Should telecom operators become part of OTT value chain?

Telecom Lead America: Over-the-top (OTT) players have started challenging the dominance of telecom operators across the world.

Mobile Phone

Only a couple of mobile operators such as Telstra have decided to work with OTT players rather than competing with them.

Recently, Hugh Bradlow, chief technology officer, Telstra, said the Australian operator would like to work with OTT providers.

In a recent research report, Ovum said mobile network operators need to collaborate with content partners and over-the-top (OTT) players if they want to avoid the risk of uncontrolled revenue loss.

Will global telecom operators rethink their business models and become part of the OTT value chain?

Another research report suggest that mobile operators are coming under pressure to improve mobile telecom service profit margins as well as bring in new services to counter the competition from Over the Top (OTT) services such as Skype, Viber, Whatsapp, and FaceTime. Mobile operators have had limited options with 3G but 4G LTE should give the mobile operators some new tools.

The erosion of messaging revenues is already a reality in markets such as China and South Korea, and this is a harbinger of similar changes elsewhere. Operators need to re-evaluate their business models, and decide on the degree to which they should compete or collaborate with content providers and OTT players.

Operators that collaborate more could potentially spend less on their own services. Other large operators will continue to invest heavily in new services as a point of differentiation, but will also need to openly collaborate with content providers and OTT players in order to get the best of both new worlds.

“Today is more about compete and collaborate. Therefore, operators that have been slow to re-think their existing business models must act or they will risk the uncontrolled loss of revenues to OTT players. Revenue loss in traditional services is unavoidable, but there are new revenues available if MNOs can find common ground with OTT players. A divide is emerging in Asia between those operators that are well on their way to a ‘compete and collaborate’ transformation and those that are not,” said Nicole McCormick, senior analyst, Telco Strategy at Ovum.

Operators should also go one step further and view the world from the consumer’s perspective as most of the time they fail to see issues through the eyes of the average consumer. Ovum believes that a more open approach to partnerships with content providers and OTT players, and a more consumer-centric attitude, is a smarter business strategy for operators.

Not all MNOs can afford to invest in developing their own services and related R&D facilities. Nor do all operators have the resources to occupy the high end of the value chain as SMART (services, management, applications, relationships, and technology) players or invest in platforms such as content delivery networks , M2M, sophisticated billing systems, and cloud computing.

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