Deploying Value-Added Service (VAS) Applications over LTE Network as an Advantage against Over-The-Top (OTT) Players

Deploying Value-Added Service (VAS)
Applications over LTE Network as an
Advantage against Over-The-Top (OTT) Players
By ALI Saghaeian
Chief Analyst & Consultant
Telecoms, IT and Media
Ali.Saghaeian [at] gmail.com

Objectives
• Exploring the interest from consumers for operator-
provided OTT-like communications app
• How do operators rate their performance against
OTT Players
• Value of messaging market & level of threat from
OTT
• What are the Telco-OTT voice/messaging
applications
• Learning about Pure-play VoIP and Video calling
• What are Important Factors in an OTT Service
Package

Agenda
• Communication apps on the rise
• Average daily usage of communications and social
networking apps
• Important Factors in an OTT Service
• Telco-OTT voice/messaging applications
• Value of the messaging market and the level of threat
from OTT
• Apps are becoming multi-modal communication
platforms
• App users & heavy users of legacy services

Communication is a feature of a wide range
of apps
Services and apps represented by level of addressability and centrality of communications features
Dedicated comms app Level of addressability
Low
High
Centrality of real-time comms
Low
High
Native device functions Niche comms app
Comms as a feature
Niche apps with
comms channels
Social messaging platforms

Average daily usage of selected
communications and social networking apps
(n=1596) [Source: Analysys Mason and Nielsen, 2014]
All IP messaging apps WhatsApp Kik Messenger IM platform LINE Google Talk WeChat KakaoTalk ping chat Palringo Jappy ChatON joyn Facebook Twitter Skype051015200%20%40%60%80%Average usage (minutes per day)Percentage of panellistsViber, Snapchat, Yahoo! Messenger, Message Me Messenger, BBM, ICQ and all other IP messaging Facebook Messenger

Traditional communication services have
come under increased pressure from OTT
5
SMS revenue (total) and volume (per handset)
Voice revenue (total) and MoU (per handset) 0 50 100 150 200 250 300 350 0 50 100 150 200 250 2009 2013 2018 MoU (minutes per connection per month) Reveune (USD billion) EMAP DVAP EMAP DVAP Voice revenue: Voice MoU: 020 40 60 80 100 120 0 5 10 15 20 25 30 2009 2013 2018 Volume (SMS per handset per month) Revenue (USD billion) EMAP DVAP EMAP DVAP SMS revenue: SMS volume:

How do operators rate their performance?

How much have operators lost?
16
38.4
43.6
2013
2014E
Global Voice Revenues Lost to OTT Applications,
USD (Billion)
Voice (Fixed & Mobile)
32.1
38.7
2013
2014E
Global Messaging Revenues Lost to OTT Applications, USD (Billion)
SMS
How much have operators lost?
Source: Frost & Sullivan

What’s the reason for this optimism?
• What’s the main asset that operators have to compete with OTTs?

Strong interest from consumers for
operator-provided OTT-like comms app
Which of the following would make you interested in using an OTT-like
app provided by your mobile operator?
Source: Ovum Consumer Insights Survey, July 2014
• 79% of respondents
interested in operator OTTlike
comms app
• Demand for enhanced
experience building on SMS
• Operator-centric features
attract consumers
• Reach, bundling, preloading
also important
0% 5% 10% 15% 20% 25% 30%
If the app came pre-loaded on my handset
The app was bundled into my data plan
The app came as a free upgrade to the
standard SMS service
The app included exclusive features, such
as enhanced voice mail, that others
weren't able to provide
The app allowed me to easily contact
people outside of the operator network
Nothing would make me interested in such
an application

Important Factors in an OTT Service Package
52% Content-related
39% Price-related

Telco-OTT voice/messaging applications
+ also TelcoOTT content, cloud, advanced comms, TV, developer platforms…
Orange Libon Swisscom iO
NTT 050 plus
Comcast Xfinity Connect
China Mobile Jego
Telefonica Tuenti (WebRTC)
Rogers One-Number

Adoption of IP messaging apps has increased
strongly
Penetration rates of various communication services
(n=1081 (2011) and 1596 (2013))
[Source: Analysys Mason and Nielsen, 2014]
Video call Twitter VoIP IP messaging Social networking Email SMS/MMS Mobile voice Percentage of panelists 2013 2011 Ali.Saghaeian [at] gmail.com

The timing of your response is driven by the
value of the messaging market and the level
of threat from OTT
IM Penetration of Base
SMS as % of Revenue
High
Low 5% 20% 15% Fight back
4
3
2
1 Grow SMS Lock in SMS Prepare to act
-Drive SMS abundance
-Launch RCS
-Protect SMS revenues
-Broad deployment of RCS
-Grow SMS usage before OTTs enabled
-Restrict arbitrage opportunities when driving data adoption
-Protect SMS revenues
-Prepare for RCS launch
10% Ali.Saghaeian [at] gmail.com

Apps are becoming multi-modal
communication platforms
EMAP: Emerging
Markets and Asia
Pacific countries
Features used in communications apps
Source: Analysys Mason - 2015
Question: Which of the following features do you use through
communications apps such as Line, Skype and WhatsApp; n = various
Other Celebs, brands etc. Stickers Games Video calls Voice messages Paid-for voice calls Free voice calls File sharing Messaging

Popularity of messaging apps is more than price: they
successfully gather together peer group activities
Features used on communications
and social networking apps
Time spent using IP messaging apps
as a proportion of overall time spent
using messaging services, by age
and country
Country
Age group
18–24 25–34 35–44 45+
France 19% 8% 9% 8%
Germany 79% 84% 78% 76%
UK 52% 31% 28% 23%
0% 20% 40% 60% 80% USA 28% 21% 17% 17%
Other
Stickers
Paid-for voice calls
Following…
Voice messages
Video calls
File sharing
Games
Free voice calls
Messaging
Percentage of respondents
[Source: Analysys Mason and Nielsen, 2014]

