The boom in OTT services was disastrous for mobile operators as consumers flocked to the free services and ditched mobile operators paid calls and text messages. Revenues came tumbling down and the irony of it all is that mobile operators are the ones footing the bill for network costs that OTT services use.
OTTs are here to stay and so the question remains if mobile operators are already paying for the networks and have the database of users: why not jump on the OTT bandwagon themselves?
OTT mobile app services like Whatsapp, Skype and Facetime are a dream come true for consumers and have pretty much replaced SMS and calls. The surge in OTTs is a nightmare for mobile operators who pay the networks that the services feed off.
Like most things in life, you only ever hear of success stories. There are countless failed attempts to launch OTT services but they don’t make for much of a news story and because they fail you never end up hearing about them. The successful OTT services are backed by large investors that have bottomless pools of resources at their disposal.
Studies suggest that, despite the fierce competition and hurdles to success, by 2019 the OTT market will have more than 330 million subscribers. Each of these subscribers represent a blow to traditional revenue and more data being used by consumers. For every OTT that is launched and loved by consumers mobile operators are taking the double hit of revenue drain and network strain.
What can Mobile Operators do About OTT?
There’s one crucial factor that mobile operators have on their side that OTTs don’t. A huge database of users. Mobile operators can leverage this database to target users and place themselves at the center of the fight for OTT consumers.
Mobile operators are faced with three clear choices when it comes to fighting back against OTT services: impose restrictions on OTT services that are using mobile operators’ networks, build out their own OTT services, or outsource. Let’s look at each in turn.
The first scenario is knee jerk and downright ridiculous. The obvious consumer reaction to mobile operators putting limits on data for OTTs is that they will simply leave and look for another mobile operator on the market.
Restrictions were introduced by AT&T in the US when Apple released their first iPhone. The data restrictions targeted VoIP services on AT&T’s 3G network in an effort to throttle the OTTs, defend revenue streams from SMS and calls, and shore up their networks. Long story short: it didn’t work. The restrictions were lifted after AT&T caved into pressure from not only consumers but the FCC. It’s clear that placing restrictions on data in an attempt to throttle OTT services isn’t a viable option. So if the stick doesn’t work, will the carrot?
By providing their own content and applications, mobile operators can attempt to retain customers and fight back the OTTs piggybacking on their networks. But there’s a catch: it’s a high risk venture.
Mobile operators lack the experience, infracture and funds to develop, launch and market an OTT or content platform. And what real value would they be adding to the overcrowded OTT market? They would be buried among the already well established brands and savvy OTT providers.
The risks are just too high and nobody in their right mind would be willing to float that idea in front of the board. The only viable alternative if mobile operators can’t compete with OTTs is to join them.
Entering into partnerships with OTT services may be one alternative for mobile operators who want to profit from the OTT boom by providing consumers unlimited access for a flat rate. But it too comes with its own risks. A mobile carrier would need to buy or license the content solution, implement a payment aggregator and then handle the distribution and customer support.
By outsourcing the content management, creation and marketing to innovative mobile tech companies that are experienced and are capable of entering into partnerships, creating content and retaining users. Mobile subscription services (or Value Added Services) is key to the reinvention of the telecom industry and operators need to be prepared to take the bull by the horns.