Depending on where you get your information from, you will see a wide discrepancy in how much the mobile network market will grow over the next five years. The one consistency that all of the reports and studies can agree on is the fact that as the deployment of LTE networks and faster broadband options continues to spread on a global level, whether we are looking at double or quadruple growth, the fact of the matter is that there will be major growth, meaning that consumers will expect more.
Ovum conducts a variety of survey programs designed to provide a robust and cost-effective set of tools for telecom decision makers to discover, understand and act on changing customer attitudes across both consumer and enterprise markets. Change is inevitable and being able to understand the effects of those changes is crucial.
Rapid change in customer behavior is here to stay and the way that Ovum sees it, the pace of change in converging communications, media and technology markets remains relentless. Users, both as consumers and employees, are constantly making decisions on an enormous array of new technologies and services. As communications technology improves and deployments of faster more reliable networks increases, users expect more from their providers.
Mobile network operators (MNO) seem to be facing a lot of challenges lately. One of the biggest confrontations that they are encountering is Over-the-Top (OTT) services. According to Ovum, by next year, operators could lose as much as $54 billion in SMS revenues, due to the increasing popularity of social messaging.
This decline shows a clear correlation with the rise of OTT services which circumvent the operator network by offering free communications services such as SMS and voice calls through a users mobile data allowance or a Wi-Fi connection. The question that comes to mind whether MNOs should partner with or compete with OTT service providers.
Ovum feels that there are five core strategies that MNOs should consider as they continue to work in both mature and the ever expanding emerging markets. The easiest option is of course to do nothing! Rather than respond to or challenge what the OTT communications apps have to offer, simply ignore them and not consider them as a threat. In essence, “do nothing.”
This option takes on the concept that their use is insignificant and the MNOs’ messaging and voice revenue is going to remain unaffected. The problem with this option is that it is not a long term solution as mobile broadband services continue to grow, especially in emerging markets.
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The second option is easier for MNOs to maintain. They can simply “disable” OTT communications services from using their networks. Ovum uses the example that a few years ago the Korean Communications Commission ruled that the South Korean mobile operators could block or charge for third-party Voice over IP (VoIP) services. In addition, regulators in Middle Eastern countries, United Arab Emirates and Iran have either threatened, or already have blocked apps such as WhatsApp and Skype.
The problem that this poses is that once consumers and enterprises learn that they can use OTT services to reduce operating costs and save money, they will find a way to make them work. In most cases this means switching to an MNO that will allow the service. There may also come a time when developers will be able to create an app that will still allow access to OTT services whether they are blocked or not.
The next option that MNOs can attempt is to “neutralize” any type of impact that OTT services would have on their networks. The easiest method for this option would be to create a type of pricing plan that could compete with OTT services. The inherent problem that I see with this option is that it could conceivably cut into the MNOs’ revenue. Would they be willing to do that in the hopes that they will regain that revenue in the future?
The fourth option brings us back to the question that was posed earlier, should MNOs “partner” with OTT service providers. In the big picture, looking several years down the road, it would seem that this would be the best option. This option can be broken down to several strategies depending on how the MNO wants to deal with the OTT provider, whether they have a unilateral bundling option, some type of marketing plan, or a revenue agreement.
Ovum’s view is that as partnerships become more comprehensive and move toward the joint venture or strategic partnership level, engagements between the relevant companies increase and so do the revenue opportunities. It does appear as if this is an option with both parties, not only maintain their revenue stream but also offers the customers the most affordable option.
The fifth option is for the MNOs to “emulate (or better)” what the OTT providers already have in place. One problem that I see with this option is that the MNOs would have to provide a better product that what the OTT providers already have available. This may not be an easy option to follow up on as it could require upgrading their traditional communications services in an effort to maximize their network access.
These are five strategies that Ovum believes MNOs need to consider as communication technology continues to mature and evolve. Regardless of any individual, or combination of options used by MNOs, Ovum has a strategic framework for selecting current, as well as future OTT communications strategies, which are broken down as follows;
Market and context insight: MNOs need to keep certain factors in mind, such as what is currently happening and what the forecast size is for the communications market. The growth and evolution of technology, regulatory and socio-economic context all need to be of the equation.
Customer insight: A recent study form Ovum shows that there is much more consideration on the part of consumers when they consider the cost and benefit decisions they are making with respect to OTT communications apps and services.
Competitor and product insight: It is important to not only know who the current players are, but also who the new OTT service providers are going to be. Several aspects need to be considered, such as when OTT apps will be available, what is the pace of adaption and what product evolution paths are OTT providers taking.
Multiple strategies in different time frames: While one of the five strategies might be the best option to use today, that may not be the case over the course of the next couple of years. Communications technology will continue to mature and evolve and new OTT players will enter and leave the market. Ovum believes that MNOs can pursue multiple strategies concurrently. The need to adjust as the market changes is essential for both MNOs and OTT providers.
We have already seen a lot of changes in the communications field over the past several years. As smartphones and tablets continue to proliferate around the world and especially in emerging markets, we can expect to see strong growth in mobile broadband and the types of services that OTT providers will offer. MNOs will have to take all of this into consideration as consumers and enterprises expect and demand more from their mobile service providers.
