the head of BTK (Information Technology and
1 Where ISPs and content providers contract for quality-of-service levels that Communication Authority) emphasized that, “OTT service
may include faster delivery to end users (Hazlett and Wright, 2017, p. 488). providers have been appreciated for their steps to comply with

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 Bilbil: Methodology for the Regulation of Over-the-top (OTT) Services: The Need of A Multi-dimensional Perspective

Figure 2: Average cost-per-minute, U.S. retail mobile services, 1989–2002

Source: Hazlett, 2003, p. 497

the financial and legal requirements of the countries in which This business model and strategy allows their customers to
they operated. Furthermore, he pointed out that it is necessary access TV or video contents at any time, place and on any device
for countries to have international technology companies produce (Figure 3). As such, they are able to increase the value of the paid
appropriate strategies for their sovereign rights, while complying services they offer, while overcoming the competitive effect of
with universal legal principles and local laws. Likewise, with independent/third party OTT TV/video services (Competition
regards to cyber security, he also highlighted the importance Authority, 2017).
of the collaboration between the public and private sectors in
anticipation of the growing user base” (BTK, 2016; Press Release. The low penetration and competition levels of OTT service
February, 15) (i.e., collaboration between content and local IPTV providers in Turkey is commonly related to the underdevelopment
provider such as Netflix in Korea). On January 06, 2004, and of broadband internet services, such as, infrastructure, capacity,
March 13, 2013, following the enactment of the laws 2014/DK- speed, and quality (Figure 4). While investigating other countries,
ETD/21 and 2013/DK-ETD/142, respectively, the tariff prices the highest average mobile connection speeds were measured in:
were regulated based on the increasing expansion of OTT services United States - 10.7 Mbps; Australia, 15.7 Mbps; UK, 26.0 Mbps;
(BTK, 2016a). However, there was no direct mention of OTT in Kenya, 13.7 Mbps (Akamai State of the Internet, 2017).
telecom regulation, as evident in the Strategy Plan prepared by
BTK (BTK, 2016b). The “fair-usage quota” regulation in Turkey is also another
obstacle that limits the penetration and attachment rate of OTT.
Based on the analysis on the OTT regulation in Turkey, Most users prefer access to unlimited internet data plans, but this
Kodatku (2014) identified 7 policy areas within the Turkish quota application, however, decreased the internet bandwidth
telecommunication regulation. These are (1) authorization; (2) after a usage threshold was reached. On December 27, 2016,
consumer rights; (3) competition regulation; (4) network neutrality, based on the 2016/DK-THD/518 law and since March 2017, new
(5) taxes; (6) fees; (7) control and audit. As a reference to these enhancements have been continuously rolled out depending on the
regulatory areas; despite the lack of direct regulation for OTTs, a bundle tariff (BTK, 2016d). The challenges with regards to the
few articles of the Law on Electronic Communication No. 5809, competition implications of tariff and data bundles are summarized
might be associated with OTTs indirectly (Kodatku, 2014). For as: (i) Bundling creates complexities in terms of market analysis
instance, for authorization, Article 8, clause 1; Article 9, clauses 1 and definition, (ii) The dominancy of the bundling strategy might
and 3; Article 19, clause 1; Article 3, clause 1; Article 12, clause create lsoers in the market due to the fact that they may not be able
1; Article 63, clauses 1 and 2 might be referred to OTT services. to afford the bundles (e.g., mobile services) and, (iii) the emergence
However, there are gaps due to the lack of the definition of OTT of non-traditional telecommunication services. In order to compete
services to be authorized. Again, as regards with consumer rights, with OTT service providers, telecommunication operators began
Article 49; Article 6; Article 512; Article 52 as well as Regulations providing VoIP applications as part of their services (OECD,
on Electronic Communications Service Quality, Personal Data 2016). Therefore, OTT services are not substitute options, but
and Privacy, Traffic Regulation Applications might be associated complementary new technologies to ISPs in Turkey.
with OTT services.
The local Turkish OTT services have been mostly initiated by
In Turkey, most operators provide OTT TV/video and multiple existing network providers, such as, IPTV service of TTNet
gaming options, together with their usual and default paid services. called Tivi GO (launched in 2014), Turkcell TV and Superonline
Turkcell TV+(launched in 2014), Digiturk Play, D-Smart’s Blu
2 This article was cancelled by the Constitution Court on July 26, 2014; RG: TV (launched in 2012), and Doğuş Group’s Puhu TV (launched
29072. in 2017). With reference to more globally recognized brands,

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Figure 3: Average connection speeds (IPv4) for mobile connections, 2017, by country/region

Source: Akamai State of the Internet, 2017

Figure 4: Over-the-top video services penetration rate in select countries worldwide in 1st quarter 2017

