x
OTT

Dutch Telcos Take Lead on OTT Transformation

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.

Non-Voice Percentage of ARPU
(Source: Deutsche Telekom)
(Source: Deutsche Telekom)

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.

Next page: Hobbling net neutrality

1 of 2
Next Page
nasimson 12/25/2015 | 8:41:06 AM
Not for too long OTT video market is buzzing with experiments. I expect a few winner models to emerge soon as the experimentation period can't go for too long.
iainmorris 12/17/2015 | 7:54:14 AM
Re: Kipper tomorrow but NOW today Arbitrage is typically used to describe the practice of buying and selling assets in different financial markets to profit from price differences. More loosely it just means taking advantage of price differences between two or more markets. In this case, that's the difference between paying for a data bundle and buying ordinary voice minutes to make a phone call. It's a term that's been used quite widely to describe this phenomenon, as in this Arthur D Little white paper: http://www.adlittle.com/downloads/tx_adlreports/ADL_OTT_Disruptive_threat_or_innovative_opportunity_v2_01.pdf

The original meaning of the Middle English/French/Latin root is to exercise judgment, which is obviously what customers are doing when they take advantage of WhatsApp or its ilk. It doesn't, however, imply that customers are doing anything wrong.
Paralogistix 12/17/2015 | 7:30:32 AM
Kipper tomorrow but NOW today @Mitch If by interesting use of arbitrage you mean incorrect, then yes. 

The Knippr product is interesting, but have looking at the UK market, satellite broadcaster and telco, Sky, already has an OTT play - NOW TV. This is in its 4th year and has already demonstrated the viability of the model that T-mobile have adopted for Knippr. NOW TV provides direct competition to most of the OTT players including Amazon Prime, Netflix et al. What is perhaps interesting is that as content producers and telcos move into the OTT space, the OTT players have started to generate their own content. A convergence of sorts.
Mitch Wagner 12/16/2015 | 3:42:41 PM
"Arbitrage" Interesting use of the word "arbitrage" here. That's a good word for the phenomenon of people switching from SMS to less expensive OTT messaging services. 
HOME
Sign In
SEARCH
CLOSE
MORE
CLOSE