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OTT services put telcos under pressure

Some make a lot of money with it, others don't know (yet) how to go about it: We're talking about over-the-top content (OTT), which describes the use of apps & services and the transmission of text, video and audio content via IP networks/Internet access. And no collaboration with network operators such as Deutsche Telekom, Vodafone or Telefónica is required.

In plain language: OTT offerings such as messenger, YouTube, Netflix, or IoT services use the networks of telecommunications providers and service providers to provide their services without participating in the infrastructure activities for broadband network expansion. In this case, the telcos only generate revenue from the transmission of the data packets generated, the volume of which is growing rapidly - to date, with afew exeptions they have generally not been involved in the OTT providers' business model.

Juniper Research study: profits in the voice sector collapse

According to a study by Juniper Research, telcos' voice revenues will fall by around 45 percent by 2024, while the number of OTT service customers is expected to increase by 88 percent during this period. Profits are not only collapsing in the voice segment; mobile OTT offerings are also causing revenues to fall in text messaging. It is no wonder that the development of profit margins is a major concern for most telcos. If you go into the question of why consumers are opting for OTT services today, you quickly find the main reasons:

  • As a rule, OTT applications are cheaper than comparable voice and data services of the telcos - often even free of charge or only associated with a one-time payment.
  • The fairly simple and convenient access to a wide range of current OTT services leads to more and more people exchanging messages, photos or videos worldwide. 
  • Many OTT applications offer functions that are not yet available in the telcos' networks or are not available across networks. WhatsApp, Viber, Signal and other messengers are a good example of consumer benefits: Compared to simple SMS, these apps offer group chats, GIFs and stickers, photos, videos, contact information, voice messages and even a phone function for worldwide calls.

Rising number of OTT users leads to network congestion

Declining revenues from OTT applications aren't the only problem plaguing telcos. Because more and more people are using OTT services, data traffic is increasing sharply. To get a grip on this problem, telcos have to invest in expanding and optimizing the existing infra structure - and that involves considerable costs. And as already mentioned at the beginning: OTT providers do not contribute to these costs, even though it is usually their services that make the higher bandwidths necessary in the first place. 

Responding to the OTT challenge with their own applications

But how can telcos respond to the threat from OTT providers? One possible key to success is addressing the home market with individualized applications. Instead of thinking exclusively in international terms, telcos can address local specifics and position themselves vis-à-vis OTTs through USPs such as security-by-design and data storage in their own network, especially for their corporate customers. 

One platform for many applications in the B2All

The CreaLog Service Delivery Platform (SDP) as a comprehensive Fixed Mobile Unification (FMU) platform for communication, signaling, media and messaging applications takes the work off the telco's hands: there are only minor internal development and staff costs, the telco's own OTT service is developed and provided by CreaLog and is available on-premise or from the cloud. So nothing stands in the way of a long-term partnership!

More information and discussions on this topic will be available at the CreaLog Telco Summit on October 20/21, 2022 in Munich.

You can register here: https://www.crealog.com/en/news-blog/event-registration/

Or talk to our experts now and find out what options CreaLog offers you for individual Telco OTT services.
 

 

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