Though both Telco’s and OTT’s have unique challenges, we see spaces for them to collaborate very much on their core competencies and natural courses. And, this not only answers their challenges; also, generates greater value and better businesses for both. OTT-TELCO matchmaking can breed a philosopher’s stone to metamorphose both the industries!
OTT-TELCO matchmaking can breed the philosopher’s stone to metamorphose both the industries! Hit by the growing popularity of the large, global OTT Apps, many telco’s have tried to tackle the issue head on with the OTT Providers; while others are actually considering OR already in the process of collaborating with them. Whatever the scenario at this moment is, Telco’s have become highly sensitive to the growing OTT dominance. And, why not! Third-party internet voice applications alone have put a multibillion-dollar toll on the global telecommunications industry  and combined impact of OTT providers on global Telecom revenues is expected to be approximately 8 percent . And, given the growth trajectory of the OTT’s – OTT voice platform alone will grow at a compounded annual rate of 20 percent to reach 1.7 trillion minutes in 2018.  – they are now the peoples’ choice for content & service consumption.
Yet, the potential that the popularity of OTT’s offers is reined by challenges OTT industry alone cannot overcome. Answers to majority of these challenges can very easily come from the core competencies of the telco’s. And the loss of telco’s on the face of OTT growth can be made good as the OTT’s flourish. We have found that they have spaces to collaborate very much on their natural courses. And, that itself can answer their challenges!
Telco’s are the Best Collection Medium for OTT Contents
OTT’s are the preferred sources of content and services these days because of their specialization and customization ability. But, monetization is the biggest challenge for the OTT’s – particularly in the Asian and African markets – due to the facts that credit card penetration to the consumers of these markets is very low and ads for niche OTT’s will never help them go beyond the critical mass. BUT, these consumers are long-exposed and habituated in micro-charging from their mobile wallets. So, the finest application of this monetization synergy can be for VAS consumptions – mobile wallets can act as the collection channel for all the OTT content & services. Even the monetization through telecom has already taken novel heights – Telefónica, along with its partner Telenor ASA, has tied up with Bango for “carrier billing” whereby payments for goods and services are added to a customer’s mobile bill . No doubt this will benefit the OTT’s most; but at the same time, will pump-in more revenue for the Telco’s with their existing infrastructure.
Content & Service Bundling
Both OTT’s and Telco’s can create greater pull from this! Telco’s can offer certain free usage of certain Apps upon recharging a certain amount for data / voice etc. Similarly, OTT’s can also offer rebated cost of usage if accessed through using data pack of certain telco’s. This is just a basic mode of bundling. Bundling will open up a completely new competitive advantage for both the OTT’s and Telco’s. TeliaSonera – a leading European telco – has taken convergence as the core of their strategy and has collaborated with Spotify for bundling offers. Telstra, Australia’s largest telecommunications and media company, has teamed up with Roku to bundle Telstra’s own BigPond movie service with third-party OTT streaming services such as Presto, Stan, Netflix and various catch up TV channels. 
Riding on Telco’s Insights & Promotion Capacity
On the consumer research frontier, telco’s are treasure troves for the OTT’s. Telco’s know the insights of customer consumption patterns, timings, tastes and preferences of content & services, trending interests, spending patterns and OTT’s can ride on these insights to produce content & services that consumers are awaiting. Moreover, as the OTT’s come in the form of apps – almost all housed in smartphones, OBD’s and SMS blasts are excellent tools for the promotions of OTT’s. Telco’s can bring in the best value of the promotion budgets of OTT players. In markets where internet penetration/usage is still in their early stages, telco’s that are yet to collaborate with any OTT are probably waiting for internet usage for certain OTT’s to touch certain thresholds. After that, they’ll use their CRM analytics to demonstrate their customer understanding to partner with some of the giant OTT’s. These telco’s will ride on their customer insights and direct promotion capacities like SMS blast, OBD etc.
Joint Venture …
NTT DOCOMO has teamed up with OTT player – Line Corporation – to offer a joint Voice and Messaging Services to its smartphone customers in Japan . China Telecom, the largest fixed-line service and the third largest mobile telecommunication provider in China, launched an OTT Messaging App – YiChat – through a joint venture with Chinese internet company NetEase . Such joint ventures are yet another frontier to synergize on the respective core competencies of the OTT and Telco – one specializing on content & service production while the other on distribution, promotion pricing, and billing.
For the Telco’s, the greatest benefit from the collaboration is a huge mobile data consumption by the OTT App users. With revenue from voice and SMS on the decline, data will be the key for the Telco’s survival and growth. Growth in data revenue is already getting stronger – Bharti Airtel reported a 59.1% rise in data revenue with ARPU for data rising 32% ; with more avenues and incentive of mobile data usage, this may even surpass the traditional voice and SMS revenue altogether in future. Revenue sharing will be the next monetization area for the telco’s from the collaboration. In all the collaboration scopes, with little or no incremental capex involvement, telco’s can actually multiply their revenue size by allowing their infrastructure as a channel for the OTT’s to collect payments, promote content & services, bundle products, and utilize customer insights.
Huawei reiterates the necessity by emphasizing that it’s not about who should be paying in this partnership, but rather creating value for the consumer so that the consumer pays for an improved user experience, and Telco’s and OTT providers can share those benefits together. But, we actually see spaces for them to collaborate very much on their core competencies and natural courses. And, this not only answers their challenges; also, generate greater value better business for both.
Mr. Tamjeed is a Portfolio Manager at SSD-TECH Ltd. He can be reached at email@example.com