OTTs, Content Providers and Operators – New BFFs!

I’m reliably informed by people much, much younger than me that BFF means best friend forever (however fleetingly). Looking at the recent advances in our industry, it seems that some operators, OTTs and content providers are becoming friends and raising hopes that they’ll start making enough money by working together to become BFFs.

It wasn’t always this way. Anyone remember Mobile World Congress in 2010 and the then Google CEO, Eric Schmidt’s keynote speech? Press coverage of the event was interesting. In one publication the “crowd” was reported as “boisterous and even throwing a few boos in his direction”. First time I’ve heard a conference audience described as a crowd. Fast forward to 2014 and it was the turn of Facebook CEO Mark Zuckerburg to address MWC, where he talked about the acquisition of WhatsApp  and the potential for internet.org. There were no boos.  There has been a significant change of attitude to OTTs and content providers since the Google CEO first stepped onto the stage at MWC. Mobile operators are now seeing that companies like Google and Facebook are not the enemy, but complementary players in the digital value chain. Many operators are now starting to work with OTTs and content providers to provide a win-win scenario, a better choice for their customers and by doing so, strengthen their own position in the value chain.

Operators have the capabilities and resources to play a central role in the digital value chain, and this is not lost on many of the innovative (and open) content providers and OTTs. Operators have always had the delivery channel for digital goods and services, they’ve got established customer and charging / billing relationships, they’ve got the brand and they’ve got the mechanism to collect customer usage and behavioural data.

The recent drive by streaming music companies to work with operators is indicative of the opportunities operators can present to content providers. Spotity, Beats, Deezer and Napster are all signing deals with mobile operators. Between these four companies they have around 19 million paying customers (compared with 3.6 billion mobile subscribers worldwide). Using mobile as a delivery channel offers immediate access to a huge market that is used to paying – month in, month out – for service. If the music business could get a small percentage of the mobile market it would transform their industry.

TV and movie companies are also looking at mobile. The recent interconnect deals in the US with the main operators and Netflix may indicate that content providers are willing to discuss paying for optimum delivery. In the UK Vodafone launched their 4G service promoting free Netflix or Sky Sports TV or Spotify premium.  One of the problems is that streaming video is network hungry. A visit to a data calculator on an operator’s web site suggests only 6 minutes video streaming a day on LTE as part of a 4GB / month package (costing $70 / month). Or if you only wanted to watch video with your data package then 32 minutes of video streaming a day on LTE would use up your monthly allocation of 4GB. It’s an expensive way to watch half an episode of House of Cards. As more and more people watch TV on tablets and operators are looking to sell more cellular enabled tablets perhaps there’s potential for a lot more creativity in data pricing. Options could include having video traffic sponsored / subsidised by the content partner or even advertisers. Or the operator could always look at intelligent network selection and off load video traffic to the nearest wi-fi network (if the quality was acceptable).

Getting back to OTTs, zero rating of popular applications has been around for some time as operators offer, for example, free Facebook  in order to drive data adoption. We’re also seeing application service passes (e.g. Ooredoo Kuwait’s WhatsApp service) where the customer pays a small amount per month and usage is restricted to the specific app. In April this year German operator E Plus launched their WhatsApp prepaid SIM card which offers mobile voice minutes, a data tariff and zero rated OTT IM services from WhatsApp. This prepaid offer costs €10 / month and the main message is WhatsApp is always free, even when the subscriber runs out of credit (in the 30 day period).  This is a major benefit over other networks who charge for the data required for WhatsApp (which is installed on 90% all smartphones in Germany). This gives a potential user base of more than 30 million people. By working with this OTT player E Plus can leverage the popularity of WhatsApp to attract new customers and open new revenue streams.  E Plus are offering new subscribers who port in from another network €25 bonus and are  also getting into the social networking aspect of WhatsApp by offering €10 credit to every consumer who recommends two friends.

Maybe at MWC 2015, we’ll see some more OTT / content partner telco deals announced. One thing is for certain, the days of booing the OTTs and content players are in the past. New friendships are being made and while many are still eyeing one another nervously we seem to be heading in the right direction. Let’s hope that the operators have the BSS systems in place to enable mutually beneficial business models, otherwise they could end up ‘unfriending’ one another as they don’t have the right systems in place to make money with their new BFFs.

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Martin Morgan
About Martin Morgan 13 Articles
With 25 years’ experience in mobile communications software, Martin has worked in mobile billing software since the early days of the industry. As such he’s been around long enough to have had numerous articles published. He has spoken at many conferences. He’s served on the boards of software companies and trade associations. At Openet Martin is responsible for marketing thought leadership and demand creation.

2 Comments

  1. Martin: In your acronym fest (above) are you saying that the future lies in CSP open-ness to new Business Models (BMs?) and therefore the more vigorously BMs are pursued, somewhat counter-intuitively the less shit operators will find themselves in? I think we should be told!

    • Hello Keith
      How’s it going. Where would we be without acronym fests? Don’t think it’s a case of either or, and there are several examples of operators working with IM providers, while some others are looking at their own RCS offers (but this seems to have gone a bit quiet).
      It’s a case of operators playing to their strengths – they’ve got the networks, the billing / charging relationships and the established customer relationships. If it makes more sense to partner with a provider of ‘competitive’ services (e.g. IM) and leverage the popularity of these services to their advantage then that’s an option.
      Cheers
      Martin

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