OPINION AND ANALYSIS
A crowded OTT market means opportunity ahead for telcos
By Kamal Bhadada, president, CMI, Tata Consultancy Services
he media industry is undergoing an unprecedented period of change. Consumers are cord-cutting expensive pay-TV and switching to streaming services like Amazon Prime and Netflix, which boast flexible packages with no termination fees. According to Ofcom, the number of subscribers of streaming platforms overtook the number of people with traditional satellite and cable services in the UK for the first time in 2018. Established content creators, studios and broadcasters who previously sold content through distribution channels are now going direct to consumer, offering their own streaming to stop the hemorrhage of cord-cutting. Newer entrants to the market such as Apple and Disney are battling more established players like Sky, BBC and HBO, making for an increasingly crowded online streaming market. In the world of telecoms, all these businesses are called OTT, or ‘over the top’ platforms, because their service literally sits on top of the high-speed internet infrastructure provided by telcos. Telco businesses are facing their own challenges, with many anticipating high capital expenditures to modernise their networks. However, there are huge opportunities here. Telcos have the chance to monetise their infrastructure assets by providing their own next-generation OTT content and smart home services as add-ons. There are plenty of new business opportunities for telcos that forge new paths, taking advantage of 5G innovations to provide their customers with the kind of creative, value-add services previously only offered by OTT players. Telcos often struggle to manage disparate bandwidths, configurations and legacy networks while maintaining high-quality services. One of the most important investments for telcos today is in building up Cloud-based digital platforms that can unify these different technologies. This is a long-term commitment and serious investment, but it is the only way to provide the scalable bandwidth required to support consumers’ ever-growing appetites for data. Videos will contribute to more than 82 per cent of global internet traffic by 2021, according to Cisco. The more customers stream content, the more strain is placed on the existing infrastructure, which will become increasingly commoditised. If telcos remain confined to network and infrastructure services, they risk sliding into a downward
spiral of falling customer numbers, falling revenue and lack of investment in the infrastructure needed to maintain the right levels of service. A robust, modern network infrastructure will provide telcos with an abundance of new business opportunities to monetise across new channels. Smart home services, gaming, AR, VR, 4K and eventually 8K streaming are all key areas of potential growth and monetisation. The key is building a robust platform capable of delivering these services directly, rather than relying on OTT players. This will require building tighter integrations with the wider industry ecosystem. Put simply, 5G gives telcos the upper hand: telcos that run 5G infrastructure will be able to negotiate partnerships with content providers. OTT platforms will need 5G speeds to distribute their content to increasingly mobile-first consumers, especially for low-latency content like sports and esports. Telcos already have experience building these ecosystems, and partnerships like BT’s rights to the Premier League and the Champions League chart a way forward for the wider industry. 5G gives telcos more leverage to develop and extend such partnerships in the future. Currently, there is an overwhelming number of OTT subscription services available to consumers. This fragmentation has resulted in an inconsistent customer experience across disparate platforms. Industry surveys have found that most customers would only choose up to two OTT services and would prefer a single consistent interface. Telcos are in a unique position to be an aggregator of this content and create a single, unified digital marketplace. According to Salesforce, two thirds (67 per cent) of consumers would pay more for a great experience, and there is real incentive for telcos to invest in delivering this experience. Telcos need to have strong analytics capabilities to deliver the right content to the right consumer on the right device at the right time. The ability to mass-personalise and create commercially attractive bundles will drive customer loyalty and up-sell. We encourage telcos to harness the abundance of opportunities on offer with OTT. It will require a mindset change, ability to innovate technically and create new business models that will position them at the core of the media industry. n
TVBEUROPE JULY/AUGUST 2019 | 07
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