Operators in Western Europe could rake in €2.2 billion gross profit over the next three years if they take a platform approach towards collaboration with OTT players, according to a new study carried out by Northstream, a consultancy.
“It’s very difficult for collaboration and bundling to have any top-line effect for operators if OTT partnerships are manually integrated and handled on a case-by-case basis,” said Landry Ndikumasabo, a Northstream manager. “A platform is more nimble and flexible, carrying only marginal cost for additional partners. Operators can offer a wider range of services and generate more revenue.”
By using a scalable and open collaboration platform, or API hub, which gives OTT players easy access to operators’ network and IT assets (such as billing and marketing capabilities), Northstream calculated operational costs can be reduced dramatically – and revenues boosted – compared with a clunky non-platform approach (which operators generally use today). Operators can then better jump on OTT innovation, according to the consultancy, and focus on what they are good at: packaging, pricing and promotion.
Northstream calculated operators in Western Europe will generate a much more modest €160 million in gross profit over the next three years if they stick to a manual, non-platform approach.
The study was commissioned by AsiaInfo, a Beijing-headquartered software company, which is trying to make headway in Europe with its Veris-branded and proprietary open operational platform (O2P).
“We’re encouraged by Northstream’s results,” said Dr Andy Tiller (pictured), AsiaInfo’s VP of product marketing. “They suggest a collaboration platform can change OTT partnerships into something interesting from a revenue point of view, rather than just keeping customers happy and improving the brand image.”
Tiller contends there’s an untapped opportunity for operators through the targeting of ‘tier 2’ IP-based players. With bigger and more popular OTT providers, such as Facebook and Spotify, which wield significant market power, operators can rarely extract revenue he said. Partnerships with them are generally done on the basis of customer retention. A scalable platform, argued Tiller, allows more partners and the lowering of API charges, which, in turn, gives smaller OTT players an opportunity to make a business case. Operators, he said, would be wrong to conclude from their dealings with the big players that there’s no money to be made from OTT partnerships.
“The study shows that for smaller operators [using non-platform based integration] OTT partnerships are probably unprofitable in small countries today,” said Tiller. “With collaboration platforms, even smaller operators can turn OTT partnerships into a profitable exercise.”
There are two aspects to the API hub. First, operators can publish its APIs (typically for charging, SMS and location). Second, OTTs can register on the platform and publish their own APIs which other OTT players can access. They can also use the platform to create ‘mash-up’ products.
A good example of a mash-up, said Tiller, is a music streaming service provider creating a free day pass through zero-rating data (so the customer doesn’t pay). This is done by accessing the operator’s IT billing assets. Sign-up to the service is made easy by placing an order via text.
“Operator IT platforms are very capable of creating that kind of package, but it’s difficult to do that if the IT department has to get involved every time and hand-crank the whole process,” said Tiller. “An API hub creates an environment where a lot of the work can be done by the OTT partner.”
Various business models are possible. OTT players can pay for APIs or enter into revenue-sharing agreements. In the case of the free music service, data can be ‘sponsored’ (with the OTT player paying the operator wholesale rates for the data). If it’s a paid-for offer, revenue can be split. Operators can also market services more effectively on behalf of OTT players, as they have greater knowledge about customers than IP-based firms.
There are other OTT platform approaches, of course, such as GSMA’s OneAPI. AsiaInfo contends, however, that though this is useful – developers have quicker time-to-market by not having to deal with operators on an individual basis– a proprietary model is better because it can be integrated directly with the operator’s own operations and business support systems (OSS/BSS). That gives developers access to both the operators network and back-office systems (such as billing, CRM and analytics). The IT firm also sees danger of excessive red-tape surrounding industry-led initiatives, which can slow them down.
Using a revenue-share model, and through collaboration with online retailers, China Telecom has been using the Veris O2P since 2011. Digital services are offered via the operator’s fixed, mobile and IPTV channels. AsiaInfo reported that China Telecom is generating around $170 million in revenue per month from its B2B digital services collaboration platform.
China Unicom is another O2P customer. Tiller said an operator in Europe is trialling the platform but wouldn’t disclose its identity.