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(MVentur) Download: Youth key to operator OTT challenge
 

(MVentur) Download: Youth key to operator OTT challenge

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If operators adopt a wait-and-see approach to OTT entrants they will lose.

The famous Darley and Latané “smoke in the room” experiment showed how people failed to react to warning signs if they were surrounded by cohorts who pretended nothing was happening.

As OTT players enter the mobile industry, telecoms operators too risk sitting around watching the smoke creep under the cracks in the door. When Google entered the fixed line internet market in the US, it didn’t offer marginal improvements over rivals at 20 or 30MB/s but went in at a full 1GB/s, catching all the incumbents by surprise. Players like Google, Facebook and Amazon are simply playing a waiting game, mollifying operator concerns until they occupy a position of strength to exert change. At that point, it may well be too late for operators to react.

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    (MVentur) Download: Youth key to operator OTT challenge (MVentur) Download: Youth key to operator OTT challenge Document Transcript

    • MVentur memo: Q1 2013DEALING WITH OTT: OPERATORS NEED TO KEEP YOUTH ONBOARDYouth OTT usage will force operators to change their revenue modelsfor the betterMobile phone’s primary usage shifted from voice to data back in 2010.Industry data shows that global voice traffic has been stagnant since2010 while data traffic has been increasing exponentially. In 2013 datawill surpass voice in revenues as well. The successful operator oftomorrow is the one built around data.Per-minute, per-event charging models will be rendered useless andunless operators adopt a more customer-focused mindset they leavethemselves open to exploitation by OTT players. “It’s a strangebusiness model at present where telcos invest huge amounts of moneyto upgrade data networks and players like YouTube, who gets therevenue, don’t pay anything.” Vodafone India’s Managing Director andChief Executive Officer Marten Pieters."Around 18 months ago we started noticing that people were using moreSkype, people were using Viber and Whats App," Vodafone Chief
    • Executive Vittorio Colao told the Mobile World Congress industrymeeting, referring to three apps that let users route phone calls ormessages through data plans. "And our SMS revenues started goingdown. So we asked them why and it was a very simple answer. It wasbecause it was free," he said. "So we decided to turn the model upsidedown."Over the top (OTT) players are eating up the market with messagingand content services that drive revenues off the operator bill. As playerslike Google have already shown in the fixed line market, incumbents areseriously exposed to game changing shifts. In response, mobileoperators need to evolve their charging models or end up left on theshelf like the record labels in the 90s.Operators have 3 options in mitigating the threat from OTTs: 1. Produce their own content or charge for added value (e.g. 4G) 2. Sign more deals with OTTs 3. Charge moreLooking at the evidence, we recommend that operators charge more fordata. To get mobile prices back up, some operators are planning tocharge a premium for faster 4G networks. EE, the first to launch 4G inBritain, has chosen to charge higher prices for new service, but has notdisclosed how many customers it has won.In Norway, Telenor increased ARPU by 2% in 2012 by charging more(compared to a 4% decline in rival Teliasonera). Telenor found that datausage varied widely by user and there was a significant number ofcustomers willing to pay extra for more data allowances (Telenor’sstandard offering was 400Mb per month).Young people are the heaviest users of data. One of the reasons youthARPU has been in decline since 2008 is because operators have beenpreoccupied with monetizing voice & text while ignoring the potentialdemand for more expansive data offerings. Because operators are notproviding data tariffs that fulfil youth mobile behavior, they are bothlosing the youth market and its revenues.
    • WHAT DO OPERATORS NEED TO DO?If operators adopt a wait-and-see approach to OTT entrants they willlose.The famous Darley and Latané “smoke in the room” experiment showedhow people failed to react to warning signs if they were surrounded bycohorts who pretended nothing was happening.As OTT players enter the mobile industry, telecoms operators too risksitting around watching the smoke creep under the cracks in the door.When Google entered the fixed line internet market in the US, it didn’toffer marginal improvements over rivals at 20 or 30MB/s but went in at afull 1GB/s, catching all the incumbents by surprise. Players like Google,Facebook and Amazon are simply playing a waiting game, mollifyingoperator concerns until they occupy a position of strength to exertchange. At that point, it may well be too late for operators to react.The successful operator of the future is one that recognizes its place inthe mobile industry and reacts now to the early warning signs of smoke.In the Darley and Latané experiment, they found that when subjects satin alone in the room they reacted fast and without hesitation. Survival,therefore, may require some operators to go it alone.The watershed of 2013 will define how operators deal with the paradigmshift. Those that hang on to the old school world view of telecomsbrands being strong media players will also be those that face thebiggest challenges in negotiating change.Rather than look at competition, operators need to focus on getting theirown fundamentals right. There is a lot of money to be made out ofproviding a simple, reliable experience (e.g. Toyota, Ikea). The challengefor operators is letting go of the old-school mindset that has themchasing technologies and winning awards.Operators that strike out now and reform their charging models are theones that will survive and grow in the next 5 years.Graham Brown, Lead Consultant MVentur.
    • About MVenturMVentur is the world’s first youth mobile consultancy.We have 2 roles:1) Advisor to our clientsWe oversee marketing plans, act on advisory panels and consult ourclients. Find out more about our consultancy work.2) Commercial think tank for the mobile industryWe promote progressive marketing ideas that help mobile companies gobeyond advertising. Read more about our youth mobile opinion pieces.www.MVentur.com