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November 2014

The Business Case for a B2B Collaboration Platform between Operators and OTTs

The Business Case for a B2B Collaboration Platform between Operators and OTTs

For a decade or more we’ve been hearing about telecom “bit pipes” and how Over The Top (OTTs) player are eating from telco rice bowls.  Industry gurus have preached to us, too, about “disruption” and a telco’s “proper role in the digital value chain”.

All this psycho-therapy is healthy, but I think it’s high time to shift the focus to actual solutions, namely a software platform — or collection of systems — that enables operators and OTTs to collaborate, innovate, and make boatloads of money together.

Well, that’s what Landry Ndikumasabo is here to talk about.  Landry is a Manager at Stockholm-based Northstream, a 20-consultant strong think tank focused on the telecom and media industry.  Recently AsiaInfo commissioned Landry and his team to explore the potential benefits of a platform that can take OTT/operator partnerships to the next level.  And that’s the backdrop of our discussion.

Dan Baker: Landry, I read the 16-page summary report from your research and it looks like a fine study.  Can you explain a bit about your research goals and methodology?

Landry Ndikumasabo: Sure, Dan.  Yes, the mission of our research was to step back and understand the dynamics of how operators and OTTs collaborate -- if they even do so at all.  And to do that we spoke to several European operators and OTTs.  The study focused on sixteen western European countries.

The experts we contacted were mostly major stakeholders: telecoms people in the strategy department and CxOs.  We also spoke to several key people at the OTT firms too.

So what’s the status of the OTT and operator partnership today?
Northstream research study

Well, the way OTTs and operators partner today is largely through simple service bundling — the operators package up OTT content services -- like music and video — and combine those with traditional telco services.

If you look at what drives the OTTs and operators to partner, it’s rather interesting.  On the operator side, the attraction is mainly to retain customers and acquire new ones.  Operators don’t really consider this a revenue-generating venture as much as a marketing play.  By associating the mobile brand with, say, a popular video content provider like Netflix, the operator gets to promote a service that’s relevant to a particular segment they want to attract.

For the OTT players, too, the partnering goals are modest.  They hope to piggyback on the operator’s brand to reach wider mass markets than they can easily reach themselves.

This limited kind of partnership works because the technical details behind the bundles are simple to track.  Perhaps the package is attached to the subscriber’s bill for one year.  The OTTs and operator usually opt for a simple settlement plan -- such as a revenue share -- and the biggest percentage almost always goes to the OTT, whereas the operator earns a much smaller amount.

But these simple partnerships don’t deliver the value they could.

There’s nothing wrong with these partnerships, per se.  The chief problem, I think, is they are not ambitious enough.  In fact, they are only designed to achieve limited goals and revenue.

But imagine if you were able to sell music, videos, and other content in a more nimble way.  What if you could leverage the full range of real-time and contextual intelligence a service provider has on its subscribers?  If you could do that, then you can probably increase revenue and profit by an order of magnitude.

It’s one thing to offer a subscription to a specific genre of music.  But do individual music lovers really get excited about a broad category like rock and roll, folk, rhythm and blues, symphonic, etc?  Some do, some don’t.  But one thing we do know is that people get passionate about particular artists — a Björk, a Plácido Domingo, or a Led Zeppelin.

And if you know a subscriber’s passion, you can monetize that intelligence by sending the subscriber potentially attractive mini-offers, say, a free day-pass to a particular music service.

Here’s another angle.  Let’s say you’re a young person with a pre-paid phone and you are attending a concert where one of your favorite artists is playing.  Well, it’s likely that person would enjoy getting a mobile offer to stream the artist’s latest album.  So by analyzing user information, timing, and location information, the operator can actually deliver such a highly attractive offer — and do so at the most opportune time.

Now when you compare these ad hoc approaches to the way an operator manages its offers today, you see how rigid the traditional approach really is: pitching a particular artist’s album would not be part of a Spotify package.

What’s lacking, then, is an ability to be more intelligent and flexible in the way content and other OTT services are offered.  And if that can do that, it should unlock some new ways to make money.

Which brings us to the need for a B2B collaboration platform.

Exactly.  Making real-time, highly relevant offers is a great vision.  But an operator can’t make that happen if the most sophisticated offer its back office system can handle is a once-a-year subscription.

So this idea of expanding the depth of partnering is what we explored in our research interviews and model.  If a B2B collaboration platform were generally available, how valuable would it be?  What are the potential revenues from that?

And we concluded that in Western Europe alone there’s €2 billion in additional revenue (over three years) that operators can capture by using such a B2B platform that enables such advanced partnering with OTTs.

That revenue comes not only from the ability to better respond to customer needs.  Another advantage is much faster time to market.

Stockholm is home to many small entrepreneurial firms, many of whom are writing mobile apps.  In fact, Spotify comes from Sweden.  And the complaint we continue to hear from these entrepreneurs is that telecoms are a very slow time-to-market channel.

This shortfall is a direct result of doing things manually across multiple non-integrated back-end systems.  But having a platform that connects APIs and is open to multiple partners, we think can solve the speed problem.  It also allows you to scale up the number of partners you work with and the number of content items that are part of a bundle.

B2B Collaboration Platform

Thanks for this perspective, Landry.  Finally, what’s it going to take to make this B2B collaboration platform idea take off?

Well, number one, many operators need to change their attitude about working with OTT players.  Too many view the OTTs as mere adversaries and fail to see the potential of win/win relationships.

By its nature, the OTT community is innovative and moves very quickly.  But a mobile operator is born into a more methodical and slower culture.  So operators need to complement their own network and business core competencies with those who better understand the content side.

There’s great potential here.  If the telecom network becomes a more open ecosystem -- though in a controlled sense -- then it can seed a lot of profitable service ideas and content that would otherwise never see the light of day.  Maybe it can nurture the next big hit in the digital ecosystem.

Copyright 2014 Telexchange Journal

 

About the Expert

Landry Ndikumasabo

Landry Ndikumasabo

Landry is a strategy consultant and holds a Masters in Electronic Engineering with experience in business development, technology consultancy and project management.

At Northstream, Landry has been involved in several business-critical client engagements spanning multiple domains such as mobile networks, mobile payments and IT.  Recent engagements include: analyzing enterprise mobility dynamics; advising clients in network sharing agreement negotiations; and consulting on regulatory and anti-trust matters.  In telecom, Landry also has extensive experience in network operations optimization and transformation projects.   Contact Landry via

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