Opinion: Going over-the-top, or not
(Image Credit: iStockPhoto/akrp)
Why do over-the-top (OTT) communication applications such as Skype, Viber, Line and WhatsApp exist? My view is, like most innovation, they exist to exploit inefficiency in a market.
If the world already had a service which provided ubiquitous, seamless communication with anybody, anywhere, at any time, across multiple media at a nominal cost, then there would be no need for OTT communication applications.
In the mobile world, applications have been created to provide services that users want but the traditional Mobile Network Operators (MNOs) were not ready to provide. However, as an overlay, there are numerous challenges that OTT communication services have to deal with including brand, coverage, handset compatibility, directory services, interoperability, and monetisation.
All these challenges can only be comprehensively addressed by the mobile network operators, because they have all the pieces of the puzzle.
I built a business around a mobile recording application because there was an opportunity in the financial markets and, at the time, the mobile networks felt their priorities were elsewhere. I ultimately sold this business to a mobile network operator because they could enable a seamless service that could scale globally and be monetised easily. They bought it because they saw the opportunity and realised they didn’t need to reinvent the wheel.
We are seeing partnering between OTT players and the MNOs which I believe is driven by the MNO’s desire to understand the market.
MNO’s dominate the voice and text market, and as price comes down and coverage improves their leading position will be sustained. Furthermore, the deployment of IMS and Voice over LTE (VoLTE) will enable seamless WiFi calling, improve coverage and effectively increase network capacity whilst reducing the cost of bearing calls. This technology also supports a mutually-beneficial symbiosis with the handset vendors as they start to embed WiFi calling into the handset dialler.
However, voice and SMS is only part of the equation. WhatsApp, Viber, and Skype show that consumers want more. They want enhanced phonebook and directory services with additional features such as presence. They want enhanced messaging to include chat and file-sharing. They want enriched calls to include video and video sharing.
The MNO’s greatest fear is that they become a “dumb pipe” as all the communication services move up the stack and the MNO’s simply become the commoditised connectivity provider. But a lot of poor decisions would have been made on the part of the MNOs for that to happen.
The fact is that the MNO’s hold most of the cards and the barriers to become an MNO are enormous. The barriers to creating Rich Communication Services (RCS) are comparatively small.
Google’s recent decision to enter the carrier services market by partnering with Sprint and T-Mobile in the USA is a key part of a strategy to provide a fully-blown mobile service. Not even Google, with effectively unlimited resources, would consider building a global or even national wireless network.
So what are the MNO’s options? I believe they fall into two categories; to buy and build, or to partner.
We are seeing some partnering between OTT players and the MNOs which I believe is predominately driven by the MNO’s desire to understand the market. There is a fundamental conflict in this type of partnering, as both organisations want to “own” the customer experience and as a result will become uncomfortable bed fellows.
Inevitably, this accolade will be won by the OTT owner as they become the customer interface relegating the MNO to “dumb pipe” status. This threat means that the approach will fail to receive sufficient support from the MNO stakeholders who will resist the conscious absolution of value to the OTT partner.
There is no question that we are entering a very disruptive time in the global communications market. It is interesting to note that the mass consumerisation of communication technology is also forcing an uncomfortable pace of change in global enterprise as rigid corporate IT departments are being disintermediated by their employees.
Applications have been created to provide services that users want but the traditional mobile network operators were not ready to provide.
I think we are going to see a polarisation of the MNO market. In the main, the Tier 2 players who do not have the bandwidth to build their own rich communications service will ultimately be forced down the partnering route. A clear illustration of this strategy is Google’s partnership with Sprint and T-Mobile – if they can get the value sharing formula right – they have a real chance of challenging the Tier 1 networks.
The Tier 1 Networks, in a bid to retain value, will have to buy and/or build their own platforms. Traditionally, the MNOs have failed at this as their biggest barrier is themselves. When WhatsApp were bought for $19bn by Facebook, they had 55 employees. 55 employees created $19bn of value! They did this because they were so few, they were agile, and unencumbered by monolithic corporate structures.
T-Mobile’s acquisition and ultimate disposal of Bobsled and Telefonica’s lacklustre experiences with Tu Me are testament to big MNO’s agility phobia. The idea of rapidly-integrating an innovative acquisition into the larger organisation just decimates value as the incumbent old guard looks to establish ownership and control and sterilises the value which the acquisition was trying to capture in the first instance.
I believe the Tier 1 players need to completely rethink how they support, consume, and ultimately deploy innovation. The OTT players are evolving at the speed of thought, how can the MNO’s even get close? The MNO’s may want to consider looking outside their industry for ideas. The financial industry is coming under huge pressure from agile, innovative, alternative finance initiatives which are representing a significant threat.
The big global banks share many of the challenges and strengths of the global mobile operators. As a way of catalysing change, many of the global banks are establishing technology incubators as a way of tapping into innovative talent without stifling creativity and growth. We are yet to see how the results of these initiatives can be successfully productised into the big banking technology world, however I can’t help thinking this approach has merit.
The MNO’s greatest fear is that they become a 'dumb pipe' as all the communication services move up the stack.
Cloud services also have the potential to provide the speed to market that the MNOs desperately need. The greatest barrier to this approach is internal perception and paranoia. The long established custodians of infrastructure and data within the traditional MNOs will expertly establish a huge amount of fear, uncertainty, and doubt as a defence against adopting cloud. This is archaic-thinking, and needs to be put to one side.
Jibe, backed by Vodafone Ventures, is a very interesting company providing an open communications platform to enable the integration of traditional standards-based telecommunications, and the OTT platforms. Nexmo are also in this new mould, and represent an innovative and interesting approach.
The GSMA’s Joyn initiative is looking to accredit Rich Communication Service providers such as Jibe, and support the collaboration of its members to ultimately develop interoperable communication services which challenge the OTT players. Traditionally these types of collaboration projects have struggled in the MNO world, but this time the threat might be so significant that the adage of “my enemy’s enemy is my friend” might make it work.
The final piece of the puzzle and, for me, the elephant in the room is how do MNOs become global? OTT applications can almost effortlessly provide global services. The silo’ed national nature of even the largest Global Network Operators is a massive barrier to their domination of the OTT market; the MNO that can also crack that challenge wins.
Do you see OTT services as an opportunity for MNOs? Let us know in the comments.
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