Operators’ OTT Puzzle: Time to Consider Sleeping with the Enemy?

James is editor in chief of TechForge Media, with a passion for how technologies influence business and several Mobile World Congress events under his belt. James has interviewed a variety of leading figures in his career, from former Mafia boss Michael Franzese, to Steve Wozniak, and Jean Michel Jarre. James can be found tweeting at @James_T_Bourne.

Over The Top’ mobile internet communications services such as Skype and WhatsApp are set to cost the global mobile industry as much as $182 billion in lost voice and messaging revenue over the next four years, according to research from MobileSquared, sponsored by mobile interaction service provider, tyntec.

This is hardly news.

It seems that every week there are new figures published that support the view that operators are being relegated to the role of ‘dump pipes’ and that OTT services are steadily eroding the traditional operator revenue strongholds of voice and SMS.

And yet this research is different.

According to the report’s forecasts, there is a potential $30 billion revenue opportunity for operators that has – for the most part – been overlooked.

Capitalizing on Off-Net Traffic

mobileSQUARED forecasts that OTT communications will generate termination and interconnect fee-based revenues for mobile operators of US$3.7 billion in 2012 rising to US$8.4 billion in 2016.

Messaging will dominate the revenue landscape over the forecast period, followed by off-net calls to mobile. The incremental revenues generated from OTT interconnectivity will reduce the annualized decline in voice and messaging revenues (US$30 billion) by over 25%.

And this is before you begin calculating what clever packaging of data bundles can offset, too.

For operators who understand how to capitalize upon and grow their off-net traffic, this means a big revenue opportunity.

But how can operators effectively grow their off-net traffic?

Exploit Operator Assets and OTT Weaknesses

The worldwide telephone network encompasses some seven billion people. To put it in perspective, it is around seven times larger than the biggest online network, Facebook.

Tying together the telephone network are phone numbers, the most significant of which are mobile numbers. Why? They are not tied to a location, they are SMS (and Voice)-enabled and they are used by persons in the far corners of the world.

Put simply, the global mobile network in combination with mobile numbers are assets that clearly set operators apart from OTT players – both in terms of communication and in terms of the potential to generate revenue from them.

Mobile numbers 2.0

Mobile numbers are such a valuable asset because they enable operators to offer a solution to the glaring weakness which hinders a steeper growth curve for OTT.

The integration of mobile numbers into OTT services would instantly create interoperability of services.  For example, currently a WhatsApp user can only send a message to another WhatsApp user. The moment the user wants to send a message to a non-WhatsApp user, there is a communication break and the user has to switch to an alternative communication channel.

The same problem applies to countless OTT apps in the messaging and voice sphere, creating what the report terms “A Fragmentation of Communication”.

Now imagine a scenario in which a mobile number is integrated into the app. This is easily doable. Today, mobile numbers no longer necessarily have to be tied to SIM cards. Operators can just as well enable the use of their mobile numbers in the cloud, so that they can be attached to services like OTT apps.

As the MobileSquared report outlines, this integration would mean that users would be able to break out of the ‘walled garden’ of their respective apps and would be reachable via the mobile number. It would mean a win-win scenario for the entire value chain.

Consumers would receive an interoperable service. Operators would be back in the value chain and  would benefit from increased traffic on their network – including lucrative off-net traffic . And OTT players could monetize the off-net traffic they bring to the table.

As the report points out, operators with the broadest reach in terms of roaming agreements will be even better placed to terminate more global OTT off-net traffic.

So really, operators need to find ways to ensure that mobile numbers are at the heart of all OTT communications. It’s a simple revenue-equation: When mobile numbers are involved, off-net traffic is guaranteed.

It’s time operators began to realize what assets they hold – and how to use them.

You can find out more about OTT communications at Telecoms Tech World on 4-5 June in London.

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