Over The Top Disruption?

Last updated: 20 March 2014

There has been a huge debate throughout 2012 about over the top (OTT) players and their impact on mobile operators worldwide. In the words of The Economist: ‘Joyn them or join them’. The biggest focus has been on what the best strategy telecom service providers should adopt when faced with these OTT providers: compete, cooperate, or both?

The third option available to them is also known as co-opetition and is a combination of competing with some OTTs with an offer of their own while, at the same time, partnering with them to get increased user attention.

The key question still remains monetization. Since most of these OTT services are free, this is exactly why users love them. Almost all of them follow a freemium or an ad-funded model. The freemium approach consists in giving an entry level service for free by way of enticement, making the bet that users will move to premium once they are hooked and willing to pay for more features. The free service can also be loaded with advertisement, in this case, users move to premium to get the service without having to suffer through publicity.

Yet making money is not the only thing at stake. The risk here is the customer relationship.

To maintain a quality customer relationship, which includes staying relevant to customers, operators must offer enhanced services on top of just data access. They should draw on the benefits of owning the network and apply a service strategy of their own instead of just providing a pipe for any OTT player to reach out to hungry app users.

Undeniably, network operators have powerful assets to compete in this market, especially being able to bundle services with data connectivity and generate access through other mechanisms, for example with phone numbers and the SMS channel. Operators also already have a close relationship with the customer due to existing billing histories and other billing interactions, for example premium SMS. The only mandatory tactic here is to be open, i.e. allow users from other telecom networks to access their services, in a pure “Telco OTT” approach. This will be a main focus at the Global Messaging World Congress in London this week, where we debate opportunities for operators and OTT providers.

There are many options for operators to get closer to their customers, navigating the complex relationship with OTT players. CloudnShare is one opportunity to offer customers a higher value service. Ultimately, however, operators need to sit up and pay attention before other players start to use the network better than they do.