OTTs & MNOs – A new dynamic

Over the Top (OTT) providers have been tremendously successful in disrupting the communications market. They have irreversibly changed how mobile network operators (MNOs) look at their own businesses and are driving their innovation. The heyday of voice and messaging on mobile are unfortunately over but that might be good for the communications industry and above all, the subscribers. Research firm Juniper Research notes that the messaging market will decline from $113.5 billion in 2014 to $112.9 billion in 2019, a reduction of $600 million. At the same time, OTT providers like WhatsApp are helping to drive a threefold increase in message traffic, from almost 31 trillion in 2014, to 100 trillion by 2019 globally. That makes it a challenging market for MNOs. Volumes are increasing while revenues decline. It is a familiar story that doesn’t end well for MNOs but that might be changing. OTTs have demonstrated the hunger amongst subscribers for cost-efficient and easy-to-use communications services. They’ve shown that new models can work and also helped to position mobiles as the most critical devices for consumers both at home and at work. How do MNOs change the dynamic and benefit from the emergence of OTT providers? We are beginning to see that the issue is no longer black and white. There is a recognition that OTTs are here to stay and that they can be valuable to a MNOs business. There is an increased openness to partnering with OTTs and discussions on how MNOs and OTTs can benefit one another. In the UK, Vodafone and Netflix have partnered to offer subscribers bundled services. Netflix has direct access to Vodafone’s subscribers while Vodafone sees increased traffic volumes. It said 4G customers are using four times more data than those on 3G, demonstrating the value of Netflix to 4G subscribers. Deutsche Telekom partnered with Dropbox to pre-load its service on its devices. This will no doubt drive data consumption on Deutsche Telekom’s network. Beyond partnering, MNOs are also looking at implementing voice over WiFi (VoWiFi) to hold back the OTTs’ increasing dominance in the roaming market. VoWiFi seamlessly integrates calling over WiFi hotspots into a subscriber’s service, which provides convenience without the need to open or share a common OTT platform. VoWiFi enables MNOs to innovate and gives subscribers a seamless roaming experience at a reduced cost. This increases subscriber stickiness while differentiating their service offering. It is an exciting prospect for MNOs who have seen roaming revenues slip away. They can reposition themselves to compete with OTTs in roaming while partnering in local markets to drive traffic. The dynamic between OTTs and MNOs is definitely changing. The ‘us versus them’ approach of previous years is fading away with innovation and new services driving a new era of competition. Ultimately, subscribers will win and both OTTs and MNOs will see new competition based on the best services.

VoWiFi Roaming 360° Vision Paper

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In collaboration with Hot Telecom
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