Local telcos and ISPs, be they wireless or fixed, know they have to move up the value chain and be more than just a dumb pipe. But the threat of over-the-top (OTT) players; and even a protectionism mentality; throw a spanner in the works of an already uphill task. Cat Yong reports her findings.
To say that telcos have to decide how to approach OTT players is an understatement. Having emerged in the early 2000s, bigger established OTT players like Google and to lesser extent Facebook, have encroached upon telco space, by offering communications services that ultimately compete with those offered by telcos themselves.
They have literally blurred the lines between Internet players and telco players – they are both now trying to be each other, most times without even realising it.
But while OTT players enter the communication services arena, young, fresh and hungry, telcos tend to be the opposite, having been around the block for much, much longer. OTT or Internet players also aren’t subject to the same regulatory scrutiny as telco players, un-leveling the playing field in their favour as they enter and (innocently) topsy-turvy almost everything in their wake, by completely redefining issues like privacy, customer data and location-based services.
One of the more progressive telcos, or rather the digital unit of the biggest telco in the country, Axiata Digital, recognise what it means for themselves to offer Internet services. Its CIO, Karan Henrik Ponnudurai said, “There is opportunity and threat in the Internet world, and we are aggressively pursuing an Internet-based approach in several business areas.”
While Google went all out into telco with initiatives like advocating net neutrality, building experimental broadband networks and creating a mobile operating system from scratch, there are OTTs doing things on a smaller scale that does impact the telco industry as well.
There is currently a trend is emerging in Malaysia especially this year of 2013, that requires a bit of ‘taking of the bull by the horns.’
Richer services, not richer telcos
In the space of five months, as many as three IP messaging or OTT messaging providers have made announcements specifically for Malaysia. The fourth event was a global announcement by Blackberry that its popular Blackberry Messaging (BBM) application is now available on iOS and Android phones for free.
The other three announcements by WeChat, LINE and Kakao Talk for Malaysia are about their respective IP messaging applications intensifying local efforts. At time of writing, at least WeChat and LINE have announced intentions to be more than just messaging clients – they want to be platforms for users to consume more applications and content.
Jin-Woo Lee, General Manager of Global LINE Business Office had said in a press release, “We expect that 2013 to be a year of transformation for mobile messengers to become a mobile platform for content distribution.” He further added that LINE has already established partnerships with many local businesses, corporations as well as well-known personalities to grow its local content and provide a more enriching user experience.
It may not be the case later on, but as far as we can tell currently, all three of these services have made headway into Malaysia. They also promote and brand themselves with businesses, celebrities, handsets and basically every player in the ecosystem that makes sense, except telcos.
All promotions being done are by the telcos instead. Talk about one-sided.
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| Mike Frausing |
Mike Frausing, General Manager at Acision viewed that basically OTT players like these are using up (telco’s) capacity and on top of that, eating into their revenues. Most OTTs even charge a flat rate for unlimited usage, so there is no real limit to the capacity that OTT applications use, in some cases.
Perhaps worse of all, from the customer care perspective, telcos almost always get faulted if there is an application issue ie. not working.
“The struggle for telcos in my opinion, is they’re trying to answer the question, ‘How do I embrace this? How do I monetise it? How do I control it?’
“Either I build the most efficient network with the biggest pipe for the lowest cost, and that’s all I do. Or I build the best network with the biggest pipe, with best customer experience, so I bring the customers back in to me,” said Frausing.
Frausing spoke of an initiative by the GSM Association branded as Joyn, that tries to stem the flood of users towards IP messaging services. Joyn is a rich communications service (RCS) that upgrades current circuit-switch voice and messaging technologies towards being supported by IP.
It is meant to combine voice and SMS with functions like instant messaging, live video sharing and file transfer across all devices and networks. In other words, it could level the playing field with OTT players.
Standards for RCS are not finalised yet, but with an industry-wide ecosystem of RCS solutions that are interoperable, solutions as whole platforms can really start to take flight and create better ‘stickiness’ – customers would want to stay around longer at a ‘portal’ or service that has content, applications and value-added services that they are interested in.
If rich communication services could be viewed as a unified messaging platform, then the idea is to also create ‘hooks’ in the platform and get OTT players to integrate with it.
“A number of OTT players have open APIs, but a handful also don’t.” Open APIs basically mean that two services or applications could integrate together and be interoperable. Frausing shared that he sees Facebook as a foundation for telcos to build the entire ecosystem, because it has an enormous amount of users. Facebook’s platform offers open APIs for other social apps to be developed on it,
In fact, a lot of content providers and services tend to gravitate towards Facebook, when they want to add an interactive feature to what they already have. For example, Spotify which offers music-streaming service, integrates with Facebook to allow users of both Facebook and Spotify to share their playlists.
