Huawei Ultra Broadband Forum 2018

Money Talks In OTT Discussions

If you think regulation is the main barrier to the establishment of partnerships between operators and OTT players, you seem to be in a very small minority.

Even though regulators in the US and Europe are forging ahead with plans to introduce new rules on net neutrality, just 1% of audience members gathered at last week's Ultra-Broadband Forum in London chose legal barriers when asked what they believed to be the most important factor hindering cooperation between telcos and OTT players.

Instead, the difficulty of reaching a consensus on revenue sharing appears to be the chief concern, followed by the belief that operators and OTT players are, essentially, rivals. Some 54% of attendees opted for the former, with another 24% expressing the view that partnerships will not take shape while operators are competing against the OTT community.

A number of operators have been in partnership discussions with OTT players –including Telecom Italia and Hong Kong's PCCW, both of which had executives speaking at the conference – but progress has been halting.

According to Gianfranco Ciccarella, the vice president of global advisory services for Telecom Italia, various OTT players have been looking for lower latency and better network performance as they introduce new video offers and other advanced services. Yet ironing out differences on revenue sharing is proving difficult. "Reaching a consensus is very tough," acknowledged Ciccarella.

Interestingly, though, Telecom Italia is trying to develop a system of revenue sharing based on the precise impact that an improvement in quality of service has on an OTT player's sales. And if that sounds like a difficult calculation to make, Ciccarella says that analysts have already been able to establish a correlation between performance indicators, like throughput and latency, and the revenues a Web company generates through advertising and ecommerce activities.

But not everyone sees tie-ups working in that way. Paul Berriman, the chief technology officer of PCCW, reckons operators are best able to assist OTT players by offering them localized expertise and resources.

"We can get an international OTT player a much better return than it would get if it tried to find customers in Hong Kong from a distance," he said.

The panel debates the sticking points holding up telco relationships with the OTT players.
The panel debates the sticking points holding up telco relationships with the OTT players.

Some, however, have been scathing of operator efforts in this area. None other than Stephen Saunders, the chief executive of Light Reading, remains wholly unconvinced that operators have overcome their poor reputation for partnering or their unwillingness to collaborate with OTT players.

"Why aren't there more joint ventures between carriers and OTTs?" he asked. "The answer is cultural – PCCW's work in Hong Kong is exceptional but it's also an exception."

No doubt, there are plenty of forward-thinking telecoms executives keen to pioneer change, but steering the largest organizations on to a different course is not going to be easy. "They're oil tankers trying to redirect themselves with small paddles," said Saunders.

— Iain Morris, Site Editor, Ultra-Broadband

iainmorris 10/6/2014 | 4:05:14 AM
Northstream Should also have mentioned that Northstream, a consultancy, has very recently published a study about operator and OTT player collaboration - saying that operators in Western Europe could generate an extra €2.2 billion in gross profit in the next three years if they take a kind of standardised platform approach to partnerships, as opposed to just €160 million otherwise.
iainmorris 10/4/2014 | 2:57:13 PM
OTT partnerships Interesting that Orange and Netflix were reported to have struck a revenue-sharing agreement shortly after the Forum took place. We'll have to see if more such deals are publicized in the months ahead, and what can be gleaned about the details (as well as what regulators will make of them).
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