Love affair with OTT apps hurting telecom providers

With internet connections growing exponentially, the degree of separation between netizens has shrunk dramatically. Who needs international dialling when over the top (OTT) players such as WhatsApp, Google, Skype, Viber et al. are available at your fingertips! OTT services provide audiovisual content that is accessible on a variety of devices for free or a nominal charge. Staying connected has never been easier or cheaper.

Revenue shift

Why this sudden surge of OTT providers? The explosion of e-commerce has triggered a shift of revenue in the marketplace. Telecom companies have been unable to benefit from the digital content and advertisements that travel over their networks. Instead, that value has been largely captured by newcomers that have built successful business models “over the top” of the telecom service providers’ networks. Facebook recently bought WhatsApp (which provides free messaging services to 450 million users) for a whopping US$19 billion.

Telecom operators are losing sleep as internet communication replaces voice calls and short message service. In a survey of telecom operators conducted by mobilesquared, 100% of respondents believed that at least 11% of their customers will be using OTT services by 2016 and 42% believed that over 40% of their customers will be using such services.

The reasons are simple – economics and comfort. OTT providers have leveraged their services as “free” and subscribers are choosing to use these third party applications instead of those offered by the network operators, which involve a substantial cost. Ease of usage adds to the freebies’ allure. It is a win-win situation for the subscriber.

Pooja Dodd is the head of the trademarks team at LexOrbis where Meenu Maheswary is an attorney.