I love conferences. I do! I enjoy meeting customers and industry colleagues, and, if possible, speaking on a panel to debate a topic. Here, I’d like to share my experience at the Policy and Real-Time Charging event put on by Informa in Amsterdam two weeks ago.
My panel had the longest title ever – I can’t even remember it – but in essence, it was about whether the fastest return on investment comes from policy use cases that address congestion management, or from new service creation. In some mysterious way, we ended up with the everlasting question of when operators will be able to convince, or force, over the top (OTT) service providers to share revenue. I am sorry to say that my answer is “never.”
I see the attraction in the proposition to tap new revenue streams. I especially see it now, as the industry is transitioning from voice to data as the main revenue contributor, and at the same time the ARPU declines, and particularly since these potential revenue streams drive recurring additional infrastructure investments. But honestly, why would they pay? The end-user will switch operators before they replace YouTube as their preferred video service.
I guess content is still king here.
The main reason, though, is that operators lack the billing relationship with the OTTs. On the other hand, I don’t see any reason why operators should pick up all the cost to meet the OTTs’ requirements. An observation over time is that new services will consume whatever bandwidth is available – increase the bandwidth and the services will consume more bandwidth. In my opinion, it makes sense to let the OTTs pick up a significant piece of the bill to accommodate their requirements, e.g. for CDNs, optimization solutions, and new technology innovations.
Let me give you an example of how OTTs adapt. Operators lowered the data caps when Netflix launched their service in Canada. Netflix responded by delivering a smaller video stream by changing codec and compression. I look at this as an ecosystem. In an ecosystem, it is good for everyone if all parties make money. Everyone depends on each other, which creates symbiosis. Operators deliver a communication service with a certain set of conditions, and it is up to the OTTs to make the most out of those circumstances.
A partnership approach also will enable more collaborative cooperation. This might not equal new revenue streams, but a Spotify bundle can attract a certain kind of subscribers that you would like, and make the customer relation stickier. The first lesson in business development is focus on your core business. So, focus on your core business of delivering a first class communication service to the party you have a billing relationship with – the subscriber. (There is also a need for a radical change in pricing model, but that is a whole different topic– anyone up for a panel discussion?)
In summary, operators charging OTTs for customer access or traffic precedence has not happened to date, and I doubt it will happen in the future. But there are a lot of other values to be gained from a partner approach, and by pushing part of the investment to the party who should rightfully pick it up.
So stop envying the fact that OTTs make money – or even that they make really good money. In the end, this should generate more money for everyone in the ecosystem. Operators have many different battles to fight today, and will benefit from turning one of these challenges into an opportunity.
I’m off to check my YouTube streams. See ya.