Some pundits already have relegated mobile operators to being bitpipe providers, declaring victory for over-the-top (OTT) players. This audience focuses on operators’ limited options to slice and dice messages, Internet data and voice minutes, and it ignores new service plans.
While it’s true that OTT players are decreasing the share of the pie for operator-provided services, they substantially increase the overall size of that pie. The result is not the demise of the operators. OTT players can create new operator revenue opportunities using compelling new applications that deliver increased value to a growing set of mobile devices. Here are some examples:
Skype is perceived as a revenue drain for mobile operators but it’s really a revenue generator. 3UK lets subscribers call and instant-message others on Skype for free. Not only has the operator added customers by partnering with Skype, Skype is increasing the total minutes of use by making international calls more affordable.
Social networking increases use of operators’ value- added services. Twitter, for example, encourages SMS integration, and networks like SMS GupShup in India are SMS-driven. In addition, knowledge of subscribers’ use of an application like TwitPic, which lets Twitter users share photos on Twitter, could lead to promotions to drive more use of MMS.
Mobile Internet usage typically is more expensive than fixed Internet usage, creating a potential hurdle to widespread mobile video adoption. Traditional TV content providers have helped for years to pay for distribution by sharing the advertising load. OTT application providers could take a similar approach or they simply could pay some amount to subsidize usage charges to remove this hurdle. These types of two-sided business models would increase operators’ revenue and keep subscribers happy with both operators and their application providers.
“While it’s true that OTT players are decreasing the share of the pie for operator-provided services, what’s more important is that they substantially increase the overall size of the pie.”
While the work is only in its infancy, operators must continue to investigate ways to create two-sided business models with app providers and third parties that need their bandwidth. The end result is a mutually beneficial open environment where third parties can work with operators to improve the customer experience, to introduce innovative services and to link bandwidth usage to pricing
The FCC’s net-neutrality regulations outline several principles:
Wireless carriers have been given considerable freedom under the rules, including the ability to charge for paid priority and the ability to block content other than applications that compete with their voice and video telephony services. However, to grow the revenue pie for everyone involved, the key is to provide subs with choices so they can make value tradeoffs to maximize their own utility.
The rules do not prohibit “toll-free mobile broadband” – third-party deals where content providers would subsidize a subscriber’s data usage (assuming no unlimited plans). An example is the Kindle model, where Amazon pays for network access and the consumer’s only charges are for the device itself and for book purchases.
For more two-sided partnerships to become a reality, operators need to be able to differentiate services across a number of criteria while weighing the costs and opportunities of new technology investments with the potential regulatory risks. They also need to account for subscribers’ mobility so they receive the same service and opportunities to generate revenue regardless of their location. Indeed, instead of making operator networks “dumb,” OTT players can enrich wireless networks with creative services that benefit mutual customers.
Susie Kim Riley is chief marketing officer at Tekelec. Contact her at Susie.Riley@tekelec.com.