Telco IT Can Unlock OTT Profits – AsiaInfo
European network operators are missing a trick when it comes to partnering with over-the-top (OTT) service providers by not making the most of their back-office Service Provider Information Technology (SPIT), a missed opportunity that collectively could be worth hundreds of millions of euros in gross profits each year, according to Chinese software vendor AsiaInfo Inc.
To improve the profitability of their OTT partnerships -- or make them profitable in the first place, in many cases -- AsiaInfo Inc. (Nasdaq: ASIA) believes operators need to engage with OTT players in a new way. They should give OTT partners direct, but controlled, access to certain back-office IT systems by deploying what it calls an "open collaboration platform." This would not only reduce the operating cost of each partnership but also make it easier to collaborate with many more OTT service providers.
This kind of open platform approach would be a dramatic departure from how partnerships between operators and OTT providers are typically structured. Usually, the partnerships are individually and manually built, integrated and managed. There is very little, if any, automation in the process of packaging and pricing new services and offers, such as zero-rated Facebook usage. The lack of automation and inability to scale limits the potential profitability of OTT partnerships.
In addition, many operators collaborate with OTT players (often begrudgingly) for the purposes of customer retention and acquisition, but not so often for meaningful revenue generation. (There could be multiple reasons for that, however -- see The OTT Conundrum and A Cultural Shift for an OTT World.)
"Operator efforts with OTT partnerships are clearly not moving the revenue needle as hoped or expected," says Andy Tiller, VP of product marketing at AsiaInfo. "But new technology is available to enable a different kind of OTT partnership."
AsiaInfo commissioned consultancy Northstream to study the business case for deploying an open collaboration platform, focusing on 60 operators across 16 European markets. Northstream reckons that the current approach to OTT partnerships, which is done on a case-by-case basis, would result in gross profits of €160 million (US$201 million) during the next three years for the European operators in the study. But by deploying an open collaboration platform, the potential gross profits during the same three-year period would be €2.2 billion ($2.77 billion) for the operators in the 16 markets studied.
"Customers really like OTT services, but it's not that easy to monetize the offerings from OTT players," says Bengt Nordström, CEO of Northstream. An open platform "allows operators to have multiple OTT solutions and different bundles available to support the offerings," he adds.
Indeed, Northstream's study found that the improved profitability from having a collaboration platform was the result of being able to increase easily the number of partnerships and the variety of partner offerings, as well as boost the take-up of offers from OTT partners.
"It's not 100% true to say that operators aren't innovative," says Nordström. "They're clever in pricing and packaging of services."
He explains that this is the key asset operators should be exploiting, and an open collaboration platform lets them do just that.
As you might expect, AsiaInfo has just such a product, called the Veris Open Operational Platform, which is described as a "B2B collaboration environment."
The platform acts as a kind of API hub, according to Tiller, that connects the IT systems of operators and OTT providers. It's also an environment for creating new products that are essentially mashups between operator services and IT systems, such as mobile data and charging, and OTT services such as streaming music or video-on-demand.
"OTTs can register on the platform to create a mashup product, such as a day-pass for their music service. Operator IT platforms are very capable of creating these packages," he says. "The point is to allow the third parties to use those APIs."
China Telecom Corp. Ltd. (NYSE: CHA) has been using AsiaInfo's Veris platform since 2011 to collaborate with online retailers. The platform now generates $170 million in revenue per month for the operator, according to Tiller. China Unicom Ltd. (NYSE: CHU) also uses the platform.
Now, an unidentified European operator is rolling out the platform, marking the first time it has been deployed outside China. "Operators have an opportunity to differentiate by opening the back-office IT systems," says Tiller. "The more powerful the back-office IT systems are, the more value operators can offer the OTTs to create an interesting package."
AsiaInfo has so far announced one significant customer in Europe that is deploying a broad range of the vendor's back-office tools. (See AsiaInfo Scores Tier 1 Win in Europe.)
For AsiaInfo, the introduction of the Open Operational Platform signifies the vendor's latest move in its European expansion, where it is aiming to take on established SPIT vendors such as Amdocs Ltd. (NYSE: DOX) and Oracle Corp. (Nasdaq: ORCL). (See AsiaInfo Takes On BSS Giants in Europe.)
— Michelle Donegan, contributing editor, special to Light Reading