Dumb pipes becoming smarter
2013 will see telecom pipes to add greater value to the content that they carry between smart devices. It will probably see the beginning of collaboration between over the top (OTT) players and telecom operators to convert telecom networks from mere connectivity pipes to smart pipes. In addition Deloitte predicts that operators will identify new revenue opportunities in verticals such as energy, healthcare, banking, advertising, etc. to make a range of business-to-business (B2B) services available to a larger number of customers
Telecom networks from dumb to smart pipes
So far telecom operators do not differentiate between the content third parties are routing on top of the data network of the operators, making the network nothing but a dumb pipe. With collaboration of network operators and third party service provides, these dumb pipes can be turned into smart pipes, representing a substantial market opportunity for both operator and the third party.
OTT applications and services have major implications on the business models of both fixed and mobile network operators. Network operators are not in a position to compete with the globally-established brands such as Apple, Microsoft, Amazon and Google. Voice (via Skype, GTalk) and SMS (via WhatsApp, iMessenger, Blackberry messenger) have been delivered over the top, which directly impacts the revenues of operators. An emerging trend of bundling popular applications with smartphones is also being observed in India. E.g. Samsung Galaxy Chat B5330 comes with ChatOn messenger, Nokia Asha 311 offers bundled apps such as Angry birds, WhatsApp, Facebook, Twitter.
In 2012, as per analysts, about 30 million Americans paid for VoIP service and the VoIP industry is expected to generate about $15.4 billion in revenue.52 VoIP via a mobile phone has been technically possible since many years but regulatory policies had restricted the same in India till now. But after the approval of National Telecom Policy 2012, VoIP has been fully legalised. Routing calls over LTE could reduce demand on the cellular network and catalyse the disappearance of the voice tariff. However, high quality VOIP is likely to be available only in LTE covered areas, which will still take some time to pick-up in India.
OTT services are attractive to customers as long as they have good reliable underlying data connectivity. Hence, indirectly OTT providers depend on the quality of service (QoS) provided by the network operators to facilitate a better user experience for the customers. Skype voice calls or voice & video calls, for instance, are only appreciated by a user if he gets high quality real-time experience without lag and interruption.
After years of fighting over-the-top delivery of communication services, network operators will need to modify business models and consider OTT providers as customers of their services. Operators will need to partner with OTT providers and launch innovative plans, which attract customers towards the data plans. For example, Enjoy Unlimited WhatsApp & Facebook at just INR16 per month! OTT players will need to share the burden of network upgrades (to support the increasing multimedia traffic) and infrastructure rollouts (in smaller cities and rural areas) with operators to mutually benefit from the increased coverage, better QoS and hence user loyalty. Especially to cater to the enterprise segment, OTT players will need to tie-up with network operators to provide high availability, strong security, and other QoS parameters that are pre-requisite for serving enterprises. Such arrangements will help telecom network, erstwhile considered as a dumb pipe, to become a smart pipe.
Telecom pipe from smart to smarter
Networks are no longer confined to communication services offered by telecom operators but are increasingly used by third parties to offer collaboration and location-based services, presence, customer analytics, financial services, etc. The knowledge that operators have about their customers coupled with their skills and assets in identity and authentication, billing, device management and customer care, allow the operators to position their ‘networks’ as ‘enablers’ of digital operations.
In the consumer markets, machine-to-machine (M2M) growth is driven by wireless Internet connectivity being built into an increasing number of consumer electronics. As growing number of devices from various industries such as automobile, healthcare, education, governance, retail are connected to the Internet, seamless and automated flow of data and services in real-time is becoming critical. Telecom networks are becoming the backbone of several industries as the operations of these industries increasingly depend on the reliability of robust telecom networks.
The implementation of smart homes, smart cars, smart grids and smart city will add value to the telecom networks as they will carry smarter applications and services. Pilot projects on smart grids are underway59 and deployments of smart city60 and smart homes61 have begun in various parts of India.
Modern networks allow access to more sophisticated applications and services (HDTV, interactive gaming video on demand, and increasingly Web 2.0), which in turn calls for even more bandwidth. Although this phase has just began, as more and more content gets digitised and as the palate of younger generation improves for applications, Deloitte expects continuous growth in demand of data services. Similar trend is shown by increasing non-voice revenues from 13 to 20% of the total mobile revenues in the last five years