Fred Huet, MD of Greenwich Consulting, discusses how operators can respond to threats from OTT providers.

While the issues that operators face concerning the rollout of 4G and data capacity are pressing, one of the biggest threats to their revenues remains the emergence of over-the-top service providers.

altWith this in mind, operators need to adopt a smarter strategy to customer service and value-add, or risk becoming a dumb-pipe.

The explosion of apps and services in the past few years has rendered some operator services redundant in the eyes of the consumer.

Particularly in the messaging world, where SMS revenues are in the billions, we are seeing an explosion of OTT providers cannibalising profits at an alarming rate.

One of the best examples is WhatsApp, the cross-platform messaging company which carries two billion messages per day.

Despite recently claiming that its service was not a threat to operator revenues, the cold, hard numbers seem to oppose this assertion.

Indeed, Ovum has released a report claiming that telcos are set to lose as much as $23 billion due to the impact of IP-based messaging.

In the short-term operators can use pricing strategy to protect against usage decreases but this is not sustainable in the long-term.

WhatsApp is not alone in its quest to shake up mobile data services; there are myriad location-based, personalised, transactional services springing up, each out of the operators’ control.

In order to avoid becoming a dumb pipe, used only for connectivity, operators need to either work with the service providers, or launch their own smart services.

While operators do see the value of providing these services, costs are generally much higher than associated with smaller start-ups; rollout involves integration with OSS/BSS and can take a number of months.

A mobile app with basic functionality can be launched within weeks; however, we have yet to see an operator really innovate when it comes to services, and as revenues continue to decline, it is imperative that operators work now to rollout smart services this year.

One such service, announced at MWC to a rather muted reception, is Joyn – a new RCS-e messaging service.

Joyn, which has been much anticipated, will enable users to send rich communications to each other, echoing many of the features that OTT users have come to recognise.

Initiatives such as these are one way for operators to claw back revenues and maintain their customer relevance.

As consumer trust in the operator remains high, it is likely that these sorts of services would be popular.

However, there is another way that operators and service providers could work together; by leveraging their billing relationship with customers.

OTT providers and operators would mutually benefit by working together, integrating the platform into an operator’s existing offering.

This would not only provide ubiquitous reach for companies such as WhatsApp and increased revenue for the operator, but also an enriched service for the end-user; truly a win-win situation for all.

Essentially, operators need to investigate new revenue streams, and the above are just two ways that they could fend off the threat of OTT services.

However, it is crucial that these new services come with flexible pricing models, offering a variety of options around quantity and speed, in order to ensure consumers cover the cost of increased mobile data traffic.

This is necessary in countries such as the UK, where smartphone usage is high, data capacity is stretched, and consumers are increasingly turning to apps rather than operator services.

For operators to not move now would certainly be unwise given the competitive context. 

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