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Operators get OTT reality check [ITWeb]
[October 06, 2014]

Operators get OTT reality check [ITWeb]


(ITWeb Via Acquire Media NewsEdge) As the amount of data used on OTT services increases, prices may have to go up so network investment keeps happening, argues Vodacom.

As over-the-top (OTT) players come to the fore this year, dominant operators cry foul over cannibalisation of their networks, imploring the regulator to put measures in place to protect their revenue.

So far, only Cell C has accepted (../index.php?option=com_content&view=article&id=138125) that OTT is inevitable, moving to embrace the communication evolution rather than push back, while Vodacom and Telkom have chosen to portray it as a threat to their core business.



Cell C – SA's third operator – is set to make the data cost of using WhatsApp free on a promotional basis, although this could be extended. Executive marketing head Doug Mattheus also indicated the operator was open to future partnerships with other OTT players, which includes voice over IP (VOIP) services.

told (../index.php?option=com_content&view=article&id=138157:OTT-represents-a-threat-Vodacom&catid=260) an Independent Communications Authority of SA (ICASA) panel on competition in the ICT sector on Friday that OTT services are becoming increasingly data-hungry, which could impact its revenue stream and ability to invest. "At some point, these networks have to be paid for." This situation will be exacerbated when higher quality video starts coming to the fore, said Van Zyl. He noted OTT disrupts networks at both the core and services level, with companies like Facebook and Google looking to provide connectivity in unregulated environments, and operators can only work with OTT players that offer paid services. "OTT players are using our own services to cannibalise our own services." Richard Majoor, Telkom's head of regulatory affairs and public policy, says OTT is taking voice revenue away from the operator, and this should be taken into account when coming up with regulation. He wants ICASA to regulate OTTs so they contribute to the development of SA's telecoms market. Majoor commended government's decision to introduce a digital tax (../index.php?option=com_content&view=article&id=72010:Final-digital-VAT-regulations-published&catid=69) and suggested OTTs that offer VOIP services also be charged some form of interconnection fee.


Analysys Mason said last year:* Operators will remain the dominant force in mobile voice, but will be significantly weakened. * Operators are tweaking the voice feature set, but most view any major transformations with voice over long-term evolution as a long-term plan. * By 2017, non-operator provided VOIP services will generate 14% of smartphone users' voice traffic. * It is the end of an era for SMS, as IP-based messaging goes from strength to strength. * SMS retail revenue peaked in 2011 and will fall rapidly in most countries thereafter. * Traffic substitution will be faster than revenue substitution. * Overall, Analysys Mason expects messaging revenue to decline by 39% between 2011 and 2017.Telkom points out smartphone use is growing, and OTT players are spilling over into voice offerings, with WhatsApp, which is well established in SA, having announced plans to offer voice calling, and Google Hangout VOIP already available.

The dominant fixed-line player notes these services are provided by foreign entities that do not have to incur the infrastructure costs local operators do. From 2012 to 2020, Ovum expects OTT VOIP will cost the global telecoms industry $479 billion in lost revenue – representing 6.9% of cumulative total voice revenues, it says.

Here to stay Ovum analyst Richard Hurst says bids to regulate OTT will find "very little sympathy with the general public" and notes the pushback against the service shows operators are moving to stop OTT instead of innovating to deal with the pain. He adds the dominant players have become rigid in their thinking, just like Telkom was when cellular services were launched 20 years ago. "The large players are behaving more and more like the incumbent." Hurst says operators' requests to remove the competitive threat come as the mobile duopoly argues the competitive environment in SA is sound and vibrant, which is contrary to Cell C's position that the market has failed. "They want to have their cake and eat it." Graham de Vries, GM of regulatory affairs at MTN, says OTT cannot be "wished away" and represents a reality that must be considered, and it is up to the industry to find innovative ways of dealing with the threat.

World Wide Worx MD Arthur Goldstuck adds operators have been sitting on their hands instead of dealing with the threat that has been coming for some time. He notes OTT has now come to the fore and operators are too busy defending their core business to innovate, just as Telkom was 20 years ago.

The dominant players have "turned into the Telkom of mobile," says Goldstuck, adding operators could use OTT to their advantage instead of pushing back. He says SMS could be revitalised by making it cheaper, and operators could push down the cost of data to increase consumption.

(Additional reporting by Bonnie Tubbs.) (c) 2014 ITWeb Limited. All rights reserved. Provided by SyndiGate Media Inc. (Syndigate.info).

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