Breaking through the Walled Gardens: A Guide to OTT and Operator Cooperation

Filed in Uncategorized by on August 6, 2013 0 Comments

Mobile Network Operators (MNOs) and over-the-top (OTT) service providers often find themselves at loggerheads. Established mobile business models have been in flux as OTT players have introduced content delivery platforms that utilize an MNO’s network without sharing revenue with the MNO. Consequently, MNOs suddenly have found themselves supporting surging data volumes without the ability to effectively monetize it, often thanks to all-you-can-eat data plans. As a result, each has begun operating in a fragmented, closed space – a walled garden, if you will – apart from each other and a return to the business models of 10 years ago.

However, things are changing, and the mobile ecosystem has now reached a crucial tipping point, with MNOs and OTT players now moving from competition to cooperation. So what are the drivers toward this symbiotic trend, and how will it change the mobile industry?

In many ways, OTT players have become too successful to ignore. OTT services are forecast to account for 8 percent of all voice traffic carried over mobile networks by 2016, as well as 65 percent of all messaging traffic, according to a report by ARCchart.

Yet, despite their growing popularity, consumer confidence and brand recognition, OTT services are still reliant on infrastructure. The Achilles’ heel of many OTT players is their isolated end-user communities. For example, a WhatsApp user can only send a message to another WhatsApp user. This means that OTT players can struggle to compete for consumer mind share and ways to monetize their service offerings.

In the crowded OTT market, consistently good quality of service, ease of use, and payment convenience are crucial to delivering an excellent end-user experience, and crucial to ensuring success for the OTT.

MNOs  are in a unique position to help solve all these challenges. First, MNOs own the network infrastructure, empowering services to connect to anywhere. Second, they already have a strong customer relationship, since they provide the handset and mobile number, oversee the billing process, and ensure a quality of experience that meets end users’ needs.

The importance of this comprehensive end-user knowledge cannot be underestimated. It enables MNOs, and those partnering with them, to target new services at the particular end user that they will find of most interest, which can rapidly drive new revenue streams. This knowledge may prove crucial to differentiating one OTT offering from those of rivals in a crowded marketplace.

One thing that OTT players can do, in order to maximize revenues, is to make their billing process as simple as possible. The more complicated the payment process is for consumers, the less inclined they will be to complete the purchase through to the end. By partnering with MNOs, OTT players can offer convenient payment options for their services. Direct operator billing is the simplest and most effective “glue” to unite the different players in this way. By simplifying and accelerating the uptake and monetization of apps and other forms of digital content, direct operator billing can drive revenue for both parties.

Moreover, by providing a seamless approach to purchasing, OTT players can benefit from greater transaction completion rates, whether they take place via a desktop browser, mobile browser, mobile app or in-app transaction (i.e., “the freemium model,” which many content providers are now embracing). Meanwhile, MNOs can raise their exposure to subscribers beyond being the touch point for subsidized handsets and contracts, which can strengthen their brand relevance in the eyes of their subscribers and reduce churn rates.

Partnering with OTT players also allows MNOs to provide their subscribers with customized, value-added services based on detailed end-user knowledge.

Thanks to the growing direct operator billing trend, in the long term, we will begin to see the current fragmented market, the walled gardens, become an aligned ecosystem. And both OTT players and MNOs will finally be in a position to cooperate to better meet consumer demands, harness end-user empowerment, and drive revenues.

Do you agree or disagree? I would be interested to get your comments.

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About the Author ()

Aaron Hayes is a former Senior Product Management Manager of Enterprise Solutions at Syniverse.

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