“Over the top” applications nearly universally are viewed as problematic by cable and telco executives, for the simple reason that, up to this point, OTT simply has been a way for third parties to create and deliver value that until now has been the province of service providers.
But it still is worth noting that the main reason OTT is viewed as a threat is that such apps often cannibalize existing revenue streams. That is a legitimate concern, but also can lead executives to question or oppose all forms of OTT.
That probably is a mistake. The reason an OTT app is a threat is that it displaces existing revenue. But OTT might be viewed in a different way if it enables entirely new revenue, to new customers, outside of region, perhaps. In other words, whether OTT is a good thing or a bad thing depends on whether a particular service provider can figure out a way to own and profit from it, in ways that are modestly competitive with any existing revenue sources.
In other words, there is probably no way to halt a continued erosion of existing voice, messaging or video entertainment revenues. But if OTT can be embraced in a way that provides growth, at minimal harm to the existing business, it might well be worth doing so. THat is not to say it is easy.
Telefonica Digital, the global business unit, has launched a new over-the-top mobile app called Tu Me that essentially represents that mobile service provider’s effort to compete head-to-head with other over-the-top apps such as Whatsapp, which has been steadily cannibalizing service provider messaging revenue of late.
So note the context: Whatsapp already is seriously eroding messaging revenue. Telefonica cannot stop it. Nor is Telefonica abandoning efforts to shore up its legacy revenue. But it also is launching its own OTT versions that create a global platform for creating new revenue, not simply cannibalizing in-region revenue. That might be key to all business cases where OTT voice and messaging services are weighed.
The app is currently available only for iOS devices, but an Android version is on the way.
The new app is not Telefonica’s first foray into over-the-top mobile VoIP, but it is the first time Telefonica has launched a product globally, including markets in which it does not operate a mobile service.
The global launch makes Telefonica one of the first tier-one mobile service providers to embrace an over-the-top VoIP and messaging application of its own, for global use.
There being only two fundamental strategies a mobile service provider can take to over the top competition, namely embrace or resist, Telefonica is a bit of a pioneer in taking the “embrace it” route.
The obvious implication is that, over time, more revenue from legacy voice and messaging operations will evaporate, leaving mobile service providers to create other new revenue streams, which might, or might not, involve embracing OTT services in some way.
The bottom line is the bottom line. The main reason mobile and fixed network service providers dislike OTT has nothing to do with the technology. OTT cannibalizes existing revenue: that’s the real problem.
What should not be forgotten is that where OTT actually enables new revenue streams in new product lines, it is a positive. That doesn’t mean any particular service provider should embrace OTT voice or messaging in ways that directly and immediately diminish its important legacy revenue.
On the other hand, neither should some service providers avoid OTT, either. The issue is how to finesse the transition. Telefonica seems to have concluded that it has to be more “proactive.” In part, the justification is that the new OTT approaches will create new opportunities to compete out of region. That is key.