OTT services: the largest threat to operator revenues


Over-the-top (OTT) communications currently represent the largest threat to mobile operator revenues.  Prominent examples of OTT services, like Skype and WhatsApp, have had a direct impact on the mobile industry's profitability and are placing pressure on operators at a time when they are compelled to build expensive new 4G networks.  In a recently published report, ARCchart forecasts that OTT services will account for 8% of all voice traffic carried over mobile networks by 2016.

A major driver for OTT services has been the ever-increasing penetration of smartphones. Growth of iOS and Android devices and their respective ecosystems have acted as a fertile breeding ground for many of the nascent OTT services currently in play.   Global smartphone penetration is expected to be 51% of total handset sales by the end of 2016, up from an estimated 31% in 2012.

ARCchart's study of the global OTT market examines how operators have responded to the OTT challenge, from early attempts to block OTT services from running through the network, to offering large bundles of SMS and voice minutes at attractive prices in order to compete with VoIP and IM.  Some operators have looked to partner with the OTT providers as a way of differentiating themselves – a strategy that has proved successful with new entrants.

Today, VoIP is capturing an increasing proportion of mobile voice minutes, but in terms of value it is worth less than 0.5% of overall voice revenues.   With regards to messaging, ARCchart expects that instant messages will exceed SMS volumes by 2014 and continue growing rapidly thereafter, accounting for 65% of all message traffic pushed over mobile networks by 2016.  Several mobile OTT providers, like WhatsApp and Facebook, have reached critical mass and the evidence shows that even when carriers price SMS and voice comparatively cheaper than IM and VoIP, many customers continue to use OTT solutions because of the richer user experience.

"To win back these customers operators will need to offer a compelling mix of quality products that are competitively priced and built with interoperability and ease-of-use in mind." says Chris White, the report's lead analyst.  

Launching Rich Communication Suite (RSC) services is widely seen as carriers' strongest defence against the OTT onslaught. RCS allows mobile operators to target non-smartphone devices (e.g. feature phones and low-cost handsets) with rich communication services, opening the IP communications market far wider - something OTT providers cannot do.

For more information on the report, use this link:

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