June has been a very exciting month for us at Chetan Sharma Consulting. We took our Mobile Breakfast Series first outside Seattle to Atlanta and then, last week, outside US to London. Both places, it was very well received and we thank all the partners, speakers, and attendees who helped us out. On Jun 29th, we hosted our first European Mobile Breakfast Series at Wayra, Telefonica in London. My thanks to the Telefonica team for hosting us and making the whole experience worry-free. The topic of the discussion was Operator/OTT – The Way Forward. Regular readers would remember, we did a Seattle Breakfast Event on the same topic earlier in June. Wanted to get the European flavor of the same hot topic.
Operator traditional revenue streams are under threat esp. voice and messaging. Access margins will continue to stay under pressure. OTT players are coming in fast and furious and it is not just the big ones like Google but also players like Whatsapp, Voxer, Viber and others. How do operators play in the new landscape – lessen the decline of their traditional revenues while investing in new areas that improve their overall margins and revenues. Do they play the role of an enabler, a utility player, or become the OTT player themselves? In a software-driven world, how do they stay nimble? On the flip side, what are some things that operators can provide to the OTT players that make them successful, take them to the market quickly and maintain a long-term healthy and mutually-beneficial partnership? Operators still generate 70% of the global mobile industry revenues, so they are an important part of the chain but how do they ensure they have an equally relevant share in the profits. The panel will discuss how operators and OTT players think about the challenges and the opportunities, the competition and the coopetition.
To discuss the topic we had excellent panel with Jamie Finn, Director of Product Design at Telefonica Digital. This is a new unit within Telefonica that is doing some great work (recently released TU Me – a messaging application to compete with other VoIP/IP messaging apps) and Jamie is an integral part of the team.
Jamie was joined by Dominique Rougié, Director, TV Interactive Services & Media, Digital Innovation, Orange Group. Dominique has an interesting perspective since he is responsible for services across the three channels – online, cable, and mobile. From the OTT side, we had Andreas Bernström Chief Executive Officer, Rebtel. Rebtel is the second largest VoIP player after Skype with over $80M in revenue slated for 2012. Finally, we had Frank Meehan who has been doing OTT for a long time first at 3Uk and then at INQMobile. Some of the earliest OTT integrations of Skype, Facebook, and Twitter came from his team.
Some highlights from the discussion -
- There is this myth perpetuating that operators are just going to fall over and die. AT&T has been around for 100 years and it is likely that they will be around for another 100. These companies will obviously morph and find their relevant role in the ecosystem.
- It is likely that the operator business will segment into commodity access business and VAS business that generates more revenue.
- OTT players need operators more than operators need OTT players.
- The biggest challenge for the operators is internal – getting organized, giving the new group autonomy to operate and innovate independent of the parent organization.
- Operators still have a lot of fat. Need to streamline.
- It does require a different mindset from the operators to operate in the OTT world – embrace beta launches.
- There are great opportunities for the operators in billing, payments, and commerce. Right now the process is cumbersome, can be made much simpler. It will help the OTT players as well.
- Right now NFC traction is low, maybe Apple’s inclusion of NFC in the next rev will spur things up?
- Rebtel is exploring transfer of credit and money between accounts as some of the new features for their service.
- It less about technology and more about talent. How do you get the brightest people to work for your organization. 17 year olds can bring in lot of energy and drive to make something big.
- Telefonica Digital launched TU Me – a messaging app in 100 days from concept to app store availability. Lot of learning right away – users cared and demanded a Spanish version which was duly built (The company released some figures yesterday – 250K active users in the first few weeks). The lesson is that you got to launch things quickly and iterate based on feedback.
- Telefonica betting big on open mobile devices, essentially a new HTML5 based OS from Mozilla.
- For Orange, in working with the OTT players – rev share is the primary business model. Additionally, for some companies, they will also take a financial stake. There is lot of value in operator becoming an aggregator of apps and content.
- There are lot of opportunities for operators in identity, security, and privacy.
- The best way to look at multiple opportunities is take portfolio-based approach. Invest in the best ideas and compete to win.
- Mobile advertising is another big opportunity for the operator though they have been a bit behind the curve in leveraging their assets.
- Operators bring the distribution power to the ecosystem. Have the relationship with the customers and for the right startup/app, they can help tremendously.
- It is clear that a more clear regulatory regime is necessary but relying on regulators to fix some of the problems might be foolish as you will have to wait too long. Regulators on their part need to create an equitable playing field.
- There is lack of consistency in regulations in Europe. For e.g. VoIP regulations vary from UK to France depending on who is launching the service and the competitive dynamics of the market.
- For any new service, you have to first build engagement and get scale, only then can you think about monetization.
I really enjoyed the discussion and audience participation. We now take a break from our Mobile Breakfast Series and focus our attention to our annual mobile executive summit – Mobile Future Forward which is going to be held on Sept 10th in Seattle. We have an extraordinary group of executives who are joining us and I hope you can too.
Until then, have a great summer and see you soon.