Pertti Johansson
By the end of 2017, Over-The-Top (OTT) messaging traffic is expected to surpass 32 trillion messages annually, while SMS will have slowed to 7.89 trillion (Source: Portio Research). This validates the challenges with which operators continue to struggle – the ongoing decline of calling and messaging revenue. There are several options available to traditional operators who are looking to break into the OTT space. Here are four options and ramifications worthy of consideration:
Do Nothing
This is an option mainly for the operators who do not realize or care about revenue losses to OTT players. By choosing to do nothing, these operators will continue to lose increasing amounts of revenue for calling and messaging. We have received reports that some operators are already losing up to 10 percent of their annual revenue to OTT players, and this percentage is increasing at a significant rate. In addition to losing revenue, operators may also lose customer loyalty and increase customer churn. By doing nothing, they will also miss the opportunity to gain a strategic advantage over other operators in the market.
Offer Joyn
Joyn was developed by committees of the five largest European operators over the last eight years. The Joyn feature set is very limited, at best the least common denominator among the advanced OTTs. Even after eight years of development and support by the largest operators in Europe, Joyn deployment in Europe has been limited to Spain and Germany. Even the main Joyn proponent in Spain, Telefonica, has chosen to implement their own competitive OTT solution in the United Kingdom. Another key consideration is that Joyn offers no service differentiation among the operators if they all implement the same service. The Joyn feature set offers low monetization opportunities. All the Joyn features are expected to be offered for free by the consumers. For the operators who implement Joyn, advanced OTTs like Voxox will remain a serious threat to their business. Furthermore, deploying Joyn typically requires an IMS core, which many operators do not have. Some operators, with multi-network vendors, have tried out RCS/Joyn in their environment and faced serious inter-operations challenges.
Build In-House
Less than a handful of operators, like SingTel, have chosen this option. It requires continuous and expensive R&D effort, which is not a core competency of the operators, unlike the Silicon Valley type OTTs who are fast and nimble and able to attract the best developers in the world. They will always stay ahead of what the operators or GSMA can do. Building in-house is likely to become a failed attempt to deliver “disruptive” apps before the OTT players do. Deployments of these “home grown” systems are typically destined to just one market with no large ecosystem or deployments. Hence the Return on Investment will be very challenging.
OTT Partnership / Acquisition
Partnering with the right OTT is an easy and inexpensive way for the operators to deploy ahead of their competitors and at low or no cost. They can deploy a disruptive “beyond RCS” OTT solution with a rich feature set in minimal time and at a low cost by allowing the OTT player to host the service and agree to a revenue share plan. This will minimize CAPEX and mitigate any risk. They are able to grow the user base and revenue outside current market “virally.” Another option is to take this a step further and acquire an OTT player, leveraging the solution in a similar way (keeping the talent, developers, etc.). So the question remains – can operators get back on top despite the increasing OTT threat? That depends on how quickly they act and what course of action they choose to take. As for the success of the strategy, time will tell, but speed is of the essence.
March 10, 2014 // Knowledge, Op Ed, Op Ed, Opinion, SR 3-16 Original By Pertti Johansson, EVP Global Business Development, Voxox Pertti_Johansson-Actiance Pertti Johansson
