A recent market report – OTT Media Services Consumer Survey and OTT-CSP Partnership Study – commissioned by telecoms and media software and service provider Amdocs and compiled by research company Ovum – charts their development and explores the mutual benefits the alliances provide.
Based on a survey of over 4000 consumers, thirteen communications service providers and twelve over the top (OTT) players across India, the Philippines, Singapore, Australia and Thailand, Ovum found that the number of telco OTT partnerships grew in every region of the world between the third quarter of 2018 and the first quarter of 2019. Growth was particularly high in Latin America (up 36%) and the Middle East (up 32%) ahead of Europe (24%) and the Asia Pacific (up 19%) where the number of existing carrier-OTT arrangements was already much higher.
Those collaborations take multiple forms, mostly tariff bundling whereby OTT subscriptions are either fully (hard bundling) or partly (soft bundling) subsidised by the carrier at an agreed wholesale price and bolted onto the customer’s mobile or broadband account charges (bolt-ons).
An alternative approach relies on the OTT service being incorporated into the TV/video service operating under the carrier’s own brand, usually via a set-top box (STB) or pay-TV interface. Offers that do not count data consumption consumed when accessing OTT services as part of the bundled cap are also widespread. That strategy involves data costs being wholly or partly subsidised by the carrier, or the carrier offering a flat-fee data plan for one or more OTT services on a zero-rated or unmetered basis.
Benefits from both perspectives
Both sides of the agreement see significant value in their partnership arrangements. OTT service providers cite many reasons for partnering carriers, most commonly the opportunity to expand content distribution and break into new markets. Bundling with mobile, rather than with fixed broadband, services are most likely to give OTT providers access to new subscribers they seek, however. In four out of the five markets surveyed, the MNOs allied with OTT video providers account for at least 99% of mobile subscribers in that territory. In contrast, coverage of fixed broadband subscribers’ averages 81% across Australia, India, the Philippines, and Singapore, and drops to just 9% in Thailand.
OTT providers also acknowledge the benefits of carrier billing, joint marketing, price subsidisation and network quality of service (QoS) guarantees. Indeed, carrier billing is generally the most popular method of revenue sharing within OTT partnerships, underpinning 63% of commercial agreements on aggregate across all five countries. Those figures were particularly high in Thailand (100% in the case of sole OTT partnership participant AIS), the Philippines (92%) and Singapore (77%).
From the opposite perspective carriers appreciate OTT partnerships as a way to boost their average revenue per user (ARPU) and acquire/retain new subscribers, although not all reported being able to conclusively link OTT service bundling to improvements in either one of those metrics. Content distribution deals are also judged necessary in driving MNO customers to consume more (billable) data, as well as promoting the benefits of upgraded network infrastructure (increased 3G/4G capacity, for example).
What others prize most is the ability to value-added services on top of basic telecommunications connectivity, widely considered a vital aid in helping to reverse the continuing revenue declines caused by lower fixed-line telephony and mobile data fees impacted by downward price and regulatory pressure. But while many MNOs perceive bundled OTT content as a good way to differentiate their services from competitors, this is becoming increasingly difficult as OTT providers partner multiple carriers rather than sign exclusive distribution agreements, especially in mature markets such as Australia.
Challenges still to be overcome
Despite the numerous advantages associated with a joint approach to digital content access and distribution, carriers and OTT providers acknowledge there is still room for improvement. Technical, as well as commercial challenges, maybe hampering closer co-operation for example, particularly when it comes to integrating the two parties’ respective back end systems.
MNOs often rely on propriety, process-heavy integration methods which are slow and resource-intensive to implement and adjust, with little commonality from one carrier to another. They can also be acutely sensitive to security issues, and fear that data breaches may ensue if they provide OTT players with direct access to their networks through application program interfaces (APIs).
Attitudes to the use of APIs vary considerably from one carrier to another. In some cases, OTT providers may only get access to network APIs only through accredited third-party providers like DOCOMO Digital. Only a relatively smaller number of carriers offer cloud-based open-source API driven platforms that trust OTT and third-party partners to deal with content, distribution, aggregation matters while it handles connectivity and device integration. This is likely to change with OTT services becoming strategically important to the digital services revenue stream for carriers.
Poor customer experience and support are also major concerns, with subscribers often struggling to redeem bundling offers or cancel subscriptions as the two sides of the partnerships bounce queries from one to the other with no clear route to a quick resolution.
Specialist payment service providers can help
Carriers and OTT players risk losing potential subscribers and revenue if they cannot integrate their systems quickly enough to deliver smooth, frictionless experiences that keep customers happy. Rather than have to worry about altering their approach to suit the contrasting ways of doing things favoured by different MNOs, content service providers may overcome some of those integration problems using third party platforms which provide the glue and co-ordinate the API development and implementation overhead on their behalf.
Third-party providers like DOCOMO Digital can help OTT players and carriers quickly set up automated billing platforms that collect revenue through direct carrier billing (DCB) arrangements for example, whilst also providing support and dispute resolution services that handle customer cancellations and refunds.
In its report Embracing payments as a platform for the future of mobile money published last year, the GSMA highlighted the role that is emerging “payments as a platform” services could play by developing interoperable APIs which sellers of digital content, payment service providers and carriers can use to build trust between the various stakeholders and promote higher levels of consumer engagement and transaction volumes.
Carrier-OTT partnerships are already on a firm footing but refining their services to keep subscribers coming back for more in the face of stiffer competition is needed to help them continue to proliferate and prosper going forward.