Source: Instituto federal de telecomunicaciones de México; Ovum, Statista, 21017

in 2016, Netflix started its operations in Turkey. Following this network operator’s main business is data service provision, that
event, the relationship between OTT service providers and the operator will view OTT players as collaborators. The situation
telco industry in Turkey has been primarily based on a cooperative today is that most network operator’s main revenue stream comes
attitude, where both sectors are determined and contented with the from voice and text messaging services. A win-win collaboration
idea of jointly and evenly sharing the domestic market dominance model will emerge only if network operators’ main revenue stream
(Bouncken, et al., 2015). A similar approach was proposed by ITU shifts towards data service provision” (p. 3).
(2017) as follows:
7. METHODOLOGY FOR STUDYING
“Network operators aim to provide secure, reliable, high-speed
networks that deliver services valued by end-users. Network OTT SERVICES: THE NEED OF A
operators will gain competitive advantage by investing in the MULTI-DIMENSIONAL PERSPECTIVE
expansion and improvement of their networks, helping OTT
players to reach new customers and deliver high-quality services. Several literature studies have reported that OTT regulations are
If a network operator’s main business is voice, that operator will based on different categories due to the complex nature of the OTT
face strong competition from OTT voice services. However, if a market. However, each of this category has challenging drawbacks.

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For instance, the Telecom Regulatory Authority of India provided groups (e.g., buyers/sellers, viewers/advertisers), by bringing them
the following classification for OTT services: Communication, together to interact via its platform.” While two-sided markets
entertainment, online market place, finance, education, health, generally include intermediary platforms, such as, eBay, Facebook,
and others (TRAI, 2015). This classification, however, overlooks Google Search, and YouTube, they also comprise of one-sided service
vertical and horizontal relations. BEREC (2015) defined OTT-0: providers like, Netflix and WhatsApp. OTT platforms enables the
As an OTT service that qualifies as an electronic communication incorporation of both one-sided and two-sided business models. For
service; OTT-1: As an OTT service that is not an electronic instance, Apple can function as a one-sided platform, as a retailer with
communication service, but potentially competes with such service; iTunes, and as a two-sided platform with AppStore (p. 75). Then,
and OTT-2: As other OTT services. Again, this categorization does with regards to the impact of OTT services on the telco business,
not differentiate OTT-2 services, such as, local or global video OTT services may provide alternative services ranging from
providers (i.e., Tivibu and/versus Netflix). This section therefore communication (WhatsApp, Facebook, Skype) to video (Netflix,
provides a combination of different OTT classifications. Hulu), and other complementary benefits (information services).

The proposed analysis for OTT regulation describes a multi- Finally, with regard to the influence of OTT services on data
dimensional perspective to unravel the intricacy of the OTT market transmission network traffic and infrastructure, these services
and position it in a suitable regulatory framework. The model might provide different levels of media content or transmission
is based on four levels of analysis: (1) Service-level analysis, capacity (i.e.,  YouTube, Skype with high requirements that
(2) analysis of business models (one-sided or two-sided market forces the telco industry to invest and carry out upgrades on their
models), (3) analysis of the competitive interaction with the telco networks) (Kraemer and Wohlfarth, 2015) (Figure 6).
industry (substitutive or complementary), and (4) analysis on the
level of infrastructural requirements (high or low) (Figure 5). 8. CONCLUSION
First, the OTT regulation scope needs to cover a diverse group of The OTT regulation requires a multi-dimensional approach to
services, which require different market models, infrastructures, comprehend the complicated and dynamic nature of the OTT
and business impact. These services may include but not limited to: market. The challenges encountered by regulators to maintain
• Entertainment (TV/video), Media (Netflix, YouTube, Spotify) parity in internet service, regulatory balance, and innovation
• Real time communication (Skype, Viber, WhatsApp) without discouraging industry growth, and traffic management
• Telework/telepresence (Facetime) by ISPs, has prompted governments to intervene to ensure
• Cloud computing/storage (Dropbox) privacy, data protection, price control, effective competition
• Social media (Facebook) and appropriate taxes. Despite network operators seeking new
• Financial services (BKM express) ways to collaborate with OTT content and application providers,
• E-commerce (Gittigidiyor.com, eBay) the innovation in platform industries has created new services
• Internet of things and market models that affect the telecom industry’s structure,
• Smart homes (Smartcam) dynamics and infrastructures. Therefore, the formation of new
• Online gaming. partnerships might still create gaps in the regulatory framework.

Next, in two-sided markets, the “service provider (the platform Instead of considering the single or double dimensional
operator or intermediary) facilitates transactions between two distinct viewpoints, classifications or the effects of the OTT market, it is

Figure 5: A multi-dimensional methodology for studying over-the-top services

Source: Adopted by the author (Kraemer and Wohlfarth, 2015; TRAI, 2016; ITU, 2015; 2016)

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 Bilbil: Methodology for the Regulation of Over-the-top (OTT) Services: The Need of A Multi-dimensional Perspective

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