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www.ovum.com
© Copyright Ovum 2015. All rights reserved.
Telco/OTT partnerships for affordable Internet access
Matthew Howett, Practice Leader, Regulation & Policy
matthew.howett@ovum.com
16 April 2015, Victoria Falls, Zimbabwe
2© Copyright Ovum 2015. All rights reserved.
The rise of the OTT
Growing market maturity and decline of traditional voice
Video traffic growth demanding significant investment
Failing to invest isn’t an option, but sustaining it is difficult
Total connection growth of 3.55% CAGR (plateaus in 2015) Fixed -3.59%
Mobile +4.68%
Revenues fall -2.4% CAGR Fixed -5.87%
Mobile -0.88%
Volume growth not offsetting revenue decline due to falling prices
3© Copyright Ovum 2015. All rights reserved.
The impact of OTT on telcos
We estimate $52bn revenues will be ‘lost’ to OTT VoIP globally in 2016
Over $40bn SMS revenues lost to OTT social messaging last year
OTT players and the internet have loosened telcos’ customer gatekeeping position
Telco SMS revenues lost to social messaging: 2010–16 ($m) Telco revenues lost to OTT VoIP: 2010–16 (US$bn)
$32.6bn
$54bn
4© Copyright Ovum 2015. All rights reserved.
Partner
Compete
Protect
Wait and see
In fragmented markets ~ Where commoditized IP proliferates ~ Against average paced innovation ~ Where local is important ~Where no other sustainable position in the ecosystem
Where dominant consumer brands exist ~ Against market leading proprietary IP ~ Against fast paced innovation ~ Where strategic fit is bad
Where there is known regulatory lag ~ Against strong unregulated competition ~ Where no other sustainable position in the ecosystem
Where there is too little market intelligence or resource to act or where the appropriate opportunities have not presented themselves.
Ovum’s OTT Response Strategy Framework
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Type 1: Unilateral bundling• One party uses the other brand simply as a marketing tool• Often no relationship between the two companies• No direct investment
Type 2: Marketing• Main purpose is to increase the marketing of each product• Some level of cooperation between the two companies• None-to-small investment
Type 3: Revenue agreement• Either commercial agreement or revenue sharing• Usually co-branded products• Small-to-mid investment
Type 4: Joint venture / Strategic Partnership• From an announced strategic agreement between the two parties up to
the creation of an independent joint-venture company• Mid-to-significant investment
We have identified 4 types of partnership
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Partnerships around the world: categories
Partnerships by category Partnerships by geography
Source: Ovum Telco–OTT Partnerships Tracker: 4Q14
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Partnerships around the world: free versus paid
Category Free Paid Total
Gaming 11 12 23
Internet search 8 1 9
Messaging 23 38 62
Music services 10 61 71
Navigation/maps 1 0 1
Payments 2 0 2
Productivity 13 3 16
Social media 51 20 71
Video 3 35 38
VoIP 16 14 30
Total 138 185 323
Source: Ovum Telco–OTT Partnerships Tracker: 4Q14
8© Copyright Ovum 2015. All rights reserved.
internet.org is probably the best known example of a partnership offering internet access and services
India (Feb 2015)Reliance customers in six Indian states (Tamil Nadu, Mahararashtra, Andhra Pradesh, Gujarat, Kerala, and Telangana) now have access to more than three dozen services ranging from news, maternal health, travel, local jobs, sports, communication, and local government information.
Tanzania (Oct 2014)Provides people with free access to basic internet services so they can browse useful health, education, finance, employment, communication and local information and services without data charges.
Colombia (Jan 2015)First time the Internet.org app is available in Latin America, and it’s also the first to include government services as part of the other free basic services in the areas of education, health, communication, jobs, finance, and local information.
Zambia (Jul 2014)Airtel customers in Zambia were the first to access services in the Internet.org Android app, at internet.org, or within the Facebook for Android app.
Kenya (Nov 2014)
Ghana (Jan 2015)The fifth country to connect with Internet.org, after Zambia, Tanzania, Kenya and Colombia. People use the internet for free to find jobs, read books, and stay connected.
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2/3 of the world is not connected to the Internet. What is stopping them?
Most of the unconnected are in the developing world, where only 32% of people are online, compared with 78% in rich countries. Just 19% of people in Africa were internet users in 2014. But why?
Mobile networks are few and far between
Networks can’t support large amounts of data
Power sources are limited or costly
Devices are too expensive
Service plans are too expensive
Content isn’t available in the local language
People aren't sure what value the Internet will bring
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…But things are improving
Affordability of smartphones is improving
Increased supply, mid-tier focus, will soon overtake feature phones
Service plans are evolving and new models being tried
internet.org is a good example, but also carrier’s are evolving their tariffs
Content is increasable available in the local language
Strong cultural identities are being catered for, deals with local artists and celebrities are being reached, local distribution is happening, Facebook transalted
Telco/OTT partnerships are stopping the Internet being seen as an abstract concept.
Things such as Facebook are an entry point, which serves as a way in to take consumers elsewhere on the Internet
Mobile networks are improving coverage
Innovative technologies being tested by Google and Facebook
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As a result of partnerships, some of those challenges are being overcome
MAIN PROBLEM
CHARACTERISTICS
SOLUTION OR PLATFORM
Obstacle to getting online is mostly economic
80-90% already have 2G/3G infrastructure
Urban, semi Urban
Build cell towers, small cells or a big network of Wi-Fi access point
Basic physical access to communities is difficult
Deploying infrastructure is uneconomic as well as impractical
10% of the world
Rural and remote
Satellites, but expensive and slow to develop
Medium density areas
Up to 20% of the world
Where some connectivity already exists but there are gaps
Unmanned aerial vehicles which can be deployed quickly with long endurance
Combination of economic and environmental factors
12© Copyright Ovum 2015. All rights reserved.
But questions remain…
Are the apps included in internet.org the right ones?
They are mostly low bandwidth and not contentious, not things such as YouTube, VoIP within Facebook and WhatsApp which would present real challenges for the network. This risks creating a further digital divide.
Who eventually owns the relationship with the end-user?
In developed markets, OTTs have stolen the gatekeeping position of the telco. internet.org believe it should be those deploying the network to become the face
Does regulation prohibit Google and Facebook plans for balloons and drones?
Some countries heavily restrict the use of such aircraft and time-wise these are still some time away
Let’s not forget the importance
160m+ jobs, reduced child mortality, empowerment
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