Why OTT is not a serious threat to Indian telecoms

OTT (over the top) players are not a serious threat to Indian telecom service providers such as Bharti Airtel, Idea Cellular, Vodafone, Reliance Communications, Tata Docomo, said CARE Research.

Though there are concerns of cannibalisation of non-data VAS by the OTT messenger applications, threat to voice revenue from OTT players is over-blown.

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The CARE Research comes at a time when several global telecoms have shared their apprehensions about the growth of OTT players and their mobile messaging reach.

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CARE Research cited several reasons.

A Skype-to-Skype call consumes around 375 kB/min for one user i.e. 750 kB/min for both users. At an average data realization rate of 35 paise per MB, it translates into 26 paisa per minute as the cost of a voice call on VoIP. If we compare this with average realization per minute of 40 paisa per minutes for voice calls, VoIP using OTT apps translates into a discount of 35 percent to the regular voice calls.

Should telecoms care about OTT

This 35 percent discount comes with several issues.

Indian Government has limited VoIP calls only to International calls so far. Opening it for domestic voice telephony will face strong opposition from the telecom operators who have invested billions of dollars in the network.

OTT based voice calls have quality related issues due to latency of 1-2 seconds, blank spots and call drops. 3G network in India, especially indoor, is patchy and quality of calls further deteriorates on 2G. Most of the developed countries, where OTT voice is getting popular, have unlimited data packs unlike in India. Lack of such plans results into cost associated with a VoIP call.

Also, lesser penetration of smartphones in India would be an issue as VoIP requires smartphones with both the users.

As the differential between voice call tariff and data tariff of a call on VoIP, operators would not lose much of their revenue even if some portion of the voice telephony shifts to VoIP.
Though it is not a threat to broader voice telephony in the immediate future, OTT voice is expected to threaten National and International Long Distance Telephony because of the tariff arbitrage.

Can telecoms ignore OTT

But some of the facts shared by OTT vendors are alarming for telecoms. For instance, OTTĀ vendor LINE, a free call and messaging app, announced its registered LINE users has recently surpassed 400 million.

The number of registered users exceeded 300 million on November 11, 2013, with growing user numbers in countries such as North America and Europe adding to user bases in Spain, Southeast Asia, and other countries, LINE said.

LINE says the amount of daily new users reached around 1.7 million per day. Since the start of the new-year, the amount of countries with over 10 million registered users rose to a total of 10, including America, Korea, Malaysia, and Mexico.

Recently, messaging platform Tango has closed a $280 million round of funding with the Alibaba Group investing $215 million.

Facebook is acquiring Whatsapp. Google wanted to buy the messaging platform. But the CARE Research report says OTT is not a threat to telecoms.

Pix source: iMore

Baburajan K
[email protected]