Early thoughts: Digicel’s decision to block ads on mobile/cellular phones on its network

Some early thought on Digicel’s plan to block all ads from the mobile web and in mobile ads on phones connected to its network.
In a press release issued this past Wednesday, Caribbean mobile/cellular carrier, Digicel, announced that it will be rolling out

… ad control technology at the network level on its networks across the globe to ensure a better experience for customers and to encourage the likes of Google, Facebook and Yahoo to help connect the 4.2 billion unconnected people across the globe. 

(Source: Digicel)

Digicel contended that advertisements (ads) on mobile/cellular phones consume as much as 10% of their customers’ data plans. By blocking the ads customers, it is of the view that customers would have an improved experience. It also expects to benefit directly from the leveraging the control it will wield to secure revenue sharing agreements with major content providers, such as Google, Yahoo and Facebook, which it indicated would be reinvested in its networks.

Digicel, operates in 31 countries, 24 of which are in the Caribbean, and has around 13 million customers. The ad blocking technology it plans to use, which has been developed by Shine Technologies, an Israeli firm, will by default be active and controlled by the Digicel. The technology will be deployed in Jamaica first, and then rolled out in due course to all of the counties in which Digicel has a presence.

Although the announcement is just three days old, there have been vociferous discussions globally, with grave concern being expressed across the Caribbean and calls for regulators to intervene. While it may be possible to challenge Digicel on every point of its reasoning, below a few of what are perceived as the ‘big issues’ are discussed.

A possible shot in the arm for network operators in the net neutrality debate?

In recent years, and with the dominance of the Internet, Digicel, like most mobile/cellular network operators worldwide, have had to wake up to the fact that they can no longer protect the premium revenues they used to be able to generate from voice services. However, although these providers may appreciate that they must now play in the Internet/data space, their revenues would be adversely affected, and would need to be supplemented.

One of the main arguments against network neutrality typically is made by telecoms network operators, is that the services of major content providers (such as the Google, Facebook and Netflix) consume considerable bandwidth, but those providers do not contribute to, or in anyway bear the cost for, maintaining the infrastructure upon which their services are delivered. Hence Digicel ad blocking initiative – which reportedly is the first globally to be implemented by a network operator, and so is being closely watched – potentially could give operators control over some of the content that is being carried over their network. More importantly, it could give them bargaining power when engaging content providers, since although the content providers’ service itself might not be blocked, the means by which they generates revenue, through ads, would be under threat.

Bargaining with large content providers at the expense of the smaller ones

Although Digicel hopes to bring the Googles, Yahoos and Facebooks of the world to the negotiating table, the company plans to block all ads both on the mobile web and in mobile apps. It therefore means that the ads placed in all apps on a Digicel customer’s smartphone will be blocked.

Before we, the app users, jump for joy, do consider the following:

  • Through their apps, most developers are trying fulfil a perceived need or void in the market
  • Only a select few of the thousand of apps on the market ever generate enough revenues to recover the cost of their development
  • Generally, we the users are reluctant to pay for apps; hence the majority of them are free in order to gain an audience or customer base
  • Consequently, most app developers have had to rely on ads embedded in their free apps to try to generate revenue.

In a nutshell, blocking the ads would obliterate a critical income stream upon which most developers and their teams rely. However, their demise may just be collateral damage in a battle between network operators and major content providers.

Caribbean app development likely to be in the skids

Having said this, it is important to emphasise that should Digicel’s ad blocking plan eventuate, the Caribbean app development community would not be immune from its effects.

With few exceptions, the majority of the apps developed in the Caribbean are locally driven, that is, seeking to address very specific, national needs. Further, the apps that are having an impact are usually those focussed on the issues of individuals in the lower socio-economic brackets, for whom it is crucial to eliminate as many barriers to take-up (such as price) as possible.

Additionally, although many of the region’s governments, and by extension the countries, are benefitting from some of the local apps being developed and from other initiatives, such open data, frequently they are not compensating the developer teams for their products. Instead, there is an expectation that the developers will figure out ways of generating revenues – in an environment where freeness is expected – which frequently means a reliance on advertising.

It should thus be of great concern that whatever ad blocking technology Digicel plans to introduce could, at the very least, make the region an unattractive market for app take-up. Apps that we might love to access may no longer be available for download in the Caribbean. Further, our local developers may opt instead to create products for overseas markets that are more welcoming of their efforts and the need recover their costs through ad placements.

At the other end of the spectrum, it is also possible that tech innovation, which policymakers have been trying to encourage, could be stifled. Additionally, one might also find that Caribbean problems that could benefit for apps and other digital solutions may not be readily solved, since an ad-based business model may in no way be viable to recover costs.

 

Image credit:  KROMKRATHOG (FreeDigitalPhot)

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