Tuesday, August 23, 2016

OTT is a Perennial Strategy Issue for Access Providers

Over the top apps are a perennial issue for access providers, even if OTT success has been very rare in the broader telecom business, for one key reason: OTT represents product substitution for core telecom products. That is most evident in voice and messaging, but starting to be seen in video entertainment services as well.

OTT voice now represents a major form of product substitution for carrier voice, and the same is happening to text messaging.

That noted, some argue OTT actually is not a direct competitor, a statement most true for Internet apps other than those related to communications.

source: Vision Mobile
“As OTT players put increasing pressure on traditional telco profit centers, it is tempting to see them as direct competitors,” Vision Mobile says. “Yet, OTTs do not compete for telco service revenues; instead, they compete to control key links in the digital value chain, with business models that span consumer electronics, online advertising, software licensing, e-commerce and more.”

That might not strictly be true: in a growing number of cases, app providers do compete for telco service revenues. But the larger point remains valid. App providers work mostly in different parts of the ecosystem.

But competition generally exists in the content, distribution and access parts of the Internet ecosystem, between “telcos” and app providers, to some extent.
source: Analysys Mason

It is easy to say telcos must “compete” with app providers. It is hard to do, and likely virtually impossible in consumer realms.

Better prospects arguably lie in any number of potential business areas, where it is easier to identify opportunities and arguably easier to create services. That is why connected car and industrial Internet of Things businesses have made sense to tier one service providers such as AT&T and Verizon.

It will make more sense for other app and device providers to pioneer consumer apps, in areas such as health and wellness, for example.

That is why app development will be such a big focus at the upcoming Spectrum Futures conference. Apps now are created mostly by third parties, so access providers mostly have to partner to create bundles of value featuring apps.

Here’s a  fact sheet and Spectrum Futures schedule, illustrating the planned discussion of how and where ISPs and app providers can partner, as well as the business issues to be confronted.

Venture capitalists will explain what they are looking for, as well.

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