Beware of the Dark Side
Over the last year several Communication Service Providers (CSPs) and
Over-The-Top (OTT) content providers have been teaming up to provide new co-branded data pricing plans. CSPs are joining forces with well-known OTTs such as Skype, Facebook or WhatsApp and offering data-cap-free use or premium access to these applications and content. Event-driven offerings are also beginning to emerge – Tigo in South America partnered with content provider FIFA and offered special viewing packages for the recent football World Cup.
These trends indicate that the common interests of CSPs and OTT content providers are leading to the collaboration model, long-predicted by vendors at least. In order to ensure the future of Internet access, this is a model that needs to sort itself out, and quickly. A considerable effort will be required by the industry (and/or regulators) to avoid the slide into the cable TV model, the “Dark Side”. The last thing the consumer wants is for the industry to regress into this type of model.
OTT collaboration will be both technical (QoS, open network APIs, Billing and other areas) and more importantly commercial. To quote a recent TM Forum report:
“Within the next two years, nearly 70 percent of providers surveyed plan to use RTCC and policy management to support collaboration with Over-the-Top providers, compared with only 35 percent that use them to underpin those services today. “
Deals being done
Many operators have realized that they cannot compete with the OTT content providers, so their ability to successfully garner commercial relationships with these entities is an existential issue. While currently there hasn’t been en-masse rush towards collaboration, the industry has made some initial and very significant steps. Notably, earlier this year Netflix closing deals with both Comcast and Verizon. While not technically significant, (rumored to be a straightforward peering deal) the commercial ramifications are huge.
There are many more examples of cooperation and collaboration. Both Facebook and Wikipedia have partnered with dozens of operators around the world with their ‘cut-down’ platform versions – Facebook Zero and Wikipedia Zero. OTT services companies have not been lagging either. Popular communication and messaging apps Skype and WhatsApp have partnered with several operators to bundle text and long-distance calling. OTT streaming music deals have become commonplace with the likes of Panadora and Deezer partnering to bundle music into data deals. As with the Netflix deal, most of these relationships are purely commercial. Deals are typically done behind closed doors with no or little commercial information on the arrangements released. And here lies part of the problem.
Make no mistake, collaboration is a good thing
Collaboration is a win-win-win. What’s the third win? The subscribers. With all sides working together, the subscriber gets the best experience possible. Both parties are left to focus on their strengths and benefit enormously from what the other can provide them. Solid commercial partnerships would enable a seamless, rich, high-quality customer experience. After all, isn’t it all about the customer in the end? OTT players take care of the content and the CSPs take care of the experience. While this is a rather simplified explanation, it will suffice for our purposes.
Where is the path to Dark Side?
Well, there are the usual Net Neutrality fears, but they typically focus on technical discrimination of traffic. The real fear should be the commercial playing field that is being shaped. As we have seen in the Netflix deals, the big name content players partner with the Mega-Operators.
Mega-Operators will have access to the crème-de-la-crème of content and others will be struggling. The smaller guys may be regulated to providing a vanilla internet access service – a second class service. These mega-operators that have the clout (and the subscriber-base in their local or international markets) will be able to bundle OTT content with homegrown services to their hearts’ content. The smaller guys may not even get a look in to lucrative deals. So while this could be a great deal for the big guys, what about everyone else? What if Netflix, Sony pictures, Google, Skype, WhatsApp, Disney and the like consider you to be a smaller operator and not significant enough (subscriber count, market share or revenue potential)? Where does that leave you? Who do you call at Sony or Disney or Time Warner to start a conversation, let alone a relationship? Is there an 800-OTT help line for operators? The deals that have been done so far are so shady that very few helpful details have emerged.
There is always the possibility that a middle-man will emerge – some sort of ‘content collaboration broker’. As yet, the picture is as blurry as the deals that have been closed. If you are left on the outside, what does that say about the future of your business? What does that say about the medium size operator’s ability to hold on to their customers? What does it say about the future of the internet? Is the mobile internet destined to be dominated by a few mega-operators and big content providers? OTT/CSP collaboration should be available to all service providers and all content providers. And may the most creative, best quality and lowest cost combination win!
While collaboration is the only practical way forward, cautious steps are required to avoid the path to the Dark Side