Over-the-top challenges

Over-the-top challenges

Faced with a deluge of content providers piggybacking on mobile operators' networks without incurring any of the costs, telecom experts warn that it's time to get a handle on the OTT phenomenon before it's too late. By Suchit Leesa-nguansuk and Srisamorn Phoosuphanusorn

A man simultaneously surfs for content on his mobile phone and laptop. Consumers can access over-the-top content through several internet-connected devices. KRIT PROMSAKA NA SAKOLNAKORN
A man simultaneously surfs for content on his mobile phone and laptop. Consumers can access over-the-top content through several internet-connected devices. KRIT PROMSAKA NA SAKOLNAKORN

The past year has seen several over-the-top (OTT) service launches in Thailand, signalling both the mass adoption of internet-based services and a marked increased in OTT off-net termination for mobile operators, or calls made with other networks.

Local mobile operators have experienced a drop in messaging revenue as a direct result of OTT clients on smartphones.

Telecom industry experts warn that it's time for mobile operators to find a way to fight back and respond quickly to the challenges, opportunities and threats of OTT services.

On the other hand, mobile operators will have to be more open to partnering up with OTT players to offset the decline in revenue by tapping into OTT opportunities.

Policymakers, meanwhile, are planning to enact policy measures to govern OTT operators, as internet-based services are rapidly pervading all segments of commerce and society, affecting and disrupting traditional industries in ways that are difficult to control.

What does OTT mean?

OTT stands for "over-the-top," the term used for the delivery of film and TV content via the internet, without requiring users to subscribe to a traditional cable or satellite pay-TV service. Content from a third party is delivered to an end-user with the ISP simply transporting IP packets.

OTT services are commonly divided into two types: free platform (advertising-driven) and paid platform (monthly payment and pay-on-demand). The services include mobile VoIP apps, mobile instant messaging, online video and TV and online music.

Consumers can access OTT content through internet-connected devices such as smart phones and smart TVs, set-top boxes, gaming consoles, and computers.

In Thailand, free OTT platforms includes Line TV, YouTube, and some digital TV channels that broadcast their programmes via OTT platforms such as channels 3, 7, 8 and Workpoint channel.

Paid OTT platforms include Netflix, iflix, Hollywood HDTV, Primetime, AIS Play and Truevisions Anywhere.

The rise of OTT

The rising popularity of OTT services is driving down average revenue per user for mobile operators, which are being forced to rethink their business models and reinsert traditional telecom services into the communications equation.

The popularity of increased viewing of OTT services such as mobile VoIP apps, mobile instant messaging, online video and TV, and online music have emerged as fruitful alternatives to traditional mobile service offerings due to the availability of wireless broadband and stronger base of smartphone users.

A report conducted by the NBTC found that free OTT service providers in Thailand had earned combined advertising revenue of 2.16 billion baht in 2016, 70% (1.66 billion) of which stemmed from YouTube.

The report found the three most popular types of OTT content were mass content such as cinema series; niche content including sport, cartoon and cuisine; and user-generated content such as on Facebook, YouTube and Instagram.

Mobile operators need to react

Mobile operators must quickly adjust their business strategies to enrich their content offerings and deliver more value and convenience to their subscribers.

Col Natee Sukolrat, chairman of the broadcasting committee of the National Broadcasting and Telecommunications Commission (NBTC), said both free TV and pay-TV operators must adjust their strategies to deal with rapidly changing viewing habits.

Mobile operators must start to realise that partnering with OTT players is the best way forward. This approach offers advantages to both parties and provides an opportunity for combined future growth.

"It's time for TV operators to broaden their content offerings from the traditional TV distribution platforms of terrestrial, satellite and cable to all digital platforms, especially mobile," he says.

TV operators should deepen their co-operation or partner with OTT firms to accelerate their content and service offerings.

Somchai Lertsuthiwong, chief executive of Advanced Info Service (AIS), says that OTT operators are reaping the benefits from mobile operators' networks.

But he says AIS does not consider OTT players as the company's enemy. Instead, the company is looking to work more closely with OTT operators on a win-win basis to better serve customer demand and drive data usage and revenue.

Alternatively, mobile operators can monetise the partnership via advertising and marketing, selling content or charging for a monthly subscription.

Also, AIS has adjusted its business strategy to overcome rapidly-changing consumer behaviour.

Mr Somchai says wireless broadband connectivity provided by mobile operators has facilitated OTT services instant access to a global network of services without being required to pay any service fee.

"Mobile operators must now act like OTT operators, providing their own-developed content and applications through their mobile platforms to serve various groups of customers," he says.

Unlike operators in developed markets, Mr Somchai says that mobile operators in Thailand still lack in-depth information about their customers.

Even AIS has had an established data analytics business unit for years, he says. But it's still not sophisticated enough to reflect the digital life of customers because its main focus has been on customers' voice and data usage, without providing a real understanding of their behaviour, says Mr Somchai.

