US Operators Better Positioned to Profit From Rise in OTT Services Vs Europeans

Published on: 9th Aug 2012

­USA based mobile network operators are better prepared to more effectively deal with and profit from OTT services compared to European operators, according to a report commissioned by tyntec. The report determines that despite the expected $30 billion revenue opportunity from OTT messaging services, European mobile operators feel more threatened and have been slower than the US in preparing for the rise in demand. In fact, nearly 25% of European operators have already experienced up to 5% loss in revenue, and almost 75% anticipate additional losses over the next three years, peaking at 11-15%.

In contrast, USA operators have yet to experience losses on operator messaging services or revenue because of OTT.

The report draws upon interviews and data from 68 markets globally, and uses the launch of T-Mobile's Bobsled OTT service as an example of successful US adoption. Since launching in 2011, Bobsled has attracted over 1 million users globally -- of which 95% were not T-Mobile subscribers. By comparison, operators in other areas of the world are working to prevent adoption by blocking OTT services, a practice that doubled from 5.4% in 2011 to 10.5% in 2012, and setting up walled gardens.

According to the report, these tactics only delay the inevitable and could hurt operators in the long run. However, this 'fragmentation of communication' could present opportunity for growth among operators and OTT players, provided interoperability standards are created that allow OTT users to communicate with all other mobile users, whatever device or app they're using.

In terms of adoption, despite Bobsled and the proliferation of other OTT services in the US, operators expect a split between 11-20% and 31-40% of their subscriber base will be using OTT by 2016, while almost 50% of European operators expect a higher adoption rate of 40%. This can be explained in part because of flat rate SMS and voice plans in the US, thus the cost savings aren't as compelling as Europe.

Other key findings in the report include:

• By 2016, operators around the globe expect that over 11% of their customer base will be using OTT services
• OTT services are expected to reach 45% of smartphone users in the next four years
• The total number of OTT users on smartphones is expected to more than quadruple from 276.8 million in 2012 to 1.32 billion in 2016
• 79% of European operators believe that OTT clients on smartphones are a threat to traditional SMS- and voice-based services.
• Every operator included in the research believes voice and SMS traffic will decline over the next 5-10 years
• SMS continues to be the standout concern for operators. In 2011, 67.6% of operators identified messaging as the most challenged service by OTT, but that figure has increased to 73.7% in 2012
• The incremental revenues generated from OTT interconnectivity is expected to reduce the annualized decline in voice and messaging revenues (US$30 billion) by over 25%.

The report concludes by stating that while the majority of OTT services currently focus on 'on-net' communication, the demand for 'off-net' services will continue to grow over the coming years. By integrating mobile numbers into their user accounts, OTT players can allow their users to make and receive calls to and from any phone, whether or not it is OTT enabled.

"The OTT market is growing fast but it's still in its infancy. The current market structure is seeing the rise of multiple communications walled gardens which aren't offering consumers a truly converged service," said Nick Lane, Chief Strategy Analyst, mobileSQUARED. "If operators want to maximize the potential upside of OTT, while minimizing the downside, then they need to stop burying their heads in the sand and look at how they can collaborate most effectively with the OTT industry."

"OTT is not going away. Rather than putting up a stoic fight, operators everywhere must learn to adapt their business models and look for new ways to capitalize on the OTT phenomenon," said Thorsten Trapp, co-founder and CTO of tyntec. "Given these stark regional differences, Internet companies looking to expand into Europe with OTT-based service offerings must enter the market with eyes wide open and an understanding of the dynamic elements at play. Partnerships with mediators and employing best practices will go a long way towards ensuring a smooth entry."

 

Tags: [tyntec]