As communications service providers (CSPs) prepare to serve their customers with ever increasing amounts of big video, the media industry is widely seen as one of the most fertile areas for them to generate revenues from. George Malim, the managing editor of VanillaPlus, spoke to Alastair Masson, the head of Telco Media at NTT Data, to understand where the opportunities lie and how CSPs will harness them
George Malim: Is the emergence of big video – such as 4k and 8k – a threat to operators’ networks because of the bandwidth demand or an opportunity to monetise more effectively?
Alastair Masson: It’s both. If network operators don’t evolve their business model, reflecting the new challenges that big video presents, it will be a threat. If they evolve a new business model, it’s a big opportunity.
There are two primary ways to monetise. Firstly, make consumers pay for improved bandwidth to consume the high definition content from other providers; or secondly, become a content provider of high definition content – enabled by augmented reality – bundled with the connectivity products to improve average revenue per user (ARPU).
The former is likely to quickly become a hygiene factor – if we take millennials as an example, they assume a network that supports their needs. Consumers will develop an expectation and therefore become the cost of standing still for the operator, but if executed quickly could also allow them to offer a premium service to the early adopter consumers. The perception of value based on speed is a short lived one.
The model of every operator having its own ring-fenced capacity for its own customers is an inefficient one. Take the electricity market as an example: one shared distribution mesh that’s used by numerous providers of service. Imagine if each service provider had to lay down its own distribution network? It would be physically messy and without economic viability.
What this insatiable thirst for throughput will force operators to do is collaborate. Connectivity technologies are manifold – whether it’s 3/4/5G, Wi-Fi, WiMax or fibre-to-the-x (FTTx). Increased meshing of networks and incorporation of content edge caching at the service delivery level will help to square the circle of quality of service and economics of implementation and operation. In short, the answer is not pure 5G, it will be a mixed economy of network technologies at the edge – or access networks.
But here’s a data point worth pondering. The Singularity University believes that by 2030 over 50% of all data will be from the Internet of Things. Therefore, it’s not only big video that networks need to handle – it’s a huge aggregate of smaller data too.
GM: What impacts do you see 5G having on CSP media?
AM: 5G will transform much more than the telecommunications business. 5G is not just about wireless technology and new radio, it’s a game changer, it’s a revolutionary ecosystem yet to be built. 5G won’t realise its potential unless the providers of fixed connectivity – for front and backhaul – are part of the formula.
CSPs have been facing big challenges over the last decade, related to their commoditisation, loss of relevance and of course ARPU, hence the fact that something new is giving them hope. 5G represents an opportunity for CSPs to be relevant again and claim back their place in the value chain, working closely with industry verticals for the development of relevant, scalable and profitable services.
5G networks are designed to offer orders of magnitude improvements in bandwidth, latency and connectivity and can support a much broader range of end users and use cases. This represents a scale up opportunity which telcos have not faced for some time. The potential of this opportunity will not be realised purely within the talented marketing and sales teams of a traditional CSP – rather through a mesh of partnerships and innovative players.
Until now most CSPs have been operating at the edge of business, providing voice services to users and connectivity services between sites. With the growth of the Internet of Things (IoT), 5G will take CSPs deeper into the heart of business operations – be that manufacturing, medicine or automotive.
We are seeing the hype effects everywhere, vendors and mobile operators claiming first 5G use case deployments and even governments funding trials and test beds ahead of the 5G standards even being defined. We also see other operators that have too many short and medium term challenges that they don’t see the rush into 5G, they don’t want to play the early adopter role and they concentrate on their common challenges around quality and cost, but without losing sight of the developments around this new era.
In terms of the telco-media couple, this is more relevant than ever, video is seen as the killer application in terms of usage for networks and it’s turning some traditional CSPs into media giants, either by partnering or acquiring licences, content and capability. You don’t have to look far to see how CSPs are already weaving media into their offerings, and vice versa. 5G will allow more capacity and better customer experience that will be key for media services.
But all these good things come with a high price tag in the form of resource and infrastructure investment, and CSPs won’t be able to do it on their own. One of the symptoms of any major shift in technology and networks is a scarcity of skills and experience; this is another inevitable consideration that operators must factor into budgets and the regulator must recognise as a market price impacting element of the service cost base. It is important not to forget that Government and regulators will play a key role in the areas of spectrum allocation and grants.
GM: Do you see telecoms operators becoming providers of media services in their own rights, similarly to BT and many others around the world, or is the bigger opportunity in facilitating the activities of content owners and enterprises?
AM: As BT has experienced, compelling content is expensive. For a national operator with a restricted set of distribution channels the ability to fully exploit the rights is limited.
The best strategy in consumer – including public places – may be to partner with 4k/8k content owners to create a joint offering that benefits both parties. [This could result in] improved take up all-round as the high definition content and appropriate distribution platform bandwidth provide the best customer experience for both parties.
There’s another truth, which may be an uncomfortable one. Commodity, high volume media is not always terribly profitable. This requires us to think of media not only from a consumer perspective, but from a business and enterprise one too.
The reason for this is that media – and big video – applications command a higher value around non-commodity applications. Examples of this include high definition outdoor survey – for example, transmitter towers and electricity distribution networks –traffic and weather content from drone based capture. Media in this context can reduce the manpower requirements of operation, not to mention improved safety aspects.
GM: What do you see as the greatest challenges involved in assuring the quality of media services as the bandwidth involved increases and the volume of users (and content) increases?
AM: As the ecosystem of network elements evolves and becomes ever more complex and dynamic, the ability to manage the end user’s experience becomes increasingly difficult. This is driven by the fact that to move a piece of content from A to B will require several different providers to pass it down the line or over the air.
But let’s be clear, this is not a new problem. However, as content requires increasing amounts of bandwidth and users’ tolerance to poor quality decreases, the problem is amplified.
Being able to quickly diagnose which part of the transit route is causing a delay will require the various providers to have a clear and operational view of the performance and throughput requirements that need to be delivered to ensure the necessary end to end service. The question is, who will have the overarching view?
To mitigate the risk, aggressive edge caching will play an increasingly important role, especially for broad consumption content or media.
GM: Do CSP media services need to be global or at least regional, rather than national?
AM: If a CSP wants to go down the media/content acquisition route, the greater the market reach, the better the ROI opportunities for exploiting the content. This suggests a regional/global model is commercially advantageous. This could be achieved through collaboration, joint ventures and M&A in the content space.
On its own though, with the exception of global enterprise requirements, associated with servicing the needs of a multinational content delivery business, or global content platform plays – take Akamai, for example – the CSP need not be global.
