The OTT phenomena and its impact on Telecos

Digital Revolution:Gateway or GraveyardFor The Modern Telecom?

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The Digital Revolution

“The Digital Revolution refers to the advancement of technology

from analog electronic and mechanical devices to the digital

technology available today. The era started to during the 1980s

and is ongoing. The Digital Revolution also marks the beginning

of the Information Era.”

-Techopedia

Digital Revolution:Gateway/GraveyardFor The Modern Telecom?

PROGRESS ERAS

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Vinyl Records gave way to CDs, then MP3’s and now streaming audio

VHS tape gave way to the CDs, then DVD and Blu-ray and now streaming video

Pay-phones gave way to Cell Phone

Film photography transitioned to digital photography

Mail evolved to E-Mail

Last 20-30 years:

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Digital Revolution: Information Storage 1980 : Less than 1% of the world’s information was in digital format

2002: The year when digital information storage surpassed analog

storage format

2007: 94% of Information was in digital format

2014: More than 99% was in digital format

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Digital Revolution: Information Storage

World Information Storage Capacity:

1986: 2.6 (optimally compressed) Exabytes

2014: ~ 5000 exabytes (5 Zettabytes)

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Digital Revolution: Access

Free transfer of Information

Easy access to Information which was previously difficult or impossible to

access

Digital Revolution changed how the world functions and communicates

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Digital Revolution: Internet Users

Around 46% of the world population has an internet connection today. In

1995, it was less than 1%. The number of internet users has increased

tenfold from 1999 to 2013. The first billion was reached in 2005. The second

billion in 2010. The third billion in 2014.

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Digital Revolution: Internet Users

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Digitization

Defining ‘digital’ Digitization at its simplest means the conversion of

analogue information into digital information. As digitization capabilities

extend, virtually every aspect of life is captured and stored in some digital

form, and we move closer towards the networked interconnection of

everyday objects. The impact of this is a real time global exchange of ‑

information between multiple connected devices (fixed and mobile).

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Digital Revolution: What does this Mean for Businesses?Businesses that ride the tidal wave that is the digital

revolution are steadily wiping out those that don’t like

Blockbuster.

Competitive Edge offered by Digitization:

Multiple employees can access the same document from anywhere at the

same time instead of one at a time for physical documents

Greater integration of business documents

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Digital Revolution: What does this Mean for Businesses? Application of classification / indexing for easier access management

Streamlining Internal as well as external business processes

Streamlining business operations with applications like Enterprise Resource

Planning

Redefining customer engagement

Create new business models

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Digital Revolution: Impact On Telecom Operators Telecoms that adapted the digital gained huge competitive advantages:

Access to customers, Ease of use, User experience, Features, etc

Streamlined internal processes

Position themselves as innovators

Telecoms not taking advantage of the digital are at a huge disadvantage

Evolution of INTERNET COMPANIES and OTT PLAYERS

INTERNET COMPANIES&OTT PLAYERS

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INTERNET COMPANIES

In simplest terms, an internet company is a company which bases its services

on the internet, usually with little or no physical service provision.

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Internet Companies

They challenge traditional business models by providing innovative solutions

to traditional problems over the internet.

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OTT Companies

The OTT service providers deliver audio, video and other media over the

internet and bypass the traditional operator’s network. Since, the OTT

players do not require any business or technology affiliations with network

operators for providing such services, they are often known by the term

"Over-The-Top" (OTT) applications

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OTT and Network Operators

While it appears streaming services threaten to take over the entertainment industry, OTT services require an Internet connection and users need a broadband connection that are distributed by most cable providers.

Streaming services only work if you have access to high-speed Internet.

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OTT Companies

OTT companies fall under the umbrella of internet companies. However all

internet companies are not OTT companies.

