For zero-rated deals, OTT providers can no longer assume the carrier will pay
"It's good to talk," said BT in one of its former advertising campaigns, and Vodafone CEO Vittorio Colao has certainly adopted that motto wholeheartedly during a visit to New York to discuss life after Verizon Wireless with Vodafone shareholders and journalists.
According to the floods of media reports coming out of the U.S., Colao covered a multitude of topics ranging from how much the operator could spend on future acquisitions (up to $40 billion) to whether U.S. operators would be able to do a better job in Europe (unlikely, he said).
According to a report in the Financial Times, Colao also revealed that Vodafone had turned down a request from Facebook to "zero rate" its content by excluding it from counting towards a subscriber's mobile data plan in certain emerging markets. Colao said he declined the request because, "it does not make any sense . . . [there] is no reason why I should give my network capacity for free," the newspaper reported.
This comment underlines a fundamental problem between operators and content providers such as Facebook that want to exploit the mobile channel, and indicates that although operators may struggle with how to approach over-the-top content and messaging services, OTT providers also really don't know how to approach operators to get what they want.
"I see this disconnect quite often in mixed OTT/carrier circles. I don't believe OTTs really understand how carriers tick," commented Emma Mohr-McClune, service director, global consumer services, at Current Analysis.
As Mohr-McClune pointed out, Vodafone is no innovation laggard when it comes to working with content providers to create zero-rated access models.
"We've seen the company implement zero-rated access offers several times throughout its own footprint, in the Netherlands, Italy and Romania--always in association with its own-branded apps or partnerships in which the company has a stake," she said. "The key examples are the joint venture with RTL in the Netherlands called Sizz, and the part-owned Romanian music streaming service Zonga."
In the case of Facebook, it would appear that Colao could not see the advantage to Vodafone and has rebuffed the company's efforts so far. "Colao wants to know 'what's in it for us?' and that's a perfectly sensible question," noted Mohr-McClune. "Presumably, Facebook had no good answer, or was unprepared to discuss data access sponsorship, and so it doesn't look like there's a deal on the table."
As Mohr-McClune explained, zero-rating is just the customer-facing benefit of any deal with a content provider that means a consumer is able to use a certain service without it affecting their monthly data allowance. "The real question here is 'who pays' for the access, and there are three models here: 'carrier pays', 'provider pays' and 'partnership pays'," she said.
While "carrier pays" was the approach initially adopted due to lack of options for operators, the growing interest in mobile by Facebook et al means that network operators are now in a much better position to call the shots and make OTT providers pay for the value they can offer to enhance the user experience of OTT apps.
Some OTT providers, meanwhile, do not seem to have caught onto that fact.
"It sounds as if Facebook entered these negotiations on the assumption that the 'carrier pays' model is still valid, but in this instance Colao has passed on picking up the tab for helping Facebook execute on its 'mobility first' expansion strategy," said Mohr-McClune. "He'd prefer to see this go to a 'provider pays' or a 'partnership pays' model, and that's pretty much in line with all carrier thinking right now."--Anne