Real Time Communications Featured Article

Can OTT Make Money for Service Providers?

June 25, 2015

Over-the-top (OTT) services have been viewed as the enemy to carriers, disrupting customer relationships and destroying SMS text messaging and voice revenues without providing a penny in return.  Carriers now face a choice of standing passively and continuing to let a third-party disrupt and own customer relationships or attempt to reclaim ground by offering their own branded OTT services.   But can a branded OTT offering recapture revenues?

OTT players cost service providers around $14 billion in lost mobile revenues in 2014, according to Jupiter Research, between social media, instant messaging, and VoIP displacing SMS and voice. Rich Communications Services (RCS) has been positioned as the countermeasure to OTT, but carriers have been slow to roll out the new, overhead-laden services.  Meanwhile, Facebook, WhatsApp, Skype and numerous other offerings continue to suck revenues out of carrier bottom lines.

Some carriers are starting to adopt OTT services in order to stem the tide and open up new opportunities for revenues. The fring Alliance represents the largest effort to date to build an carrier-based interoperable ecosystem of OTT services, leveraging a "network effect" by being able to get more value in combining individual carrier OTT user bases together into a larger whole. 

But how can OTT make money for service providers? There are three different models that hold promise in recapturing and providing new sources of revenue by leveraging OTT.

The first play is strictly business, as in being able to provide a unique business number to an existing subscriber.  An OTT client in combination with a business cloud solution can enable anyone to make and receive phone calls using a dedicated business number, rather than having to hand out a personal number.  A dedicated business number provides separation and notification between personal and business calls, as well as provides businesses of any size the ability to provide an affordable BYOD solution to employees.  Calls made to the business number can be directly routed to an employee's personal cell phone, as well as ringing one or more desktop phones.  Outbound calls made from the employee's phone through the OTT client display a business caller ID, reinforcing the business brand and letting the receiving caller know that the call is coming from.

A carrier-operated OTT platform provides a ready-made advertising platform.   Advertising can be provided within an OTT white-label client, with ads served using any number of parameters, including location-based ads and ads tailored to the individual user's preferences and previous viewing habits.  The downside to advertising is that users can become numb to ad offers, especially those that are not relevant to the individual's tastes and interests.   Carriers implementing advertising need to be smart about when and how they show ads.   In the worst case, annoying and/or overwhelming advertising can push users to abandon an OTT client.

E-commerce is the third opportunity. Carriers already have an established billing relationship with their customers in either a pre-pay or post-pay plan.  With the billing relationship and infrastructure already in place, carrier can provide opportunities within an OTT client to provide purchase opportunities linked to advertising  or potentially as a stand-alone service within the OTT client.  Pay for a cup of coffee or your restaurant bill via your OTT client may sound a little far-fetched today, but users are looking for convenient and secure ways to pay for things beyond carrying around a wallet with (every increasingly compromised) credit cards.   Carriers can provide multi-factor authentication for billing and payment for both vendors and customers, reducing fraud and increasing convenience. 

None of the scenarios listed above are guarantees of revenue.  Carriers need to be fast moving, customer aware, and willing to take risks in a way they haven't before.  In today's rapidly evolving mobile world, failing to take risks and create new business models is a guarantee to further declines in revenue. 

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