Operators can monetise OTT through cloud hosting strategies

Voracious consumer appetite for Over the Top (OTT) technologies has bred an exceptionally chaotic telecommunications environment, and has ignited a heated battle for market share. In fact, a recent Ovum analysis predicted that telcos will lose $54bn in SMS revenues by 2016, as a growing portion of the public turns to OTT communications.

With consumers already favouring free internet calling platforms and social messaging services like WhatsApp in favour of traditional telecoms offerings, Communications Service Providers (CSPs) are suffering huge revenue losses and struggling to manage this shift in core market values.

In response to the success of OTT providers, some CSPs have pegged these developers as “parasites” that feed off their networks and offer nothing in return. While it seems they have already lost the battle, however, service providers do have options that will help them adapt and find success in the OTT era, particularly by capitalising on their Infrastructure as a Service (IaaS) cloud hosting solutions. So how can CSPs make the most of their network assets and cloud-based resources to generate new revenue streams in this unfamiliar arena?

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To begin, service providers have an opportunity to capitalise on the move from physical to IP networks by developing OTT partnership strategies that make the most of this next generation technology. In addition, armed with superior quality of service and unparalleled adeptness at securely managing consumer data, CSPs are well-equipped to spearhead the next phase of the OTT/LTE movement and entice developers with attractive cloud partnership options.  By opening a dialogue with OTT providers, service providers can then work together with them to develop exceptional applications for their customers. Developers that enter partnerships with CSPs can in turn benefit from superior network resources to achieve success and reach a larger number of users with their offerings. Together, these conditions add up to improved customer service all-around.

For CSPs, this means providing OTT providers with a platform on which they can develop their applications while at the same time benefitting from the core network values of operability, security, and reliability that only service providers can provide. By hosting OTT apps on IaaS platforms, for example, CSPs will allow developers to create applications for their customers without having to invest in heavy network infrastructure. In this win-win scenario, CSPs can monetise the cloud as a venue for innovative service development, while OTT providers can side-step the investment into expensive in-house servers and take advantage of CSPs’ network quality to develop the most engaging, scalable applications possible.

Service providers may prefer to take matters into their own hands, and continue to work against OTT developers rather than embracing the potential of partnership agreements. But recent attempts by CSPs to offer customers their own competing applications, as Telefonica Digital did with its Tu Me rich communications service, have failed. In fact, the telco’s innovation arm took down Tu Me only a year after its inception following disappointing results. In light of this, it would seem that for service providers looking to get their profits up, collaborating with innovative OTT developers is a more attractive course of action.

The possibilities in this domain have already begun to infiltrate discussions across the industry, as CSPs look to regain forward momentum with their cloud offerings. For example, at the Telco Cloud World Forum to be held in Munich next year, topics on the proposed agenda focus in large part on how service providers can profit from leasing IaaS solutions to developing businesses. To add to that, a recent whitepaper by Informa Telecoms & Media reveals that CSPs have invested close to 20 per cent of their expansion efforts into launching IaaS services for both consumers and businesses.

Many service providers already possess the infrastructure required to host OTT development on their cloud. Vodafone, a leading UK telecoms provider, leases IaaS solutions to small and medium enterprises looking to expand; by allowing them to steer their investments towards revenue generating strategies rather than on expensive IT infrastructure, Vodafone provides businesses with a significant cost-cutting opportunity. In addition, because CSPs uphold an exceptionally high level of data security, their clouds present a particularly attractive space for OTT providers looking to develop a competitive edge in the fast-moving applications market.

With these attractive platforms at their disposal, CSPs are well-positioned to form profitable relationships with today’s applications developers. OTT providers hoping to break the “next big app” face a difficult road to success, as low barriers to entry have flooded the OTT market with an overwhelming number of offerings. Developers looking to differentiate themselves with superior products and service have a lot to gain by using CSPs’ IaaS hosting services.

Service providers can extract additional value from their relationships with developers in the cloud by employing a network application program interface (API) tool to fuel demand for high-level policy management services. An open API resource serves as an interface for partner management, and makes service providers the gatekeepers of network priority among their OTT collaborators. By structuring their service offerings to favour higher paying developers with premium service packages, CSPs can drive competition between their collaborators and create a new micro-market in the network cloud space. By facilitating initiatives such as this one, network API tools give service providers the means to develop yet another successful revenue stream in the OTT space.

In addition to this outlook for sustained income, CSPs also stand to gain by requiring supplementary fees from subscribers at the onset of their IaaS migration. Developers moving to a service provider’s cloud will likely rely on high-level support from IT experts to facilitate the move. By offering this service themselves as an add-on to their IaaS offerings, CSPs stand to further capitalise on their in-house expertise.

There is no doubt that OTT technology has cast a large shadow over traditional forms of communication in the telecommunications industry. With free instant messaging services and IP communications applications winning over a growing base of money-conscious consumers, CSPs are eager to regain their foothold in a rapidly evolving market. By adopting a powerful and well thought-out IaaS cloud hosting strategy, service providers can bank on their superior network assets to develop mutually beneficial relationships with developers.  This collaborative spirit will transform the battle for market share into a productive race for innovative application development that will yield profits for CSPs and OTT providers alike, and promote top-level service for mobile customers.

Gordon Rawling, director of EMEA marketing, Oracle