OTT – an unstoppable disruptive force that should be embraced
The consumption of content in both the consumer and business space has been completely changed by the arrival of ubiquitous internet access, and unheralded levels of affordable bandwidth.
As prices have fallen and usage caps have either risen or been abolished, use of the internet has transitioned from an IT function to that of a utility service in a par with electricity, gas and water. User perception is the same, says Avi Kulshrestha, industry head – Communications Media, Entertainment Europe & OEM Global, Infosys – they expect internet access and their customer experience to be as transparent and simple as turning on a light switch.
The rise in over the top (OTT) services has created a multi-billion-dollar industry, driven largely by new entrants and challenger brands that have disrupted everything from conventional telco carriers to established broadcast networks. However, while new entrants are delivering software-driven services to users, it is still the physical networks responsible for carrying this ever-growing and costly traffic, without necessarily sharing the financial spoils.
Across both consumer and enterprise customer bases, there has been a concerted price war over the last decade that has driven last-mile bandwidth prices down to historical lows. This was initially made possible by large volumes of cheap dark national and international fibre in the market, devalued and written down as original owners failed amid the dot com collapse. Telcos were able to buy additional bandwidth for cents on the dollar, allowing them to slash broadband and leased line prices and commoditise the connectivity market.
The cheap dark fibre has now been filled and new dark fibre is being laid at much higher current market rates. To support the appetite for OTT services today, telcos now face significant operational and financial strain to add bandwidth to user services.
At the same time the service revenues for OTT, as with earlier internet service offerings, largely bypass the underlying telco or ISP. A premium internet “express lane” for OTT services and two-tier traffic management was seen as a way for telcos to tap into OTT revenues. However, legislators and net neutrality groups have blocked these efforts.
Today, telcos continue to shoulder the financial and infrastructure burden of a bandwidth-rich internet service, while OTTs reap financial returns expected to exceed $60 billion by 2020. The problem is that while the uses for broadband have changed substantially over the last decade, established telco business models have largely failed to evolve in step with user expectations and consumption models. In many cases, they are the same businesses they were 20+ years ago.
Nonetheless, the telco sector has to adapt and change in order to find balance with the OTT sector, which is not going away.
Embracing the OTT sector and welcoming them into the core network is the first start. Doing so means that, for audio and video streaming services, content can be cached, significantly reducing the burden on expensive WAN links. However, in transitioning the core network to more of a content delivery network, telcos also need to rearchitect physical infrastructure to be more agile, more software definable and ultimately, more automated.
Using AI to handle routine actions not only frees up engineers, but it cuts the time needed to do things. Operating at machine speed can mean activating a new line takes seconds rather than hours or days. Software defined networks mean that physical provisioning or reconfiguring of network segments to alleviate congestion can be done the moment a traffic threshold is met, not when someone has time to visit a cabinet.
Telcos have a long-term challenge ahead to tap into OTT revenue streams, either by partnering or by launching OTT services of their own. In the meantime, they need to become leaner and meaner. Able to reinvent themselves and act like a disruptive new technology challenger, rather than be locked into long-term business models defined by fixed infrastructure and slow time-to-market.
The author of this blog is Avi Kulshrestha, Industry head – Communications Media, Entertainment Europe & OEM Global, Infosys
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