‘Over the top’ puts a hundred billion back in your pocket

Published on the 16/01/2017 | Written by Donovan Jackson


A figure is put to internet protocol gains…

Just how much cash has been returned to consumers thanks to the emergence of over the top (OTT) services has been quantified by Juniper Research and the number is good and staggering. The UK-based market analyst has put the figure at above US$100-billion – and that’s for this year ALONE.

Interestingly, however, Juniper has chosen to characterise the enormous reduction in the cost of communication as ‘lost revenues’ for telecoms operators, rather than an advantage for the man in the street. We know who pays the bills at the research organisations.

The company said in a statement that it has calculated that the consumer migration from operator voice and text services to OTT messaging services and social media will cost network operators nearly US$104 billion this year, equivalent to 12 percent of service revenues.

OTT services include the likes of Skype, Netflix, WhatsApp, Facetime, Facebook Messenger and any one of probably millions of applications which rely on telecoms/internet infrastructure, but are operated by third-parties which don’t pay the network owners.

In its research, titled ‘Mobile Operator Business Models: Challenges, Opportunities & Strategies 2017-2021’, Juniper said it reached this conclusion by analysing the scale of operator traffic decline together with the uptake of OTT VoIP and message services. The research pointed out that the success of several platforms had substantially impacted on operator margins, with WhatsApp alone now generating nearly three times as much daily traffic as SMS.

Furthermore, Juniper argued that with most leading OTT messaging platforms now incorporating or trialling multiple communication options, including group voice or video chat, operators would see continued erosion of traffic levels in the future.

OTT is a major problem for network operators which see it as an unfair assault on ‘their’ money-makers – traditional voice and text revenue. After all, creating and running internet infrastructure is capital intensive, subject to regulatory and licensing provisions and has multiple market restrictions; the OTT application providers earn their crust leveraging that infrastructure, without bearing its overheads.

In several jurisdictions, network owners have even made noises about regulating OTT service provision, leading to predictable bunfights over net neutrality; the International Telecoms Union has much to say on the subject, too, while the humble consumer is likely to feel a warm fuzzy that the companies which have ripped him off so hard and for so long are now under the gun. That any ‘victory’ could be Pyrrhic probably doesn’t warrant a second thought.

The result of OTT and other forces is that telecoms companies, including those in Australasia, have upped their game and created multiple new business units and services. New Zealand’s Telecom of old, for instance, bears little resemblance to the Spark of today.

In any event, Juniper said it has highlighted measures that operators could introduce both to arrest the decline in core revenues and to develop new sources of income, which include a few of our regular suspects: big data and analytics packages for both consumer and IoT devices, carrier billing payment options, and mobile money and identity services.

The research also argued that with mobile increasingly deployed within the context of a quad-play offering (broadband internet, television and telephone with wireless service provisions – services recognisable from Australian and Kiwi telecoms operators) it is essential for telcos to provide consumers with attractive, original content to differentiate themselves from the competition.

A complimentary whitepaper, ‘Mobile Operators ~ Making the Networks Pay’, is available.

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