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communication & media

OTT ADVANCES VIA "SERVICE-STACKING"

5/2/2015

2 Comments

 
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Horizontal Service Chain
In the early days, when mobile devices are not 'smart' and internet accessibility was limited, these devices and their respective VAS providers provide the critical 'service-chain' in order for customer to receive full telecommunication service experience (e.g. content delivery, voice mails, call chargeback, etc.). These VAS services and sales of handsets creates additional revenue to telcos. Partnership with mobile device manufacturer have not only allowed telco's to earn additional revenue out of handset sales but also created a steady revenue stream by packaging voice, data and messaging services into contracts. In return, handset manufacturer gain access to local markets without needing to build expensive retail presence and cut short the sales and adoption cycle. 

Technology Forces Breaks Service Chain
As smart phone technology and internet services evolved, this service-chain by telco is gradually broken. The emergence of IP-based data access as the dominant form of service consumption enabled OTT players to dominate. This is possible as services can now exist in a higher plane than that of the transmission and access network - decoupling of the service layers in good old OSI-fashion. 
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To VAS or not to VAS
Although OTT have long existed and was mostly confined to desktop/laptop computing, the threat to telcos came to light when mobile handsets themselves wield the technology and communication capability required for OTT players to offer disruptive telco services. The OTT players are now dominant in voice, video, messaging and other familiar telco revenue territories. The telco-VAS alliance is weakened as OTT continues to erode their operating margin.

With fundings and revenue opportunities, the OTT industry continue to attract new players. Now, you can almost find an OTT service provider for each class of services offered by a traditional telco (a short list is as shown in the diagram below). The challenge was not so much the entry of the OTT themselves but the value driven business model that they are pursuing by taking advantage of the internet. 
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OTT Service Stack 
OTT services are not a single stack of services. It is a combined complementary stack of technology advancement. The OTT service stack consists of:
1. Communication Devices HW Platform - the one directly above communication service stack 
2. Operating Platform - the one above HW device stack 
3. Device Independent services - the one above the Operating platform stack
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In order to drive more traffic to OTT services, they have to focus on attracting large user base by value adding heavily. Their revenue model is also mostly asymmetrical in nature in that they cross subsidize one product in order to attract subscription or revenue in another. Some times, the OTT service providers rely only on advertising revenue.  Telco needs to understand the impact of OTT service stacks.

As-a-Platform or As-an-Ecosystem
Today, the OTT themselves have evolved and have mostly settled in either a platform (OTTP) or ecosystem (OTTE) format. Some have a combination of both (OTTEP).

Apple as OTTEP
Take for example, Apple's combined ecosystem and platform approach. The apple ecosystem is an engine that drives revenue from both the Apple Services platform and Apple Hardware platform stack but offers Apple Software stack for zero direct fees. In other words, Apple is giving away its software platform in order to drive sales at the top and bottom stack of its ecosystem. Some of these software services are in direct competition with Telco services - e.g. Facetime.  As a device manufacture, Apple also allow other device independent services to operate atop its software platform e.g. Facebook and Whatsapp. More to the appeal of Telco is the revenue opportunity by "subscribing" into the Apple ecosystem model - hardware sales & data subscription/consumption. Less important is the extent of Value Stacking and Platform establishment by Apple and the amount of control that Telco will cede to Apple's ecosystem. The irony here is, each devices that the telco sells potentially erodes the revenue from telco services.  
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Telco willl continue to focus on its core capabilities that is providing connectivity and access. While their focus is still fixated on current blockbuster product/services, their value proposition will be limited as they choose to operate within their service-chain boundary.  The digital world requires telco to rethink their role within the industry and along the service stacks. There is already evidence of their eroding role as the cost of delivering data services is not equaled by what they have earned from selling data.
2 Comments
Digital marketing company in Coimbatore link
4/27/2020 12:58:41 am

Very clear explanation. you wrote it early. This platform become more popular now. So much of OTT channels available there in market. But now netflix become master of all.To promote your ads in OTT Platforms visit cloudi5 tecnologies. https://www.cloudi5.com/digital-marketing-service

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Traffici5 link
8/6/2020 01:52:04 am

Traffici5 is the digital marketing company in coimbatore. Traffici5 offers many digital marketing services like Social media marketing, PPC, designing in landing page

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    Author

    Davis Chai is an Enterprise Architect and has special interest in the communication. His career involvement in the industry informed his work and allowed him to contribute to this blog.

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