The OTT opportunity

This article was authored by Don Sambandaraksa, and was originally posted on telecomasia.net.

Ovum’s recent report on how social messaging has cost operators $13.9 billion in lost revenue has been making the headlines. But the fact of the matter is, while SMS is on the decline, data is on the rise and this shift is as much an opportunity as it is a threat.

Skype and VoIP in general was once hated, banned and persecuted like a witch in medieval times. However, in many countries, the smaller players have turned to embracing Skype as a way of gaining market share and, more importantly, identifying the high ARPU customers.

StarHub in Singapore launched Pfingo VoIP back in 2007. The idea, as Chan Kin Hung, then StarHub’s head of Multimedia services explained, was to tap into a market of billions beyond the borders of the tiny dot that is the city state of Singapore. StarHub felt that cannibalisation of voice revenue would better be done by themselves than by someone else. Not that things went quite as planned, but the reasoning behind it was sound.

Today, many streets are littered with pictures of Nokia E-series phones with the familiar green WhatsApp logo. The former giant is trying to ride the social messaging wave, its own Ovi services and its MSN Messenger integration long forgotten.

A while back I talked to Erwann Thomassain, head of Marketing for Asia Pacific at Amdocs, who explained how in emerging markets, the race to acquire new subscribers is now giving way to the race to get existing subscribers onto smartphones and data plans. This is where the key difference is. In the West, OTT is seen as a threat to an already developed, rather stagnant market. In emerging markets, it is seen as an opportunity to partner and upsell.

In the Philippines, internet packages now come in chunks as small as 15 minutes and handsets are pre-loaded with apps that are simple to use for people who are not tech savvy. Another telco launched IM plans around Christmas and the result was that the revenue from the data packages outweighed the loss of revenue from traditional messaging.

In Singapore, SingTel has a created a driving app that pulls real-time traffic information from government databases as well as weather and real-time alerts from news agencies. Thomassain believes it is these local mashups that will differentiate a telco going forward.

Huawei Asia CTO Mark MacDonald also spoke of OTT players and how the 30 cent a day unlimited WhatsApp package was really changing the market for value added services. However, there is a difference between vendors leveraging the success of Whatsapp and a partnership. In these scenarios, Whatsapp does not gain out of the relationship and is oblivious to what is happening on the ground.

The question is what happens when the telco transitions and wants to control the app or control the app revenue directly.

Chris Jenkins, EVP and MD for Asia-Pacific at Acision, believes that one option for telcos is to outsource messaging to his company so they can focus on what they do best. It is cloud, but not for cloud’s sake, rather to drive down costs and move quickly.

Telcos need to move quickly and Acision’s proposition is to be able to quickly launch a freemium service within months with combined VoIP, IM, video but with optional extra-cost add ons such as conferencing and context based advertising.

“And I stress context, not just bloody irritating ads,” he said, to underline a key frustration point of many users.

Acision also has a SIP client that is distributed virally through social media to allow VoIP calls to the telco’s subscribers. Social media is at the centre of the user’s world these days and the idea is to get the telco back into the centre of the world and keep it relevant.

More importantly, the power of social media means that a telco’s apps can be virally marketed out of market, and even out of country, bringing in ad and freemium revenue to the telco from non-subscribers around the world.

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Categories: Wireless