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The growth of over-the-top (OTT) services has created a new environment for mobile operators. In the past decade, these service providers enjoyed a relatively easy ride in taking cord-cutting customers from their wireline competitors. But now, OTT apps and services threaten a different war, one of attrition, which leaves mobile operators with customers who want nothing more than a dumb mobile pipe. Can this “OTTrition” be avoided? Can “normal service” be restored? This article will discuss the strengths and weaknesses of mobile operators in this environment and outline some strategies for winning the war.
Innovation and feature parity
A lot of noise has been made out of the speed of Internet innovation, about how mobile operators are lagging behind and need to achieve “feature parity.” Let us step back and look at the whole picture. The remarkable speed of Internet innovation has had five main drivers allowing startups to compete quickly and aggressively:
–Nonlinear business models providing unprecedented upside.
–User acceptance of beta quality.
–Low investment need.
–Short-term revenue focus and an acceptance of unclear business cases.
–Low user loyalty.
These are all very different from the drivers in the traditional telco industry. Mobile operators don’t have the luxury of providing a best-effort service, as telephony is an integral and crucial part of our infrastructure. Likewise, the upfront investment needed for a mobile operator is huge, forcing a long-term view and a focus on subscriber retention.
The question seems to be: How can operators, bound by slower business models, ever reach and maintain feature parity? Will they always have to play catch-up to the Internet players, who can launch new ideas weekly and discard whatever doesn’t work?
Or perhaps the question is rather, should they?
Using the operator strengths
Against the wave of new services from Google, Viber, WhatsApp, Tango and others, the operators have several strong points.
–The phone number as the incumbent identifier on a ubiquitous network.
–A strong customer relationship.
–Ownership of a feature rich network.
–A strong community.
Maybe the most important of these is the phone number and network. While other OTT services may have, at best, most of our contacts on them, the phone (and especially the mobile) is the only communication method on which practically everyone can be reached. While it is easy for most of us to survive a day without Skype, being without a phone will leave us with plenty of unsolved communication scenarios. How else would you call your doctor, your kids’ school or the local council? Not to mention the problems with OTT services when you really need reliability — for example, when you need to call 911.
But even among friends, the OTT players are running into problems since not everyone is on the same service. This gives rise to a situation where people will use one OTT service to reach one part of their network, another OTT service to reach another part, and the phone to reach everyone else. Also, using a mix of identifiers can lead to strange problems, like when the introduction of iMessage had the side effect of sending what was intended as a private message (SMS) to what is often a family device (the iPad).
The ownership of the phone number and control of rich network features gives the operator a strong position in controlling communication, and unlike the OTT players, operators can control the whole value chain from the originating device, through the network, to the terminating device on the other end.
Rather than trying to achieve total feature parity, operators should build on the phone number and select the most important features to cover, and do them better than anyone else. There will always be niche applications and solutions for them, but the strong cooperative environment between operators and vendors makes it possible to launch new ubiquitous services with wide appeal, regardless of which operator the user is on or which technology he uses.
The push to launch RCS and RCS-e shows a very important movement. Operators are jointly using their intelligent cores to provide services to the mass market. Handset manufacturers are implementing clients to go on regular devices, and with the phone number being the subscriber identifier, RCS and RCS-e may fly. And this should be only the first of many initiatives by traditional operators.
A call to arms
Users are easily enchanted by the impression that they are getting something for nothing by the OTT players, and to a certain extent they do. But, even if mobile operators are often infamous for bad customer support, OTT services frequently offer no support at all. Operators should show users the value they are paying for when they use operator services. The promise of quality is something that cannot be held for free.
A lot of the OTT services absolutely have tempting value propositions, but how many features do we really need on a day-to-day basis? If operators prove that they can offer quality services, the small feature improvements OTT can offer will be much less important than the quality and reach operators can offer.
Finally, operators should not expect complete loyalty from their customers. They will go out to try the new and exciting services that are made available to them. In most cases, however, they will be disappointed, by quality, user experience, hidden costs or by the people they want to communicate with not being on that service. Operators can expect their users to come back “home” to the trustworthy and well-known offering of their mobile network.
Operators should be bullish about their position. If they play their cards right, and invest in innovation on their own turf, the over the top players may find the descent on the other side of the summit steeper than they could imagine.