Frausing emphasised, “But what we feel is important as Acision, is this is now ready for telcos to do, to embrace OTT players and take more of a leadership position to really pull this all together.” He also believed that OTT players who aren’t open today, would begin to play nice with telcos by opening up their web APIs.
Threat from all quarters
Local telcos are taking the friendly approach.
DiGi’s tagline reflects how they are geared towards delivering Internet For All, and to deliver best value for their customers, they have close collaborations with Internet players like Twitter, WhatsApp, Facebook, Evernote, Skype, music-streaming service Deezer… somehow, I don’t think they would stop at just that, and they have already deepened engagements with these partners in order to deepen engagement with their subscribers.
Celcom isn’t far behind, having set up a dedicated team in Group Digital Services. CEO Dato’ Sri Shazalli said, “We are already exploring more avenues with new start-ups from our parent Axiata and the presence of OTT players, which compel collaboration and partnerships to offer value through our enabling channels.”
Shazalli added, “You will see us work more closely with OTT partners or create similar types of experiences to meet customers’ shifting needs.”
Service providers are moving towards a re-pricing of packages and plans based not on traditional minutes and bytes, but based on the applications they want to use. For example, DiGi offers unlimited WhatsApp usage and Facebook service, for a certain monthly fee. This is a strategy which they apply to other applications, as well.
The MVNO opportunity
OTT applications like Facebook, Viber, Skype and so on, are driving the masses to using the Internet. It is their brand names that stick in their minds and steal limelight from telcos, but not for lack of trying on the latters’ part.
Celcom for the longest time have talked about segmenting customers to be able to target relevant products to relevant audiences. They were one of the first telcos to begin the mobile virtual network operator (MVNO) business model, when they realised that enabling other ‘telcos’ to target all the different segments of Malaysian society, was more efficient than them doing it themselves.
To date, they have the largest number of MVNOs in the market, enabling over 5 or 6 ‘telcos’ to serve the different niches.
That leaves Celcom to focus on their core business, and not become too diversified in terms of branding to make themselves appealing to all the Ah Kows, Muthus, Alis and many more in Malaysia. They have become a common infrastructure for all their different MVNOs, letting the headache of differentiating themselves in terms of branding, products & services and pricing, fall upon MVNOs.
From what that has been related so far in this feature story, telcos have had to ensure that their pipes’ capacities are used in ways that earn them optimal revenues. In short, OTTs are not doing them any favours, while MVNOs allow telcos to optimise their capacity without de-focusing. (Also read MVNAs: Voice of the little telcos on page 58)
How shall they approach fibre though? And what about LTE when it comes around?
LTE moving forward – up for a rethink?
Eight spectrum licensees for LTE service, at a glance, does seem a little excessive. Just 20MHz blocks of spectrum for each, is overwhelmingly not.
.jpg "RIch telco, poor telco Pt. 1 2") |
| Rob Bratby |
Managing partner of law firm Olswang, Rob Bratby observed, “From an external perspective, it does appear you have a lot of LTE players in a relatively small market. If there are too many players, you’ll find ROI isn’t as good. So you’d tend to invest less and consumers don’t get as good a service.”
Olswang partner Ian Ferguson also chipped in, “It’s hard to make a business case out of small blocks of spectrum.”
There is expectation from regulator MCMC, for the licensees to share infrastructure or spectrum, as this could reduce deployment costs, while sharing spectrum blocks allow for realistic business models to emerge. A number of sharing deals were inked last year, and on paper, the idea is appealing, because it reduces capital expenditure for the players. But, it would be a nightmare to execute.
Ferguson shared his observations of a similar scenario in the U.K. “(Because of small spectrum blocks) what we have seen in other markets, is there has been consolidation, or network sharing arrangements to defray the costs.
“Previous attempts in the UK markets didn’t work, because they tried to throw legacy arrangements and sharing arrangements into the pot.
“When you look at Malaysia, if you have problems with your existing network, don’t try to solve them by saying, ‘We’ll do network sharing and chuck all the problems into the pot, and hopefully it all goes away.’ Because it doesn’t. So as you go forward, be aware that network sharing is not the solution to all your current problems.”
The individual problems of individual telcos could worsen instead, and the best practice before entering any sharing agreement is to sort them out first, and bring a fresh slate to the table.
According to Ferguson, there are four telcos in the UK market now, but they offer services on two networks.
– To be continued at Part 2-
