Over-The-Top – play, an opportunity for communications service providers?

Over-the-top-players (OTT) have been seen as a big threat to the traditional Communications service Providers (CSP).  In short, the traffic generated by the OTT players is congesting the communications networks in which the CSPs have invested hundreds of millions of Euros, while the same OTT players also bring home most of the revenue streams. The Telco industry has been discussing the topic already for quite a while now, and – as often – the market and business disruptions have been seen as a threat rather than an opportunity.

As an example, CSP executives around Europe and the Middle East gathered at a conference in January 2011 to share experiences on how to compete with Google, Skype and others, that is, the dreaded, revenue-hoarding global OTT players. (Source: Global Telecom Business). Other commentaries, such as this from Ovum,  remind the CSPs that they should rethink their business model and become a part of the OTT value chain. The list of similar examples just goes on.

Let’s recall some of the earlier disruptions to see if there is anything we could learn.  Although the Mobile Virtual Network Operators (MVNO) phenomenon was more or less a local disruption while the OTT players of today are truly global, there might be something worth noticing from those days. Many of the MVNOs in the early phase were established in an opportunistic manner to cash in on the disruption quickly, while trusting that the traditional CSPs will buy them out simply because CSPs should see them as a competitive threat. This also happened in many markets.  After attempting to fight against the grain, many CSPs started to see the MVNO business model as an opportunity, although with the strong encouragement of regulatory bodies . Some CSPs have taken the role of selling the network assets to the MVNOs and some have built their own MVNO business to differentiate within specific customer segments. A good example of the differentiation strategy is E-Plus, who still in June 2012 was the jewel in KPN’s crown. E-Plus established its own MVNO, Ay Yildiz, with a segmented offering to several million (statistic vary from 2.5 to 4 million depending on the definition) Turkish people in Germany, who communicate with their relatives inside the country and between Turkey and Germany.

Some of the leading CSPs have taken similar steps in capturing the OTT opportunity rather than seeing it as a threat. Naturally, there are multiple approaches. One good example is Telefonica whose Jose Valles explains how Telco’s are in a unique position to take advantage of opportunities to facilitate OTT services through their relationship with users. The example by Zain Deputy CEO and COO, Hisham Akbar, is another instance of the CSP leveraging their competences and assets to build a whole sale service.  Zain sells network infrastructure to other players to deliver a wider variety of OTT-type of services and applications to Zain’s customers.

Where there is a threat, there is also an opportunity. However, it often requires the courage to go for the opportunity instead of fighting the inevitable change.