It’s hardly a surprise to point out that OTT is a big challenge for operators. Service providers are spending billions on beefing up capacity to handle the tremendous increase in video and data traffic, but Google, Facebook and other OTT players are walking away with all the revenue.
Despite their best efforts, operators are increasingly seen by many subscribers and content providers as being a mere data pipe.
Platform players like Google, Facebook and Amazon are practically everywhere, but it’s not just in terms of geographical borders – increasingly, players cross lines of business. Telecommunications providers are also investing in healthcare or media and entertainment.
Even if operators themselves want to focus solely on connectivity services, there will be other players who want to use their networks and they need to allow them to do this in more efficient ways. Operators can share channels or customer data with other firms to facilitate the marketplace, allowing other companies to approach their customers more easily.
“We live in a world where the borderless player is emerging”, says Michal Harris of Amdocs. “The players in this Connected World are less defined – they will have to act on this new reality and become more of an ecosystem.”
The way that operators utilise their networks is becoming much more efficient. Operators need to allow more partners to come on board, to introduce new models and extract the data that they already have to run a more efficient operation or provide better customer experience and more innovative business models.
“Service providers have been absorbing disruption – even until recently, they saw OTT as a red flag”, says Harris. “Now, there’s more of a realisation that operators can’t be the sole innovator – they need to open their doors to the companies providing a popular service.”
If a service is popular with customers, it makes sense that they will gravitate towards a network that allows them to use this, so by embracing OTT companies operators are actually able to hang on to subscribers. “Operators can’t necessarily avoid the OTT ‘threat’ – there are services that people will use regardless”, says Harris. “Using Facetime over Wi-Fi means that the service provider won’t see any revenue, so providers need to become part of an ecosystem rather than pushing themselves out of it.”
Noam Green, VP Marketing at optimisation and monetisation specialists Flash Networks, agrees. “Mobile operators are exploring ways to secure a place in the value chain and they are beginning to achieve this”, he says. “They have the advantage that they know where subscribers are searching, what they are buying, and what content they like to consume. All this information flows from their handsets through the carrier’s network.”
Using this data, operators can alert subscribers - for example, that they are about to exceed their quota if they watch a video, or that there is a product available for a lower price similar to the one they’re searching for. This data enables operators to provide the right information at the time it brings the greatest value to the user.
In regions where OTT services are gaining traction more slowly, operators still have the opportunity to beat them at their own game. As it sits on the cusp of becoming a one billion person market, Africa is becoming a major focus for OTT players looking to exploit the growing mobile ecosystem. According to IDT Global’s Jonah Fink, the continent’s service providers have the capability to rise to the challenge OTT players provide.
“The goal for service providers is that they basically need to become OTT operators faster than the OTT providers can become carriers,” says Fink, “but they can do it and the fact is that consumers don’t like OTT operators very much – they would stay loyal to the African Telco brands if they could get the same services.”
“Ovum is already estimating that globally carrier OTT could be worth $20bn by 2018. That $20bn will not just fall into laps of African operators – they’ll have to make sure they fight for it. They also predict that OTT operators could cost carriers $63bn per year if they don’t react fast enough and in the correct way”, he adds.
In the next few years, mobile operators will need to find new sources of revenue to maintain their investment-hungry networks. The traditional business model OTT players are used to working with is in the form of revenue share. Operators will need to be able to demonstrate how they can increase these OTT’s players’ revenues, and in turn share this revenue with them. In order to survive, mobile operators will have to adapt to this new revenue sharing model and to develop compelling offerings to enable it.
As Fink observes, “to take on the OTT operators you have to either have very deep pockets, very slick processes and cooperative distribution channels, or be willing to partner with someone who’s already been through the trials and tribulations of launching an app. Customers are not as loyal to OTT operators as they are to African Telco brands, paving the way for operators to launch their own OTT value added services that can take full advantage of this loyalty.”
Green concurs that partnerships will be integral to the OTT space going forward. “With the highly competitive landscape in this market, operators will need to be creative in growing their revenues without reaching into their subscribers pockets. The fastest way to implement this would be by cooperating with the large Internet players such as Google, Facebook, Amazon etc”, he says. “In 3-5 years, this cooperation could also lead to significant revenues which in turn could result in lower mobile prices for subscribers.”