OTTs in the telco space – welcome to our world

Telecoms.com periodically invites expert third-party contributors to submit analysis on a key topic affecting the telco industry. In this piece Andy Tiller of AsiaInfo reflects on the current competitive tensions between telco and OTT players, as illustrated by Google’s MVNO initiative.

Each time you use a Google product – be it an Android handset or their internet search engine, the company gathers data about your profile, enabling the delivery of targeted content. Google’s business is all about monetizing that data and knowledge. They are arguably the world’s biggest and best data analytics company.

However, Google doesn’t necessarily know exactly who you are at any given time, nor does it have a direct billing relationship with you. Become a customer of the Google Fi MVNO and that will all change. For a start, Google will know more about your identity, where you go, and how you use your mobile device. The company will have a billing relationship with you personally, will know the services that you buy via mobile, and will begin to know more about the non-Google apps and services you use on your mobile device. Google will be perfectly positioned to use its giant data analytics brain to leverage all that information and deliver truly personalized advertising and promotions direct to your hand.

In many ways Google’s entry into the MVNO market is analogous to Apple’s entry into the smartphone market. Smartphones existed before the iPhone; the potential of the mobile internet was developed in Japan with iMode, and the app concept had been around since the days of PalmOS and Symbian, and yet nothing was really “taking off” in the mass market. Operators had looked at the experience in Japan and at the fledgling smartphone market and were busy trying to figure it all out when the iPhone landed and the mobile world changed almost overnight. The iPhone created the app market and the OTT phenomenon that to this day remains both a blessing and a curse to the operator community.

The same could apply to the MVNO concept. There are many already in existence and operators allow (or are required to allow) them to piggyback on their networks. MVNOs are “just another route to market” and a way to maximize the network investment. But if anyone seriously thinks that Google will be “just another route to market” they are probably in for a very rude awakening.  Google is potentially poised to be the iPhone revolution of the MVNO market.

Mobile operators could be forgiven for having recurring nightmares about the prospect. After all, they have known all about their customers for decades – have had just the information and relationship that Google is seeking, but have so far not done very much to exploit that knowledge. With Google about to acquire an individual billing relationship with each of its MVNO customers, will the internet giant’s unrivalled expertise in big data analytics enable it to leave the traditional operators trailing in its wake in terms of exploiting its new customer insights? Maybe – but there are a couple of elements to this question that mean it is not that straightforward.

Firstly there’s the little matter of regulation to consider. The regulatory environment for Google in the internet world is very different to the one it will encounter in the telecoms world.

At the Mobile World Congress this year, for example, Deutsche Telekom’s CEO Timotheus Hoettges pointed out that Facebook – especially after its acquisition of WhatsApp – is a communication service but is not yet regulated as one; and it seems that the regulators in Europe at least have been listening.

The European Commission’s proposals for a single digital market for EU member states – due to be published this month – are expected to include a review of EU telecom and media rules to encourage investment. What’s more – according to some pretty clear signposting from Andrus Ansip, the Commission’s vice president for the digital single market – the rules should find a better balance between the telecoms service providers and the OTT players, and recognize the challenge from the number of voice calls now being made over the internet.

If the regulations do change, operators may become more confident to use their own big data analytics capabilities to start monetizing their customer insights. The technology is available today to provide a real-time understanding of each individual customer’s context, and advanced operators such as China Mobile have begun to put these tools to good use.

However, operators still need to find business models which allow them to exploit these insights (and to do so without risking the customer’s loyalty and trust). Mobile advertising alone is unlikely to replace the lost revenues from traditional voice and messaging services under threat from the OTTs, especially with Google already set up to dominate that market. However, customer context information could prove very valuable to many OTTs; as could the operator’s other assets such as the billing relationship and distribution channels. To succeed, operators will need to figure out how to use these advantages to add value to digital service partners and ultimately create a better (and more valuable) experience for end customers.

Whether any re-writing of the regulations makes it easier for the operators to compete with Google or harder for Google to exploit its analytics remains to be seen. One thing is certain though: the savviest operators are gearing up for the battle.

Andy joined AsiaInfo in 2012 to create a global Product Marketing function and establish a European presence for the company. His responsibilities include all aspects of the marketing mix for AsiaInfo’s international business. Prior to joining AsiaInfo, Andy was SVP of Product Marketing and Strategy for ip.access, where he was also a board member and director of the Small Cell Forum. Previously, Andy was CTO and VP Product Marketing for ShoZu, a GSM Award-winning mobile service for sharing user generated content. From 1998 to 2002, Andy was VP of Product Marketing with Geneva Technology, a provider of telecoms billing software, where he helped to create a successful strategy for the company’s entry into the mobile billing market.