Pure-play VoIP is still to demonstrate broader
appeal
Source: Analysys Mason - 2015
Reasons given for not using voice/video calling apps, selected advanced countries
Question: “Why do you not use apps to make phone calls
on your mobile phone”; n = 3548 (2015), varies (2014).
Unsure Other These apps are too complicated to set up The call quality/reliability is poor I am worried about data usage I see no benefit in doing so I have plenty of minutes available already

VoIP services currently lack compelling
reasons for most end-users to migrate usage
Reasons given by VoIP service users for not using VoIP on a mobile handset
[Source: Analysys Mason, 2014]

The Worldwide Growth of OTT Video

We continue to see strong potential in OTT
Video
Expected ARPU of OTT Video subscribers1
USD
1. Defined as premium over-the-top Video-on-Demand (VoD) content,
distributed over the Internet.
Source: statista.com, Google’s Consumer Barometer, 2014-15, A.T.
Kearney
6%
10%
6%
4%
1%
CAGR
‘15-’20
US
TURKEY
KSA
CHINA
INDIA
FTA broadcasters/
Content
producers
14%
Satellite Pay TV
operators 18%
Dedicated OTT
Video service
providers
32%
Telecom
operators

SVOD and AVOD services have been growing
rapidly in the UK
Compared to 6 months ago, users of SVOD and Catch-Up services are
watching more on these platforms, at the expense of both traditional
physical products as well as live, scheduled TV.
Source: Gfk, 2015
F_CHABBITS To what extent are you watching/using more or
less of the following now, compared to 6 months ago? Base:
All using each service
19%
10%
7%
8%
13%
8%
10%
5%
3%
3%
17%
22%
23%
21%
15%
15%
7%
11%
12%
5%
On-Demand streaming services that you
pay a subscription to receive
Free TV Catch-up or On-Demand
On-Demand offered free as part of your
Pay TV package
Recorded or time shifted content
Other sources
Free online video
Scheduled / Live content
Pay per view (rental) video on demand
services
DVD or Blu-ray disc you own/have
rented
Paid for download to own video content
Watching a lot
more than before
Watching a little
more than before
On-Demand SVOD services
Free TV Catch-up or On-Demand
On-Demand free as part of Pay TV
Recorded or time-shifted content
Other sources
Free online video
Scheduled/Live content
Pay-per-view on demand service
DVD or Blu-ray
Paid-for download

The big picture: OTT Video
􀂃 Total OTT revenues hit US$
320 million in 2015, will double
to $650m in 2019
0
100
200
300
400
500
600
700
2012 2013 2014 2015 2016 2017
2018 2019
Eastern Europe OTT Video
revenues ($m)
OTT Video market split is now
largely set
Source: Ovum
SVOD
71%
TVOD
13%
EST
16%
Eastern Europe OTT digital
video revenue in 2019 split by
platform

Video calling is more widely used than VoIP
in most markets
Highest penetration amongst
migrant worker populations
Correlation between penetration
of VoIP and video calling service
usage.
Video calling was a more widely
used service than VoIP on
handsets.
• adds value to the
experience in typical use cases,
overwhelmingly on Wi-Fi.
• apps perceived primarily as
video apps, rather than simply
cheap voice.

Consumer demand: Higher quality content on
the rise
 Consumers want higher quality content; trend is echoed in the general global pay TV subscribers growth
 Exposure to existing Ultra HD content – whether over the internet, in movies etc – is building consumers’ interest in Ultra HD
Source: IHS Trax
Global Pay TV subscriptions
Millions of subscribers

Pay-OTT Over the Next 3 Years
Number of pay-OTT services
Few
Many
1. Nascent
2. Fast growing
3. Plateauing
4. Consolidating
= present
= in 3 years
Nascent OTT markets
Accelerating OTT markets
Advanced OTT markets
Consensus: pay-OTT services will grow strongly over the next 3 years
Pay-OTT
New Services
OTT Partnership
Success Factors
Third-party OTT
Partnerships
OTT Marketplace
+70% growth
4-5 launches
67% Yes
Ease of integration
Strong user experience
Business tools & services

Nevertheless, app users also remain heavy
users of legacy services
Average SMS/MMS usage for users
and non-users of IP messaging apps,
by age and country (n = various)
Average voice usage for users and
non-users of VoIP apps, by age and
country (n = various)
Source: Analysys Mason
and Nielsen, 2014
Average outgoing messages per day
Average outgoing minutes per month Ali.Saghaeian [at] gmail.com

What have we learned … ?
… and what should operators do about it?
28
 Defend and evolve
operator comms
capabilities
 Leverage voice (and
video)
 Extend multi-device
presence
 Selectively offer
segmented service
offerings
 Provide back-end
support for others’
real-time capabilities
Operator actions
 Providing an everlarger
suite of services
 Enhancing native
capabilities of devices,
integrating services into
OS
 Moving into real-time
voice and video
 Segmenting more
effectively
 Developing new
business models to
support the above
Internet players
 Blurring between
comms and
entertainment
 Rich communications
within peer groups
 Fragmentation across
interfaces and apps
 Many features beyond
core expertise of
operators
 Real-time capabilities
still emerging, but good
fit
End-user trends

Any Questions?

Deploying Value-Added Service (VAS) Applications over LTE Network as an Advantage against Over-The-Top (OTT) Players

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