Being talked out of business

Telecom firms not happy with Skype, WhatsApp

Windhoek – Telecommunications operators and service providers, which have over the years claimed pole position in pioneering technological breakthroughs and services, are at a loss on how to adapt to over-the-top (OTT) communications developments, which are said to have become the biggest threat to operators’ revenues.
Prominent OTT services include WhatsApp and Skype, which telecommunications analysts say, could threaten the profitability of traditional services providers.
OTT generally entails broadband delivering video and audio without system operators being involved in the control of distribution of the content.
Unlike traditional products from telecoms services providers such as short message services (SMS), the network provider may be aware of the contents of the IP packets, but is not responsible for, nor able to control, viewing abilities, copyrights, redistribution of the content, which is the nature of the internet.
The Internet provider only becomes responsible for transporting the IP packets.
Analysts say that rising penetration of smartphones has provided fertile ground for OTT services currently in play.
“We are competing with Skype, WhatsApp-these do not have regulators like we do and they come through our networks and if the regulatory environment is slow to respond, we are limited on how as operators we can react against this,” Miguel Geraldes, MD of one of Namibia’s largest mobile operators, MTC, said.
While telecoms market surveys have shown that some users do not yet trust OTT, analysts say the next battle between operators and OTT will be over brand loyalties.
There is also a belief that operators are capable of competing with OTT service providers in service innovation. Operators have also been calling for OTT players to subsidise the cost of traffic that their services generate. There is also an opportunity for operators to partner with OTT players for mutual benefit.
But industry players agree that they are losing critical sources of revenue. The problem is magnified in developing economies where the regulatory environment is slow to adjust to the changes provided by the fast paced industry.
Skype is said to be the leading OTT with over 900 million users spending over one billion minutes a day making Skype-Skype calls for free.
This has led technology analysts to conclude that Skype has become to OTT what Facebook is to social media. Similarly, there are currently an estimated 75 million WhatsApp users globally, with that figure projected to rise to 250 million by 2016.
WhatsApp users are estimated to be sending two billion messages a day, an average of 27 messages per user per day, research data released last August by MobileSQUARED reveals.
The same research also projects that by 2016, global smartphone penetration will be around 39 percent and this could mean that one third of users of mobile phones will be able to access OTT via their smartphone.
MTC’s Geraldes appealed to Namibia’s telecoms regulator CRAN, to be timeously responsive to changes in the industry.
“As the industry we realise how OTT will impact on our revenue and we are saying to the regulators, help us, give us support-the industry is changing a lot and we need to compete with this OTT,” Geraldes said.
A recent paper by researchers at Arthur D Little titled “Disruptive Threat or Innovative Opportunity? Scenarios for Mobile Voice OTT” expects global mobile voice OTT market size to range between US$14 billion to US$100b in 2016, accounting for between two to 20 percent of total voice revenues.
The paper urges operators to develop strategies to respond to a world with mobile voice OTT presence.
Arthur D Little’s research paper says Skype already represents over 25 percent of cross border international call minutes and the company is now focusing on business users, in addition to mobile users and HD voice.
Microsoft’s acquisition of Skype can also lead to voice becoming just another application on users’ smart devices, the analysts say.
“Complacent telecom players face the risk of losing significant revenues and market share to these emerging challengers. Alternatively, OTT may be an opportunity to enhance customer experience, broaden range of services, enable the operator to position itself as an innovator, limit the risk and investment in content production and extend the market reach,” researchers at Arthur D Little say.
The researchers also encourage operators to partner with OTT, use their customer appeal and innovative features to enter market.
“The success and sustainability of the chosen move will be partially determined by the telecom player’s market position, as well as the business and legal context of individual markets. Telecoms need to prepare their strategy carefully to support business models which are sustainable, profitable and deliver competitive advantage,” the analysts say.

April 2013
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