While operators plot, OTT rivals lure millions of users

editor's corner

Many people feel that the ship has sailed when it comes to the battle between over-the-top services providers and mobile operators, with a yacht full of end-user expectations forecast to dock comfortably in OTT land.

The problem is that mobile operators have made their networks a bit too good. They're too versatile, too reliable. OTT gatecrashers are quickly exploiting mobile networks by offering innovative and less-expensive services that operators simply cannot match if they wish to find a decent profit margin that takes into account their heavy network investments.

OTT service providers also live in a world largely free from regulation, a factor that dogs every move a mobile operator makes. Minus regulatory oversight, OTT players are free to innovate quickly, reducing time to market and often catching operators flat-footed. They can deploy new cloud-based services rapidly without worrying about interconnection rules and regulations related to tariffs and and telecom taxes.

Some vendors are encouraging the mobile operator community to battle back via Rich Communication Suite (RCS), which are interoperable IMS-based services such as instant messaging, video sharing and buddy lists with presence, all of which are already offered by OTT players. In addition, mobile operators are being pushed to compete in video chat and videoconferencing, the idea being that current offerings from OTT providers are too limited and, thus, vulnerable to competition. Because popular OTT communications services such as Microsoft's (NASDAQ:MSFT) Skype or Apple (NASDAQ:AAPL) FaceTime require compatible clients on each end, none of them will likely ever completely own the market.

However, the present reality is that while mobile operators ponder how best to deploy RCS and IP-based services that can compete with OTT offerings, their cloud-based rivals are already out in the marketplace, gaining millions of new users.

For example, Tango has attracted 45 million registered users in 210 countries in under two years. The company claims its app, which is available as a free download in Apple's App Store, Google Play and Windows Phone Marketplace, delivers millions of minutes of voice and video calls daily, 80 percent of which are video. The company has raised nearly $100 million, including $40 million in Series C funding this past April when Qualcomm (NASDAQ:QCOM) Ventures signed on as a new investor.

Yet some pundits contend mobile operators can still top OTT rivals by prioritizing traffic and delivering higher quality of service. OTT services, in the absence of a partnership with a mobile network operator, will always be confined to being best-effort offerings that must compete with all the other data traversing a mobile network. Quality and reliability, the thinking goes, will save the day for the operators.

I'm not convinced the operators can pull out a win over their OTT rivals. Operators can never compete entirely on cost even when they are using an IP foundation for their services because they are still saddled with huge debt burdens related to spectrum acquisitions and network buildouts.

Further, high QoS may be important in some enterprise communications but not all. Years of cell phone use in areas of spotty coverage and even fixed VoIP use have taught consumers and business users to lower their expectations in exchange for saving a buck. Seriously, do users presume they'll come anywhere close to five 9s of reliability with cellular or VoIP (meaning that you can successfully make a call 99.999 percent of the time)? OTT services may be best-effort services, but that might be enough in most situations.

Nonetheless, certain vendors contend there is room for operators to successfully compete in the OTT realm, particularly when it comes to using IP-based architectures to enable enterprise services such as video conferencing. For some perspectives on how that might be accomplished, check out this new FierceBroadbandWireless special feature. The possibilities are intriguing and the product demos thought-provoking, but I have to think the service revenues, should they arrive, will be quite a ways off.--Tammy