The Knippr service that T-Mobile Netherlands plans to launch next year appears to be a rare example of a genuine over-the-top (OTT) telco offering. Unlike many other services that operators tout as OTT equivalents, video content from Knippr will be available to customers on other networks, making T-Mobile resemble a localized Netflix Inc. (Nasdaq: NFLX) or Amazon.com Inc. (Nasdaq: AMZN). (See Eurobites: TeliaSonera, Huawei Claim '4.5G' Speed Record.)
Intriguingly, though, rival KPN Telecom NV (NYSE: KPN) launched a similar service last month under the brand of KPN Play. And Vodafone Netherlands is thought to be working on OTT video plans of its own. The Netherlands is developing into a hotbed of operator-led OTT activity.
These OTT moves by operators are partly a response to the overwhelming popularity of classic OTT services in the Dutch market, where consumers quickly spotted an arbitrage opportunity in using web rather than traditional telco offerings. "Dutch operators had very affordable rates for data when it began to take off, but they kept their pricing for voice and text," says Bengt Nordström, the CEO of consultancy and analysis firm Northstream . "That created an incentive for consumers to move to new data plans."
Previous research from McKinsey & Co. singles out the Netherlands as a market that has seen a dramatic slump in the usage of traditional services because of this dynamic. At one unnamed carrier cited by McKinsey, the year-on-year change in outgoing text messages per customer went from a 33% increase in the July-to-September quarter of 2010 to an 11% decline in the April-to-June quarter of 2011. During that period, the penetration of Internet messaging service WhatsApp rose from 5% to 85% of all smartphones.
That trend has made the Netherlands one of the most advanced data markets in Europe. Indeed, in the July-to-August quarter of this year, 59% of T-Mobile Netherlands 's average revenue per user came from non-voice services -- a higher percentage than at any other of Deutsche Telekom AG (NYSE: DT)'s European subsidiaries. Web players like Netflix have been racing to satisfy this appetite for data services and applications.
By driving up revenues from data connectivity, this has been a welcome development from the network operators' perspective. But it is also forcing them to address challenges posed by the OTT phenomenon with greater urgency than in other parts of Europe. How they do that could be instructive for telcos elsewhere.
According to T-Mobile, Knippr will cater to soaring demand for skinnier bundles of TV content, which traditional pay-TV companies do not typically offer. Customers will be able to enjoy the service without being tied to contracts. Nor will Knippr be sold as part of a package that includes connectivity services (T-Mobile sold its Dutch fixed-line business in late 2013 but remains one of the three main mobile network operators). "Knippr puts an end to the forced trade," said Tisha Lambs, the director of consumer marketing and Knippr for T-Mobile Netherlands, in a company statement. "It offers interactive TV without any other obligations."
While T-Mobile has yet to announce details of pricing and content, it claims to be in discussions with "nearly all channels, including the online video services." KPN Play, which is already on sale, costs from €11.99 ($13.12) per month and comes with 22 linear TV channels, including Home Box Office Inc. (HBO) , Comedy Central, TLC, Nickelodeon and Discovery. Like Knippr, it can be canceled at a month's notice and does not have to be used with the service provider's own network.
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