Editor’s Note: Welcome to our weekly Reality Check column where C-level executives and advisory firms from across the mobile industry share unique insights and experiences.
If over-the-top service providers are cannibals, somebody forgot to tell Atlantic Broadband, Grande Communications, RCN Telecom Services and Suddenlink. They’re among the cable operators that have partnered with Netflix in 2014.
Why? Partnerships enable companies to provide what consumers want. Turf wars don’t. Cable executives are increasingly acknowledging that fact. Some examples:
“This agreement is a great example of how the cable industry can work with Internet content providers on innovative solutions that benefit consumers,” said Suddenlink Chairman and CEO Jerry Kent.
“Netflix is good for us because it’s fantastic for our customers,” said David Isenberg, Atlantic Broadband chief marketing and strategy officer. “It’s delivering the best possible customer experience.”
“The dynamics of this game-changing relationship are clear: More choices for the viewer via a simple, unified device,” said Jim Holanda, CEO at RCN and Grande Communications.
Mobile operators can learn a lot from the cable-Netflix partnerships. Those that do are uniquely positioned to get their share of the OTT market, which the analyst firm MobileSquared predicts will be worth $53.7 billion by 2017. Those that don’t will become what they fear most: dumb pipes.
Conventional wisdom says mobile operators are too big, too cautious and have too much money sunk into traditional ways of doing things, all of which make change difficult and slow – maybe even impossible. But the same could be said of cable operators, and they’re doing it. So have dozens of record labels, which partnered with Apple, Spotify and other upstarts to provide consumers with what they want.
Savvy mobile operators realize that OTT can be an opportunity – if they play their cards right. Partnering with the right OTT player enables them to change their offering and business model faster, more cost-effectively and with less risk than if they tried to do everything on their own. Partnership examples include Spotify and Orange, and T-Mobile US with IHeartRadio, Pandora and Rhapsody.
5 must-have attributes in an OTT partner
There’s no shortage of potential OTT partners for mobile operators to choose from. The catch is that some are better than others in terms of maximizing the mobile operator’s revenue potential and competitive position. Here are five attributes that every operator should consider when vetting potential partners:
• A comprehensive, turnkey solution. That way, the operator can do a deal with a single company instead of cobbling together piece parts from multiple vendors. A one-stop shop enables faster time to revenue and lower overhead.
• A company that brings more to the partnership than just an app. When the partner can also provide, for example, a network, content and customer base, the relationship has less cost and risk for the mobile operator.
• Multiple deployment and branding options. One example is having the OTT partner’s app pre-installed on handsets to encourage customers to choose that service rather than hunt for competitors in an app store. Another example is co-marketing to encourage customers to download the app. That’s an ideal way to build adoption among existing phones, where pre-installation no longer is an option.
• Multiple revenue-sharing opportunities, such as a share of each call or text. Mobile operators have the leverage necessary to convince OTT providers to share revenue. For example, operators own the network, so they’re able to ensure quality of service for their partners’ services. That QoS helps those partners attract and retain customers.
• Deep, actionable analytics that enable mobile operators to tap new revenue streams to offset OTT losses. Suppose the OTT provider determines that a lot of OTT calls and messages terminate in India. Presented with that information, its operator partner might decide to pursue a marketing partnership with an Indian airline. Analytics also enable targeted, relevant marketing. So instead of all customers getting a push notification about the Air India partnership, it would go only to those who use the app to communicate with people in India.
The reality of today’s marketplace is that customers are in control. Consumers love innovative, often low-cost alternatives and will always seek them out, and OTT providers will always find ways to deliver those alternatives. Mobile operators that don’t accept that reality will continue to waste revenue and market share fighting a battle they can’t win.
Instead, mobile operators should aggressively pursue partnerships that enable them to offset OTT losses through revenue sharing and new business opportunities. The savvy ones already are.
Bryan Hertz is a successful entrepreneur, bringing more than 20 years of experience in building companies and management teams, raising capital and driving technology innovation for Fortune 500 banks, insurance companies and data processing facilities. Hertz entered the telecom industry in 2006 and created Voxox to fulfill his vision to unify personal and business communications on a global basis. Today, award-winning Voxox solutions are used in over 200 countries by consumers and businesses.
