Telcos tough it out vs OTT players

Those of you who have been regular readers of Inside Revenue Management over the last four years will be acutely aware of my concerns that the telecom industry is missing opportunities to protect and enhance revenues by utilizing or exposing its assets to the outside world.
I have gone blue in the face presenting on the subject at conferences around the globe and have even authored Quick Insights research reports within the Forum targeting the ways and means to do this.
Some of the more enterprising, and dare I say it, adventurous CSPs have made tremendous strides in taking on the dreaded over-the-top (OTT) players, and even working with them to minimize any potential revenue loss. So it should come as no surprise that, at long last, the analyst community has picked up the cause.
Total Telecom reports that in an interview with Nielsen’s European managing director David Gosen, he stated that operators have been preoccupied with keeping up with the latest OTT services rather than concentrating on making the most of the unique assets already at their disposal.
Gosen called on mobile operators to focus on enhancing their CRM (customer relationship management) and billing services in order to stem the tide of revenues flowing away from operators towards OTT players. He also added his voice to the argument that operators can make their offers stickier by enabling customers to pay for more than just basic voice and data services via their phone bill.
“Research has shown across a number of companies that if you can get consumers to subscribe to more than one service through a single billing platform they are much less likely to churn,” he said. Sounds like Gosen has also been reading TM Forum publications because these issues have been stressed 'ad nauseum' for years, and without the need for research - it should be just plain common sense.
He went on to point out his disbelief over operators dragging their heels when it comes to adding value by leveraging their customers’ data. “It’s a six billion dollar question; operators are sitting on a fantastic asset of customer data,” he said.
I don't want to detract from Gosen's well-intended comments but most CSPs I come in contact with are acutely aware of all the issues he raises and are actively trying to address them, but there is an over-riding debate in each CSP as to how best to invest and balance a diminishing set of resources and limited budgets.
The battle of the budgets swings between network infrastructure, IT, business systems and, of course, marketing. Spare a thought for those in the C-Suite having to make decisions, mostly high-stakes, on where best to invest and the consequence they face from boards, shareholders and customers when they make the wrong one.
Being bold is admirable, but in an industry that is historically, at least, averse to radical change, it can also be career-threatening. Fortunately for some, the results of these big decisions often take years to become obvious, and the smarter ones often move on to greener pastures before getting caught out.
I digress, but to get back to Gosen's closing point on utilizing customer data, it's no longer the sole domain of CSPs. Sure we know who they are, what they spend on our services and, to some degree, what they like, but the real experts in assessing what they spend money on and what they are interested in are the same feared OTT players.
There is no doubt that companies like Apple, Google, Netflix, Amazon and Facebook are not only capturing and analyzing all their customers’ activities, they are also able to design and provide new products and services directly targeted at them, with or without the involvement of any CSP. They nearly all have established accounting relationships with their customers as well, and even in markets where credit and debit cards are not prevalent they have managed to partner with local entities to produce pre-paid facilities in the form of vouchers or scratch cards.
So, if the OTT players are in these spaces already, where can the CSP add value? Is it too late to play ball with them or can our industry work out another way to monetize its combined resources. One thing is certain, some CSPs acting individually or as national/regional groupings have found niches in their own markets that they have been able to exploit remarkably well, and profitably.
Safaricom's ‘m-pesa’ mobile banking system comes immediately to mind, the Japanese and Korean NFC rollouts, Universal Music partnerships with selected CSPs and the potential of the ISIS mobile payments initiative in the U.S., but industry-wide success stories are hard to find. The GSMA-led Wholesale Applications Community (WAC) and its own NFC initiative have yet to make an impact, and it is too early to comment on ISIS and a myriad of similar m-payment groupings currently being undertaken globally.
If it looks like we are really going to lose the ‘value-add battle’ with the OTT players then we will have to come up with something pretty radical and pretty quickly if CSP revenues are not going to be impacted dramatically. If customers are expecting unlimited data access anytime and from anywhere, and they are not willing to pay for what they consume, then we have to find other sources of revenue to compensate for the investments being made by CSPs. We tried getting advertisers to cover consumers’ spending but the Googles of the world have a far better grip on how this is done and already have all the advertisers as their customers.
So, what’s left to do? Suggestions that those OTT entities that use up the most bandwidth delivering services to consumers take some of the responsibility and cost has, to date, fallen on deaf ears. There is the constant fear that any attempt to garner revenue from them will simply mean that they advise their own customers to change over to networks that don’t impose charges. What might be foreign to OTT players but is common practice in the telecom industry are inter-connect arrangements. It seems only fair that those that use the network resources should pay something for the privilege.
Some European operators, notably Orange, are said to be looking seriously at restructuring of Internet peering agreements with third-party non-ISPs specifically to address this revenue imbalance. Maybe we should look at making all the large OTT players into virtual network operators (VNOs). That way, they could manage their own channels but would also have to pay CSPs for the privilege. However, it will need to be a united industry front if it has any chance of succeeding, and we don’t necessarily have a good track record of united front actions. We can only hope that necessity will change this.
Tony Poulos is a market strategist at TM Forum.
This article originally published on TMForum’s Inside Revenue Management newsletter