The world around us constantly evolves, and as a result, we are at the dawn of a new age of cognitive cities. This new chapter of the digital era requires innovative solutions for connectivity and telecommunications. One such solution is Over-The-Top (OTT), also known as Telco-OTT. What OTT in telecom is, in layperson’s terms, the delivery of audio, video, and other media over a group of computers connected via their unique internet protocol (IP) addresses, completely bypassing traditional operators’ networks.
What is OTT?
Before we delve further into the OTT vs telecom operator debacle, we need to understand what telecom OTT is. As stated above, OTT in services in telecom include the delivery of media over an IP network sans a traditional operator network. But it is a little bit more complicated than that.
The Origin Story
OTT media services, which offer media services directly to viewers via the Internet, existed before OTT telecom. OTT avoids the traditional controllers or distributors of such content: cable, broadcast, and satellite television platforms. These companies include Netflix, Hulu, HBO Max, and Disney+, to name a few. Furthermore, they have been utilized since 2007, when Netflix expanded its business by introducing a streaming service while retaining its mail-order rental service.
What About OTT in Telecom?
Over an IP network, a telecommunications service provider offers one or more services. Telcos occasionally use cloud-run services. Subsequently, these services are delivered through an organization’s current Internet Protocol Virtual Private Network (IP-VPN) from another provider rather than the carrier’s own access network. Nevertheless, the IP network is primarily the public internet. It encompasses a range of telco services, including cloud-based (e.g., compute and storage), content (e.g., TV and music), and communications (e.g., voice and messaging).
Several industry analysts and media commentators view telco-OTT as the strategy that mobile network operators must use in order to compete with the vast and expanding range of over-the-top (OTT) services offered by non-telco companies. This perception is fueled by the availability of high-performance fixed and mobile broadband networks as well as the quick uptake of smartphones and tablet computers.
Telco-OTT was created in response to the fact that users would likely have multiple devices (smartphones, laptops, or other connected devices like TVs and game consoles), all of which would almost certainly have different access providers (especially with the growth of public-access Wi-Fi). As a result, in order to deliver telco-branded services consistently, at least at some points, third-party access will be required.
OTT vs Telecom Operator: Losing their Monarchy
By 2024, operator voice revenue will decline by 45%, according to a 2020 Juniper Research study, despite an 88% increase in the total number of third-party OTT mobile voice over IP network (mVoIP) users over the next five years. Most telco operators are worried about losing money to mobile OTT players. Voice profit pools are shrinking, and operator text messaging is shifting to VoIP-based Mobile OTT apps like Viber, WhatsApp, Skype, or apps developed by professional solution providers.
In this OTT-dominant market, all that is left for the operator is the data revenue. However, data isn’t in an excellent position to make up for the lost sales. Operators are forced to search for content and applications to create new revenue streams.
Mobile operators, who once held a monopoly, now have to compete with OTT players for market share. Communications apps, with free calling and messaging over the internet, are increasingly threatening telco operators’ traditional voice and messaging businesses. Due to the growth of mobile OTT, operators find it challenging to manage and guarantee customer experience conventionally.
Let’s use an instance where someone is using a smartphone with GSM calls and SMS service and a 4G data plan from XYZ mobile operator. Using Skype, or another VoIP service, over Wi-Fi or LAN represents a significant loss for mobile operators. The primary cause is the operators’ profit-making voice call and SMS revenue transfer to OTT players.
Why Mobile OTT, However?
A telecom OTT strategy is very attractive to users in an era where everyone is more or less glued to their devices consuming audio or visual media. Its main qualities are as follows:
- Free and Cheap Calls and SMS with VoIP: Users save money on text messages and local, national, and international calls.
- Geographical Limitation: Only customers who are located in the licensed provider’s regulated dominion can be served. However, OTT services in telecom are accessible to any user, anywhere in the world.
- Terms and Conditions: OTT providers do not have to abide by a plethora of regulations. In contrast to licensed network operators, mobile OTT providers have a great deal of freedom and flexibility when offering services.
- Real-time Communication Experiences: Seeing the person you are chatting with writing makes for a pleasant visual experience. Users can use cartoon emoticons or expression trolls like the GIF keyboard to express their feelings and send instant pictures while chatting.
Impact of OTT in Telecom
Impact of OTT Services on Telco Revenues
OTT applications actively use a telecommunications operator’s infrastructure to provide their services but do not directly contribute to the operator’s revenue. However, the services require data subscriptions, which is how money is made.
Many telecom operators are concerned about the threat that OTT services pose to their own services. Numerous OTT applications are created as replacements for current “classic” communication methods like SMS. Therefore, even though the data packages generate income, operators are losing money due to the decline in demand for their own core services. Network providers need to adapt if they want to survive to manage this effect on voice and message revenue.
Impact of OTT Services on Data
The alternative services that OTT applications offer will dissuade current and potential customers from using standard services. Thus, it clearly impacts a service provider. Network data congestion is a problem that could have an even greater impact, which is perhaps more worrisome for network providers. The network is under pressure as more people use OTT services in telecom, causing an increase in data traffic. Service providers must invest in various technologies, like small cells and spectrum acquisition, to maximize and improve their current infrastructures.
What Can Telecom Service Providers Do?
For network providers, reacting to the emergence of OTT services has taken up a significant portion of their efforts. But are there any longer-term solutions to the problems that service providers are facing? Can they regain control, or will they have to give in to public pressure?
Several options can be considered:
Alliances with OTT partners for telecom provider are a frequent solution for the issue to share in the exposure that each platform offers. Using this tactic, the operator can maintain traffic and reclaim a portion of the profits. This strategy can guarantee customer adoption and retention. Still, it gives the network provider no control over the Quality of Service (QoS) of the OTT applications. This detail could backfire and potentially harm their reputation and relationships with customers.
Development of Their Own Services
In order to compete, network providers can create their own OTT services. This would give the service total control. An operator may create its own internal team to create the services or purchase an existing business to offer a quicker route to market. It costs a lot to do this, and developing the services can take a while if the necessary skills are absent.
Blocking OTT Services
The most extreme response to the emergence of OTT applications might be to block them altogether. It is a short-term tactic that would undoubtedly reduce the revenue generated by OTT services in telecom through the network service provider’s platform. Therefore, it possibly buys time for them to create their own rival service. However, given the variety of operators available, it could lead to the formation of rival partnerships and the loss of revenue from data subscriptions.
Invest to Protect
Telecom service providers can offer the most competitive platform to deliver OTT services. This is done by continuing to expand their networks and implementing new technologies (small cells, spectrum allocation, etc.). They will safeguard the current revenues and possibly spur further growth by investing in their infrastructure and keeping as many of their legacy communications systems operational as possible.
OTT in Telecom took every key player in the industry by surprise. It ripped the power that telcos held over the population’s heads from their hands. We no longer need to give them ridiculous money to stay connected. Instead, we rely on OTT applications such as WhatsApp, Viber, and Telegram. As we charge towards a cognitive future, the earth is becoming a village in terms of connectivity and communications thanks to innovations like OTT services. OTT in Telecom is consumer-based rather than business-based. It is not generating profit for telcos yet using its infrastructure to operate. And the solutions range from “we can make something work” to downright petty.
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