Internet Companies

OTTPlayers

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Factors Leading to the Adoption Of OTT Services

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Rapid Adoption of OTT Services

• Data Rate of Skype 3 mb / Min , 50 kbps

• Call Rates jazz Rs 1.00 / 30 seconds ~ Rs 2.00 / min

• Jazz Average Data Rate (Package):

17 paisa/ mb OR Rs 0.17 / mb

Translates to 51 paisa / min, 25.5 / 30 seconds

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Rapid Adoption of OTT Services

Jazz earns about 1 Rupee per 30 seconds for a normal call.

VoIP Call Results in only a fourth of normal voice call revenue

Highest impact on international call revenue; People almost always use

VoIP for cross border calls

However, VoIP’s Quality of Service, one of its major drawbacks

Operators still retain the better voice quality

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OTT and Network Operators

While it appears streaming services threaten to take over the entertainment

industry, OTT services require an Internet connection and users need a

broadband connection that are distributed by most cable providers.

The increased usage of OTT services results in increased data usage which

somewhat makes up for the revenue loss from call and text based services,

for now.

Streaming services only work if you have access to high-speed Internet.

There exists a dependency

Opportunity

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Digital Revolution: Mobile Apps

A mobile app is a software application developed specifically for use

on small, wireless computing devices, such

as smartphones and tablets, rather than desktop or laptop

computers

One of the primary means of OTT players’ revenue

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Mobile Apps Usage

The 21st century has seen a rapid increase in mobile app usage which

is a direct result of smartphone penetration

Apps like Whatsapp, Snapchat, Instagram, etc have redefined

connectivity, entertainment, user engagement, etc.

WeChat : https://www.youtube.com/watch?v=VAesMQ6VtK8

How China is Changing Your Internet

https://www.youtube.com/watch?v=VAesMQ6VtK8

https://www.youtube.com/watch?v=VAesMQ6VtK8

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How Are Apps Monetized?

OTT Players use different strategies to monetize their apps

OTT can largely be broken down into three different revenue models

Subscription-based services such as Netflix

Free and ad-supported services such as Hulu

Transactional services such as iTunes, Video On Demand and

Amazon Instant Video that allow users to pay for individual pieces

of content

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Freemium (Gated Features)

Basic Core Services Are Provided For Free While More Advanced Features

Must Be Paid For

Gift Economy

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Paid Apps

Cost Money To Download

Examples :

MineCraft Pocket Edition (Game)

TeamSpeak (VoIP Client)

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In App Purchases

Selling Physical / Virtual Goods

Example:

Amazon Underground App

Game Currencies, Extra Health, etc.

Remove Ads

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Paywall

Subscriptions

Temporary Access To A Service In Return For A Fee

Example : Netflix

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Sponsorship

App Sponsorships Display

Company Names, Banners And Slogan In App In Return For A Fee

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To Stay Relevant, Telecoms Must Transform Themselves and Brace Digitization

• Telecoms have now realized that in order to retain their customers who are

being tempted by substitutive OTT services, they must come up with new and

innovative ideas and digital solutions.

• The consumer of the 21st century is much less tolerant and will switch to the

best service being provided if anything feels short of perfect

• The internet has made it so that the whole world is now a single market place;

you are no longer just competing with the player next door, but with the

whole world

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O.T.T. (Over The Top) Players



access


A SWOT ANALYSIS

A TELECOM OPERATOR MOVING INTO THE

INTERNET MARKET

SWOT Analysis

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1. Introduction2. SWOT3. Three

4. Four5. Five6. etc

Existing Brand Image

Existing Market Share

Capable Sales Force

Capable Marketing Team

Existing Infrastructure

Excellent customer service

Can Compete on the same ground as OTT players

Chance to Capture Back Cannibalized Market Share From OTT Players

Compete More Vigorously in the App Market

Mutually Profitable Partnerships With Other Internet Companies

New Competitors

Risk Averse Customers in Pakistan

Internet Usage 3G usage limited to

areas

Facebook Aquila Drone, Google Loon

SWOT

STRENGTHS WEAKNESSES

THREATS OPPORTUNITIES

Customer database

(know-how of how to

entice them)

