Friend or foe?

Telecom operators have long viewed OTT services as a dual-edged sword

Tags: United Arab Emirates
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By  Roger Field Published  June 28, 2012

The telecoms sector is possibly the only industry in existence to complain about too much demand. But barely a week passes without operators from around the world complaining about end user demand for internet-based services, from Facebook to WhatsApp and Skype.

Of course, the messaging and communication function on many of these applications saps some revenues from operators in the form of SMS and voice minutes. But these types of apps have also, collectively, made the internet an indispensible tool that people want anywhere and anytime.

It is interesting to note that most operators also view internet access as the big driver going forwards. In this light, pretty much any tool or application that creates demand for internet access should theoretically be viewed as a benefit to operators. But as we all know, in many cases, revenues from internet access are failing to offset declines elsewhere, namely voice and SMS.

But the endgame is far from here, and there remains a broad difference in the opinion of operators on the subject. Some are optimistic, while others all but predict the end of traditional operators.

CommsMEA attended the Abu Dhabi Telecoms CEO Summit in May, where Ross Cormack, CEO of Oman’s second converged operator Nawras, made it clear that he was totally optimistic about the capability of demand internet access to offset decline in more traditional voice and SMS service. Cormack has seen firsthand the effects of a drop in SMS use - Nawras’ Q1 profit for 2012 declined by 19% compared to Q1 2011, and the drop was attributed mainly to a decline in SMS, so we can assume that the CEO has a realistic take on the situation.

But despite this, Cormack sees the OTT players in a positive light. Speaking at the Abu Dhabi Telecoms CEO Summit, Cormack said that the “last thing we want to do is repel this so-called OTT industry”. His argument is simple: The OTT (over-the-top) players, along with the handset industry, have helped position the mobile phone at the centre of people’s lives. “It is all about customers at the end of the day and we have to take into account what they need and to deliver the services they want,” he said.

Cormack’s opinions were contrasted sharply a couple of weeks later in Jordan, at Arab Advisors Group’s Convergence Conference. At this event, Hakam Kanafani, CEO, Turk Telekom Group, said that telecom operators are facing “survival questions” and must reassess the way they operate and invest in infrastructure (see p20), while Nayla Khawam, CEO, Orange Jordan, said that operators in the region were ill-prepared for OTT players. Moreover, Kanafani pointed the finger at OTT players for many of the operators’ current woes.

“We are creating their network of distribution, their infrastructure. No one denies customers love them, but we have to change our business models,” he said. But at its core, Kanafani’s views were not as far removed from those of his counterpart at Nawras as initially appeared to be the case. Indeed, he put much of the blame for operators’ troubles on governments that have taxed operators heavily while being far softer on OTT players.

He also mooted infrastructure sharing, albeit in a more extreme way than most operators would want to accept at present. Kanafani said that operators in some markets should consider sharing a single LTE network and questioned whether it would be feasible for multiple operators to deploy LTE networks in a single country. Certainly network sharing in its various forms will be instrumental in helping operators to reduce their costs.

While the debate about OTT players rages on, it is clear that operators must put in place many measures to cope. And there is much that operators can do: From cost reduction measures – preferably from infrastructure sharing, managed services and better procurement – to improved customer segmentation and innovative, tailored packages.

It is a tough challenge, but one that the region’s operators can rise to.

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