OTT Apps: Time To Beat 'Em or Join 'Em

CSPs have to devise a strategy either to monetize third-party OTT services or develop and deliver their own OTT-telco service offering.

4 Min Read
OTT Apps: Time To Beat 'Em or Join 'Em

Mobile communication service providers (CSPs) worldwide are facing a rising threat to their business model with the advent of disruptive technologies and applications. The rise of over-the-top (OTT) players like Skype, WhatsApp, Facebook, Snapchat and Viber are having adverse impact on voice and SMS traffic, revenues, customer mindshare and brand image. CSPs are facing a constant decline in their ARPU and experiencing customer churn.

OTT players provide their services using the underlying infrastructure set up by CSPs. This doesn't affect the basic services of CSPs, but it has reduced them to just a fat dumb pipe. The majority of OTT services are Internet-centric and have increased the data traffic in the CSP's network exponentially, which they never expected and were never ready to face. As CSPs do not have the infrastructure in place to tackle this data upsurge, the result is both a poor quality of service and user experience.

It's not all bad news, however. There are a number of ways that CSPs can fight back, namely:

  • Bundling: CSPs can offer app-centric data plans to customers to allow access to select OTT services, to offset the SMS/voice revenue cannibalization by OTT players and boost data usage. But, even this approach may not protect operators from price pressure, because with increased popularity of these data-hungry OTT services the price per MB will come down.

    • Pricing: Operators could offer integrated plans, i.e. a single bundled price for all the three core services (SMS, voice, data), to combat the OTT effect. CSPs could also increase SMS bundle allowance and reduce the price of SMSs to boost usage. Again, this approach doesn't guarantee success, as widespread popularity of apps like WhatsApp, Viber and Snapchat are seriously encroaching on the long-term prospects of SMS.

    • Rich Communication Suite Enhanced (RCSe): This approach lets telcos compete head-on with OTT players by launching a new, competitive service which allows the users to chat, share files and images and video call. The GSM Association (GSMA) initiated the idea of developing an application called JOYN -- a consumer brand for services based on the CSP-backed RCSe specifications. This initiative helps CSPs tackle the increasing consumer demand for enriched messaging and voice services, using RCSe underlying technology of an IP multimedia sub system (IMS). RCSe faces its share of challenges; the concept has so far failed to obtain widespread support from operators, due to its complexity and slow time to market, since its introduction eight years ago. In comparison, WhatsApp, Skype, Viber, FB, etc., were introduced to the market within a span of three to six months.

    • Partnership: Partnering with OTT players means CSPs can use their quick time-to-market strategy, and gain experience in Internet-based business models (e.g., ad-based and freemium). CSPs have the reach, subscribers and network capability, but with increasing penetration of smartphones, subscribers are getting accustomed to third-party services. CSPs need to drop the walled garden approach and stop operating in the closed environment of the past. Telco-OTT partnership can take the following forms:

      • OTT Partner: Operators can partner with an OTT player and add value to a service by providing their users unmetered telco-OTT transaction from the partner service, so existing data plans are not impacted. This supports faster introduction of services, but operators would not have control over the direction or quality of service, which may weaken customer relationships.

      • Private Label Partners: CSPs can choose to label a privately owned third-party OTT service with their brand name, which greatly improve the time to market. In the long term, the operator may choose to migrate or recreate the service in-house as per the business needs and cost structure.

      CSPs have to devise a strategy either to monetize third-party OTT services or develop and deliver their own OTT-telco service offering. The latter is the ideal option for operators, as there is already an existing market for their self-developed OTT services. The caveat is that CSPs need a services platform that can be widely deployed and is interoperable with other mobile networks; in this regard, the GSMA's initiative of RCSe with IPEX ecosystem could deliver the desired solution.

      IPX eco system with common interconnection model and roaming bilateral agreement will underpin end-to-end mapping of "IP classes of service." Mobile operators can provide consistent customer experience even on partner systems to support the rising use of service level agreements and the introduction of tariffs tiered by quality-of-service levels on a global scale.

      However, RCSe is still an immature technology; while a number of operators have adopted the technology, penetration is still slow. The industry needs to develop the RCSe ecosystem further to provide a diverse range of service offerings and products to the customers.

      Once successful and adopted fully the approach would allow operators to offer new services with attractive pricing plans to compete with third-party OTT services on both WiFi and mobile networks. This could halt the dilution of operator brands that third-party OTT services have caused -- WATCH OUT.

      — Ravi Palepu, Head of Telco Solutions, Virtusa

About the Author(s)

Ravi Kumar Palepu

Ravi Kumar Palepu heads Virtusa's Telecom Solutions Group. In his role, Ravi has led technology council for Telco across locations and drove consistent standards, best practices as well as domain and technical competency across the Telco accounts. He was also part of the Global Technology Office leadership and has bridged the gap between the GTO and the global Telco accounts. Prior to joining Virtusa, Ravi served as Principal Consultant with Tech Mahindra from July 2002 to Nov 2010. He has been responsible for managing the CRM Centre of Excellence and helped Tech Mahindra deliver green field implementation in Europe and Asia region. He has over 17 years of experience in Telecommunication, managing large complex transformation programmes and innovating industry solutions. Ravi graduated from Delhi University with Bachelors in Commerce, earned his Master in Computer Application from NCC UK, and earned his Master's in Business Administration from Cass Business School, London.

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