Are OTT Applications Really Causing Operators to Lose Revenue?

OTTThe rise of Over-The-Top (OTT) applications has not been a recent one. Some of these applications have been existent for over 10 years (Skype) while others are as new as 1-year-old.

“An over-the-top (OTT) application is any app or service that provides a product over the Internet and bypasses traditional distribution. Services that come over the top are most typically related to media and communication and are generally, if not always, lower in cost than the traditional method of delivery.”

Mobile Network Operators (MNO’s) claim that they are losing revenue due to these OTT applications. The revenue bleed is mainly in the following aspects:

  • International calls: A sharp decrease in international revenue is due to these applications as per MNO’s (no mentioning of VoIP operators)
  • Local calls: Minor loss of local calls due to IM usage & some of the VoIP calls
  • SMS: Due to IM sharp increase of over 100% Year-over-Year (YoY) through 100s of applications.

Although a lot of marketing experts agree with the above hypothesis, I tend to disagree that MNO’s are losing tremendous amounts of revenue due to these applications for several reasons:

  • OTT applications have surged the huge boom in Mobile BroadBand (MBB) which has generated over 100% increase in data revenue over the past 3 years. Had these OTT applications not emerged, the MBB revenue would still have stayed below 5% of the MNO’s total revenue rather than reaching 30% in several MNO’s.
  • OTT applications have incurred more CAPEX (infrastructure) and I do tend to agree with that item.
  • The emerging of these OTT applications have fueled the smartphone revolution and has helped better penetration of the mobile networks in different ecosystems to over 60% and up to over a 100%. This has fueled a good deal of revenue & penetration rise for these MNO’s.
  • The loss of revenue in international calls field has been always an issue in MNO’s due to VoIP networks/providers that have been existent for the past 10 years. This is the main revenue bleed for MNO’s rather than the OTT applications.
  • IM have cut down the SMS revenue yet on the other hand has helped increase the MBB adoption.

If looked at closely and objectively, the above reasons can be quantified to see that the OTT have helped in revenue increases for some MNO’s and break-even for others. I don’t believe that such applications have caused the MNO’s any loss and if they did at any point, it is because of the MNO’s strategy.

A perfect solution for all these MNO’s who complain about OTT is either to stop all VoIP applications technically (or through regulator) or sell such access-packages for a fee:

  • An evident example of the first solution is evident within the UAE: the RTA rule in UAE that all VoIP calls are banned (this does not affect a lot of the OTT applications) has been in place since the emerging of MBB. Voice calls through Skype, Tango, Viber, and the likes are not allowed in UAE and are managed technically. Nevertheless, there are ways to get over this through VPN programs but the impact is minimal.
  • An example of the other solution is what I was planning to implement in 2006 in MTN Ghana: implement an access-package for using Skype (by opening port) for a minimal fee of $5/month. This will allow subscribers to use the Skype service and will generate revenue for the MNO. Same can be applied to Tango, Viber, etc.

In short, lack of strategy or technical expertise is the means to lose revenue due to OTT and not OTT themselves. I see OTT as a means to expand and increase MBB revenue rather than the opposite. Soon all calls will be over VoIP & thus will have the same implications like OTT!

VoIP: Voice over IP

MBB: Mobile BroadBand

CAPEX: Capital Expenditure

IM: Instant Messaging

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  1. Pingback: Why Re-Invent the Wheel?! | Samer Mehaidly

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