The OTT Challenge for Service Providers
Partnering with OTT players is the productive...
52 | BROADBAND
Public Internet access was originally designed for traditional Internet services, where users could do basic web browsing and access the email. If one recalls, the traditional Internet packages were also named as “Internet Access + Email.” For the consumer segment, dial- up was available to access the Internet. Corporates, for advanced services like broadband access, P2P, file transfers, VPNs, video conferencing, etc., could rely on Integrated Services Digital Network (ISDN), dedicated E1/E3 or their American counterparts.
The network and the technology were evolved to provide better Internet speed. DSL technology was a boon as it could be deployed on the same copper loop as Plain Old Telephone Service (POTS) and infrastructure overhead on the communication service providers (CSPs) was minimal. Fact is, DSL is still the most widely used technology for fixed Internet consumer segment. With the enhanced speed, subscribers could do more than just the basic Internet access and emailing. P2P and file transfers (downloads) were the major activities on the broadband. Better modulation technologies improved DSL performance and provided higher upstream and downstream bandwidth capability. Other fixed broadband technologies like Cable (DOCSIS) also evolved and provided a greater speed than DSL. Double play services like TV + Internet became popular on the DOCSIS (Data Over Cable Service Interface Specification) network.
Twenty-first century has brought the fundamental shift from electrical signal transmission to optical signals transmission. Fiber, being an optimal and cheaper alternative to copper, has revolutionized the telecommunication industry and with the lightning speed of FTTx, CSPs can offer triple play services (VOIP, IPTV, Internet) over the same fiber network.
Similar evolution happened on the wireless side, which started with GPRS that provided bare minimum data service. For the last one-and-a-half decade, the mobile broadband bandwidth has exploded from 150 kbps of limits of GPRS to 100Mbps of advanced LTE. The growth of mobile broadband was more significant
in developing economies, where around 60 percent of Internet consumers were mobile-only. This has been mainly attributed to availability and affordability of smartphones, social media and innovative content/applications.
The pricing model for the broadband access has also evolved with time. Duration-based charging for the data services has (appropriately) diminished and usage (megabytes)-based charging has become popular. Pricing is eventually evolving to fair usage policy based unlimited broadband, where subscriber pays a fixed amount for an offered quota at a specific speed, and the speed is throttled upon exceeding the quota, with an option to buy the additional high-speed quota.
Evolved Packet Core (EPC) is a 3GPP initiative that envisions the convergence of core networks for fixed and wireless accesses. This helps operators to deploy a single and uniform packet network for 2G, 3G, 4G and fixed accesses (DSL, DOCSIS, Fiber, etc.) and provide innovative and convergent mobile + fixed Internet plans.
The Challenge
Broadband was intended to provide a better data service experience to consumers and generate additional revenues for the CSPs in addition to the traditional voice and text services, a.k.a. “bread-andbutter” services. It was expected that the data traffic growth in the network will generate proportionate growth in the overall revenue. However, the broadband revolution was also accompanied by major challenges for the communication service providers.
Over The Top (OTT) Content: OTT, which refers to the multimedia content that is being delivered by the third party providers over the high speed internet without the CSPs control, is considered to be the biggest challenge for them. OTT, especially social media in conjunction with the smartphones, has been the biggest driver for the broadband growth. However, it has also significantly impacted the CSPs’ revenue from the traditional voice and text services. OTT players have en-cashed (or misused, from the perspec-
“OTT VOIP application is expected to cause 30 percent decline in voice revenue in three years. This revenue loss cannot be compensated with the broadband revenues, which are primarily priced megabytes based”
tive of CSPs) the so-called net neutrality principal, which is still supported by many regulatories. OTT social media applications (e.g. WhatsApp) have made a huge dent on the SMS revenues of the CSPs. According to Telco 2.0 research, the decline of SMS revenue between 2011 and 2015 is expected to be around 40 percent. Similarly, OTT VOIP application is expected to cause 30 percent decline in voice revenue in three years. This revenue loss cannot be compensated with the broadband revenues, which are primarily priced megabytes based. Overall, telcos could lose $172 billion from core service revenue in next five years if they do not make strategies to transform their “dumb-pipes” to “smart-pipes”.
Continuous Increase In Traffic: Global IP traffic has increased eight times in the last five years and is expected to increase another four times in the next five years, according to Cisco VNI. Though the technology has achieved enormous improvements in the data rates, yet the overall bandwidth is still “finite” and the same has to be shared between always increasing number of consumers and the demanding applications they use. For example, mobile video, which is becoming more and more popular each day, is the biggest challenge when it comes to choking the bandwidth.
Need for Differentiation
Blocking the OTT like Skype/WhatsApp, which has/had been the “temporary”
strategy adopted by few providers is not going to last long, as it’s not going to be welcomed by respective countries’ telecom/Internet regulatories. For example, recently, Telecom Authority of Singapore has directed operators not to block OTT services. The CSPs need to look beyond considering OTT as a threat and consider them either competitors or partners.
Enhance the billing plans to tackle OTT: More granular billing plans are required where CSPs can differentiate the OTT traffic from regular Internet traffic and charge it differently. Different quotas can be created for OTT and regular Internet contents, for example.
Partner with OTT providers and differentiate the service guarantees for
partners: Operators can partner with OTT providers and prioritize the traffic for the partners. This will provide appropriate quality of service to partner services, better customer experience to users of those services and a share of revenue to the CSPs. Recently, US courts have also supported this model by favoring Verizon’s appeal against the FCC’s net neutrality principle. This means that operators no longer need to follow FCC’s rule and may decide to charge OTTs.
Become OTT competitors: Being owners of telecom networks, CSPs can themselves provide the competitive OTTlike services (digital services over IMS network like regular or HD VOICE over VoLTE) with appropriate quality of service. Make these available to consumers and once they are addicted to a better quality, charge them for the service usage.