Monday, August 13, 2012

What's the Difference Between Over the Top and Carrier Apps?

Deutsche Telekom took a step into mobile gaming:with a €2 million investment in Flaregames and now has gotten a  worldwide license to create a browser-based game based on the popular Asterix Belgian comic books, as part of a larger expansion of its gaming activities.

By definition, the games are "over the top" apps. That raises the question of the difference between over the top apps and carrier apps, from a carrier's business perspective.

To be sure, carrier views have been shaped largely by the fact that the first wave of OTT apps have competed directly with carrier voice and messaging offers. In the past, the adjectives "low gross revenue, low margin" have been an unstated part of the understanding carrier executives have of over the top apps or even broadband access services, as exemplified by the disdain for the term "dumb pipe."

And yet, what is a broadband access service, especially in a fixed network context, other than simple access? The features, values and apps come from all the apps and services a Web browser or app can supply. If the adjectives "high gross revenue, high margin" were appended to the phrase "dumb pipe," how many carrier executives would not want to be in the dumb pipe business?

Also, even so, simple access is just one of multiple services offered by most carriers, and Internet access is but one of them. The Deutsche Telekom gaming initiative is one way a particular carrier is moving to create "high margin" OTT apps it owns. 

Increasingly, what matters is not the manner of delivery, or even the substantial disruption of carrier service pricing, or the type of app, but the ownership. 

In point of fact, OTT represents the foundation of software architecture, where apps are intentionally designed to run over virtually any physical network. So the manner of delivery no longer is a useful way of understanding the difference between carrier-owned and third party owned apps. 

The disruption of pricing is a key issue, especially for all legacy apps, but that is a problem carriers simply must grapple with; it cannot be wished away. One might argue that, going forward, it is the matter of ownership that is key. 

Over the top voice and messaging apps are feared not because they are available to any potential user with a broadband connection, but because those apps are owned by a third party.

To be sure, disruptive pricing impact is certain to occur, as OTT providers reset consumer expectations about what apps or services such as voice or messaging should cost, and what the key feature set should be.

Increasingly, though, it is helpful to keep in mind that though carriers are right to be concerned about low gross revenue, low margin OTT apps that cannibalize existing carrier services, they should not similarly view with disdain other OTT apps that offer high gross revenue, high margin and do not cannibalize legacy services. 

In other words, the clear disruption of carrier voice and text message services should not cloud vision about other OTT apps. 


To be sure, over the top voice and messaging is a concern of mobile service provider executives around the world, for good reasons. Over the top mobile voice and texting apps now affect traffic for almost 75 percent of mobile service providers operating in 68 countries surveyed by mobileSquared as part of a project sponsored by Tyntec.


About 52.1 percent of respondents estimate over the top mobile apps have displaced about one percent to 20 percent of traffic in 2012. That’s a clear issue since traffic lost means lost revenue as well.

Almost 33 percent of respondents expect one percent to 10 percent of their customers will
be using OTT services by the end of 2012, with 57 percent of respondents believe 11 percent to 40 percent of their customers will be using OTT services in 2012.

But 10.5 percent of service providers anticipate more than 40 percent of the user base will be using OTT services by the end of 2012, the survey found.

In 2016, 100 percent of respondents believe at least 11 percent of their customers will  be using OTT services. In fact, 42 percent of operators believe that over 40 percent of their customer base will be using OTT services in 2016.


All that is a genuine worry. But OTT is not everywhere, and always, something a carrier should avoid or oppose.

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