Over the Top (OTT) Services
The over-the-top trend started in the telecommunications sphere with free, IP-based telephony services but has now crossed to all other telecom services, gaining momentum by focusing on content and services. Currently, OTT providers are developing innovative ways to differentiate themselves by increasing quality as well as adding value through features and functionality. They no longer depend on the pricing attribute that has thus far given them an advantage over traditional operators. The mobile messaging applications world is a good example of this. As mobile phones are expected to become the main communication source worldwide, mobile apps with large active user bases are highly valued. Proving this point is not a very difficult task.
We only need to take a look at some of the movement going on in this particular market, such as the $19 billion purchase of WhatsApp by Facebook, the $3 billion acquisition offer for SnapChat by the same company, the $11 billion market capitalization of Twitter and the $1 billion acquisition of Instagram by Facebook (again). But as there are two sides to every coin, this can also be used as a reminder of how much money mobile carriers are losing, both in voice and text messaging revenues, with the widespread use of free mobile text and chat applications.
As voice services and text messaging still represent around 70% of mobile carriers’ revenues in Latin America (unlike developed markets in which data and value-added services surpass 40% of the total revenues), mobile messaging apps represent a significant threat for mobile carriers in our region. Mobile messaging applications offered by OTT providers are offering a far richer experience with far deeper user engagement than the text messaging experience that mobile carriers can provide. This fact is severely impacting their text messaging and voice revenues. In fact, a recent Frost & Sullivan study predicts more than $7 billion in negative impact on text messaging revenues from 2014 to 2018, across the three most developed markets in Latin America (Brazil, Mexico and Colombia). Although voice and text messaging revenue are still growing in most countries across the region, the threat to operators persists as they have not been able yet to increase the share of Internet data and value-added services. Because OTT providers do not have to incur network and infrastructure expenses, they have an advantage that they are exploiting and, therefore, they ought to be taken more seriously by mobile carriers. In fact, traditional service providers wish the threat would stop there, but OTT providers are increasing their capabilities to start offering bundled services, such as a triple-play package of voice, TV content and connectivity, similar to traditional carriers. For mobile carriers — and telecom providers in general — to tackle this challenge they need to be able to find new, innovative approaches to meet current customer demands. Developing their own applications, enriching text messaging services or partnering with industry experts (including OTT providers) or rich communications suite-type services (like the one being offered by Joyn) is a good way to start. In the end, offering more than just messaging and expanding into exclusive and third-party content, gaming features, business features and other payment features, should lead to more success. Latin American mobile carriers are at a milestone point when innovative services are needed.
Gina Sanchez has seven years experience in the Latin American information and communication technologies industry covering a broad range of sectors, leveraging long-standing working relationships with leading industry participants’ senior executives. Sanchez has a particular focus on telecom services.
