The broken dream of Telco OTT

Mobile Operators have since Apple catalyzed the separation of the Service layer in 2007/2008 ,with the establishment of modern smartphone ecosystems, had a severe identity crisis which has clouded their judgement -and as a result wasted millions of dollars.

It was extremely tough for operators, who for years saw themselves as the gatekeepers to the mobile experience, when their earlier subordinate partners (the handset manufacturers/mobile OS providers) reinvented the mobile phone and opened the service layer for innovation. A whole new economy appeared out of thin air, or at least from the tools provided by these new players. New players who had fixed some of the frustrations which had been suffocating the pre-Apple mobile content & service development. Suddenly there was: single point of distribution, a functioning payment solution (at least for consumers with credit cards), ability to update software and scale that wasn’t limited to the fragmented footprint of mobile operators. And least but not last; the new players knew software.

The app economy was out there in the operator’s face. Getting media coverage. Generating revenue. Having impact on customers lives. The same customers who also were Telco customers… Operators felt left out. Someone was stealing their “customer relationship” by making business on top of their access through the medium which for so many years had been a sole tool for Telco services. And on top of all this, the separation of the service layer could pose a serious threat to the good old money making machines; Telco voice and messaging -exposing these as mere services.

The following years the mobile operators went into a state of mass suggestion, doing all and nothing. The big fear was becoming a bitpipe. A dumb bitpipe, as opposed to a smart bitpipe (the lingo obviously invented by consultancy firms capitalizing on the confusion). There was an urge and aspiration to become a visible player in the service layer. After all -that is were the customer relationship and emotions are the strongest. They needed to fight for voice and messaging on the same battleground as their enemies and take back a stake in the sale and distribution of mobile content & services. Out of the mist came operator app stores, operator app portals, operator app recommendation engines, aggregated social media clients, over-the-top (OTT) voice and messaging clients, hybrid voice and messaging clients, social phone books, and various other OTT initiatives including everything from mobile coupon services to video streaming services…and WAC. Nothing worked!

Along the way, and with their heads firmly planted in a fluffy cloud and their pants lined with money, operators had forgotten what they predominantly are -and have always been. A provider of access. A builder of infrastructure. An enabler for moving bits from one place to another. A bitpipe! They had failed to see the forces that governed the new mobile service economy. Why players were doing what they did and what their main revenue was generated from. Competitors strengths and own weaknesses and limitations. The real bottlenecks and/or control points. -One important one being the mobile phone itself and the fact that operators presence was (and is) limited to an inserted SIM card and nothing else. And least but not last the operator DNA. Meaning the way operators work. The skill set. The bureaucracy. The telecom margins every new initiative is measured against. The way every cell in the telco-body had been fine tuned for years to produce and sell a limited set of products which are so important to people that the value sells itself. Well, there is of course competition among operators which has to be battled. -And not to mention the threatened voice & messaging services. But operators will figure this out. Pricing being the most important tool and universal reach being the unmatched differentiating factor.

The point to this rather dull story of identity crisis is that the whole time the operators were running after and aspiring to become someone in the service layer -the service layer on its own was adding more value to the access layer than ever before. The more addicted customers are getting to use mobile content & services wherever they are and whenever they want -the greater value do they put in having access to it all. Operators should have embraced the mobile content & service economy and been thankful that someone else managed to handle this better than they could do themselves. The operator involvement in the service layer should be limited to providing components of value (billing, location?, authentication, ID..) to the players in the service layer -without taking an end-user position themselves. And perhaps an occasional bundle with service providers to use as lock-in or acquisition tools for the access products.

A lesson from history: CPA (Content Provider Access) did work because operators provided a billing component to the content industry and most commonly without involving themselves in the actual service creation or end user sales, marketing or distribution -CPA only bringing real value to the content owners/developers when operators managed to create an interoperable regime in a given geographical market (aka scale). – thereby overcoming the fragmented customer footprint of each single operator.

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