Prisana Ratanasuwanasri, senior vice-president for postpaid business of Total Access Communication (DTAC), says that apart from music streaming, video traffic streamed over the internet is becoming increasingly relevant to Thai consumers as it provides interactive content.

Video has emerged as the medium of choice, not only for peer-to-peer content sharing and broadcast media, but also for brand-to-customer communications in both business-to-consumer and business-to-business markets.

The fragmented landscape of mobile video has increased availability for digital video service platforms ranging from YouTube channels to Facebook/Instagram user-generated videos and live streaming.

To serve the growth in OTT apps and content platforms, Ms Prisana says DTAC is offering a series of unlimited data tariff packages to enable customers to access the internet with data speeds on mobile devices that are not throttled.

Kittinut Tikawan, group chief commercial officer of True Corporation, says the company believes Thai consumers are increasingly turning to streaming media devices to view content over the internet.

True is on the verge of partnering with potential OTT players in order to leverage its strengths to provide innovative services.

In November last year, True set up a new business unit with the expressed purpose of providing digital platform service. The development is part of the group's policy of moving towards convergence by offering bundled services, ranging from its fixed-line broadband to mobile broadband and content.

Weeradej Panichwisai, research manager for the telecommunications group of IDC Asia/Pacific, says local mobile operators must extend their presence into digital lifestyle services, instead of simply providing traditional telecom services.

Despite the positive signs for mobile data revenue growth in Thailand as operators' revenue from mobile data services was equivalent to voice revenue in 2016, revenue growth from mobile data services could not offset the huge losses in voice revenue, which would have enabled them to achieve significant increases in overall mobile revenue.

Mr Weeradej says IDC expects Thailand's mobile data usage to reach 3.5 gigabytes per user per month in 2017, up from 2.7 GB in 2016.

Users access data through a variety of platforms, including mobile and fixed-line broadband and Wi-Fi.

"Mobile operators need to find new revenue sources from both individual consumer and enterprise segments to sustain their revenue growth," he says.

The popularity of OTT services such as social networking media and mobile messaging over the past few years has posed a credible and measurable threat to operators' revenue, especially international roaming service revenue.

Mobile operators are accelerating OTT investment to jump into linear TV, music and movies this year as they strive to seek new revenue streams, after operators rolled out their 4G networks nationwide.

Mr Weeradej says multi-screen TV is gaining mass adoption and becoming a must-have for pay-TV service providers worldwide as consumption continues to shift to digital platforms.

Mobile operators, nevertheless, have a unique opportunity to lead the OTT market as they own the entire range of wireless networks, from home broadband to mobile broadband and Wi-Fi. Operators also can offer OTT services in various and attractive bundled packages.

Mobile operators can develop their owned OTT applications -- like AIS Play IPTV service, True Corp's H TV IPTV and DTAC's music streaming service -- that require high data usage and subscription fees.

Mobile operators can collaborate with OTT players for a win-win solution through a service bundling or service integration strategy.

Mr Weeradej says a recent move by AIS to partner with HBO to broadcast the US studio's movies via its IPTV service as well as teaming up with Google to be the broadcaster of the Google Chromecast service will change the mobile competition landscape, reviving IPTV and posing new challenges to other video streaming and cable TV operators.

"This could lead to a real convergence era where fixed and mobile broadband services are integrated to take more money out of consumers' pockets," he says.

"Content is now king. It's increasingly working its way to the forefront of all digital service strategies as it becomes a crucial element to generate more revenue and add value to mobile operators' products and services," says Mr Weeradej.

It's time to govern OTT operators

Not only Thailand but most countries worldwide are facing challenges. The rapid growth of OTT services is seen as difficult to control, especially content that is not required to be filtered by any state agencies.

OTT operators who ride on mobile operators' networks are not required to pay any licensing fee or corporate income tax to the Thai government, while digital TV operators and pay-TV broadcasters must be licensed by the NBTC and paying an annual license fee.

Col Natee says it's time for the NBTC to implement policy measures to govern OTT services, including a licensing system.

Singapore is the only country requiring that OTT operators apply for a broadcasting licence, he says.

Consumers increasingly see OTT services -- such as mobile VoIP apps, mobile instant messaging, online video and TV, and online music -- as alternatives to traditional offerings, posing a critical challenge to mobile operators' call and data revenue, thanks to greater broadband connectivity that provides instant access to a global network of services and applications providers.

Col Natee says the planned control measures will affect OTT services with more than 1,000 viewers.

But he says it is difficult to classify groups of broadcasters under the current digital convergence platform as there has been no clear definition of content on broadcast and telecom networks.

"Without proper policy implementation in Thailand, it will create worse impacts to the ecosystems of the broadcasting and telecom industries, as internet-based services are rapidly pervading all segments of commerce and society -- affecting and disrupting traditional industries and society in ways that are difficult to control," says Col Natee.

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