With the proliferation of digital in the telecom industry, incumbent telcos find themselves in a paradox. As technology breakthroughs accelerate, more and more new digital natives are entering the core telecom market with innovative business models and technologies, leaving many established players wondering if they can keep pace or if they will be replaced. OTT is a disruptor, and telecom providers such as cable and legacy voice systems have understandably been under scrutiny. These providers will need to act quickly to keep pace, and many have already begun to shift to address these new technologies and the endless opportunities they create.
The impact of OTT services on telecom revenues
OTT applications do not directly contribute to the revenues of telecom operators, although they actively use their infrastructure to deliver their services. However, these services require data subscriptions and therefore generate money in this way.
Many telecom operators are concerned about the threat OTT services pose to their own services. Countless OTT applications have been designed as an alternative format to existing “classic” communications such as SMS. Subsequently, while there is revenue from data packets, operators are losing revenue due to reduced usage of their own core services.
The impact of OTT services on data
The obvious impact of OTT applications on service providers (as described above) is that their alternative offerings will prevent existing and potential customers from using standard services. Perhaps more worrisome for network providers is another issue with potentially greater impact: network data congestion. As more and more people use OTT services, data traffic increases, putting an overall strain on the network.
When viewers choose OTT services, it doesn’t necessarily pose a threat to traditional telecom providers. After all, not everyone who uses OTT services has stopped using cable TV. Nonetheless, there are plenty – and that can have a negative impact on revenue. A study by the Telecommunications Management Symbiosis Institute found that at least some of the lost revenue could be offset by increased use of systems offered by some telecom providers. After all, streaming services require an Internet backbone to connect subscribers, and subscribers need the same infrastructure to watch. As a result, Internet revenues increase, while cable TV takes a hit.
How can telecom operators transform?
A large part of the response to the emergence of OTT services has become a reactionary factor for network providers. But is there a longer-term approach to dealing with the problems that have arisen for service providers? Can they take back control or do they need to give in to consumer demand?
A popular option for network providers is to partner with OTT providers to mutually benefit from the exposure each platform offers. This strategy allows operators to retain traffic and regain revenue share. This strategy ensures customer retention and adoption; however, it does not give network providers any control over OTT applications, which could backfire and potentially damage their reputation and customer relationships.
Develop your own OTT services
Network providers can also develop their own OTT services to compete. This would allow complete control of the service. Operators can develop their own internal teams to develop services or acquire existing companies to provide a faster route to market. This is expensive to implement and can take a long time to develop services if the required skills are not available.
OTT will continue to grow at a rapid pace
It is safe to say that OTT platforms are a permanent addition to the entertainment and communications space. These services will continue to disrupt the status quo until the day they become the norm – and if it hasn’t already, that day will come soon.
If you’re looking to add your voice to the chorus of OTT streaming services, then now is definitely the time to do so. Contact Xmediatv Systems today for help getting started.