Experienced in Surviving

in a Competitive

Environment

High Conversion Cost Possible Voice Quality Loss Smaller Target Audience Difficult to Verify Online Users Only smartphone users can

utilize an internet companies services to their fullest

Lack of relevant expertise Customers cannot get

connected everywhere Getting the current

workforce acquainted to a new set of techniques

Telecom Operator Moving Into The Internet Market

SWOT Analysis

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• Strong Brand Image Company Brings With It An Established and Trusted Name

• Existing Market Share Has an Existing Customer base Right From the Start

• Capable Sales Force Competitive Team Experienced In Driving Sales Under Dynamic Environments

STRENGTHS

SWOT Analysis

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• Capable Marketing Team With Years of Telecom Marketing Experience Behind Them, The Marketing

Team Is Used To Working In Challenging Environments

• Existing Network Infrastructure Unlike Most OTT And Internet Companies, An Established Network

Infrastructure Is At Their Disposal (Towers, Coverage, Cables, etc.)

• Easier To Get Customers To Try Your Service

STRENGTHS

SWOT Analysis

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• Excellent Customer Service The Excellent Customer Service That Cellular Companies Bring Will Give Them An

Edge Over Competitors

• Customer Database (Know-how Of How To Entice Them) Existing Customer Profiles And Knowledge Of Customer’s Tastes Allow For Better

Customizability, Personalization And Customer Retention

• Experienced In Surviving In A Competitive Environment

STRENGTHS

SWOT Analysis

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WEAKNESSES

• Only Smartphone Users Can Utilize An Internet

Company’s Services To Their Fullest

• Lack of relevant expertise Familiarizing With An Alien Idustry, Might Have To Outsource Some Conversion

Processes, Risk Losing Some Control

• Smaller Target Audience Will Risk Losing Major Segments As Customers

SWOT Analysis

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WEAKNESSES

• Conversion Cost

• VoIP: Possible Voice Quality Compromise Tower Based Audio Transmission Generally Has A Better Voice Quality, VoIP Might

Not Deliver The Same

• Smaller Target Audience Will Risk Losing Major Segments As Customers

SWOT Analysis

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WEAKNESSES

• Verification Of Online Users Difficult Tracing Online User And Verifying Identity Is Quite A Complex Task

• Coverage Difference Internet Coverage Differ From Traditional Cellular Coverage, Customer May Not

Get Connected Everywhere They Could Before

SWOT Analysis

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OPPORTUNITIES

• Compete In A New Market (Apps, E-Commerce, Etc.)

• Capture Back Cannibalized Revenue From OTT Players

• Mutually Profitable Partnerships With Existing Players Operators Can Use Partnerships To Position Themselves As Innovators

Enchance Customer Experience

Expanded Services And Market Reach

Limit Risk And Investment In Content Production

SWOT Analysis

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THREATS

• New Competitors Company Brings With It An Established and Trusted Name

• Threat To The Interdependence Of Internet Companies

And Mobile Operators: Facebook Aquila Drone, Google Loon Project, Free Global Internet Coverage

Programs

• Risk Losing Risk Averse Customers

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Mobile Operators Vs OTT Players

Although telecom operators are in a reactionary mode to the

challenge by OTT service providers, they are well-placed to confront

them. Here are a few counter plays mobile operators can use to deal

with OTT players:

• Blocking OTT

• Bundling with OTT

• Partnering with OTT

• Developing their Own Services

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Partnering With OTT Players

• There is a saying that if you cannot beat them, join them.

• Saving RnD Investments

• Eliminating Risk; Not moving into a market where we have no experience

and instead using each others resources for mutual benefit

• Operators keep the traffic and gain share of revenue

• However, there is always the issue of loss of control over the quality of

service

May adversely affect their relationship with customers

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Partnering With OTT Players: ExampleDiGi Communications, Malaysia & Reliance communication, India’s

partnership with Whatsapp:

• Customers get unlimited access to Whatsapp in return for a fee

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Digital Revolution: Access



access


The OTT phenomena and its impact on Telecos

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