Media publishers are rarely put on a pedestal as business models to follow these days, but Sandvine CEO Dave Caputo told European Communications that one particular strategy could be copied by operators looking to solve a key problem.
“Operators are spending billions on spectrum, networks and other things, but the problem is people increasingly don’t want to pay to use the services they provide,” he said while discussing his company’s latest Global Internet Phenomena Report.
The overall message of the report is clear and unsurprising – real-time or on-demand entertainment, mainly in the form of video, is being consumed in ever-greater number and duration on both fixed and mobile networks.
In Europe, for example, over 40 percent of all fixed peak downstream traffic is real-time entertainment, a figure that rises to over 46 percent on mobile networks.
Interestingly, Caputo predicts it will rise to around 70 percent before plateau-ing in five year’s time.
Google-owned YouTube alone now has a 15 percent share of all peak period traffic on fixed networks in Europe, according to Sandvine’s figures.
Facebook has a two percent share while iTunes has a 1.5 percent share.
Says Caputo of the OTT threat: “Operators in a dangerous place, but they remain the key player and if they can build agile-enough networks then they will reap the rewards.”
One interesting, and so far little discussed, response is that of sponsored connectivity.
Sandvine defines this as a third-party paying the carrier directly for data – most likely via a mobile app – used by consumers.
This is a model that publishers, particularly in the trade press, have been using for many years – funding the production and distribution of a magazine through advertisers paying to get their display ads in front of a specific audience.
To be fair to Caputo, he uses a much more timely example – the Amazon Kindle. Consumers pay for the device, but Amazon picks up the tab for the mobile coverage based on the assumption that content sales through the e-reader will more than cover the costs.
Applying this model more widely to the communications is not only valid, it is a “win-win-win” for consumers, operators and content providers alike, according to Sandvine.
Says Caputo: “[Operators] have a manifest destiny to deliver sponsored connectivity.”
The Sandvine report cites e-commerce websites and retailers as the obvious beneficiaries given the attractiveness of getting consumers to browse their content free of data charges.
More futuristically, it thinks about the possibilities provided by connected cars and mobile gaming.
“In the future there will be many different ways to pay for bandwidth but it is still early days,” says Caputo.
He cautions that sponsored connectivity is unlikely to replace the traditional model of consumers paying the operator directly, but that it is nevertheless “a growing trend” that merits discussion.
Significant barriers certainly remain, not least around traffic classification, pricing and device setup.
Nevertheless it is an interesting concept that should be discussed as traditional revenue streams continue, like the printed page, to dwindle.