OTTs – Telcos match : get your counter attack right

Wed 14 Nov 2018

Operators must work in parallel to create new revenue through high value-added solutions with a lower risk of substitution.

Madjid Babaci

In my previous article (“ Telecoms vs. OTTs: the time to fight back is upon us”), I discussed the various approaches telecoms operators can take to combat OTTs and limit turnover losses. Experience shows that a long-term counter-attack is preferable to an overly rapid reaction, which can turn out to be more harmful than the OTTs themselves. A methodology analysing the root causes of why users are abandoning operators’ services will make it possible to respond more effectively.

 A carefully planned counter-attack is key

Operators’ solutions are domestic i.e. with each operator developing its own strategy to counter the progress of OTTs on its network. These solutions are piecemeal and unilateral while OTTs are adopting supranational strategies without borders.

Thus in order to respond effectively, operators must adopt a 360° strategy. They must consider the entire range of existing instruments and create a joint, effective and measured response. When it comes to OTTs, an overly simplistic response will not have the desired effect. However, a good balance of legal, tariff protection and technological measures would have the opposite effect.

Let’s look at two examples:

  • Example 1: when users revolt

The first example concerns an African operator,leader in its market. Faced with significant revenue losses, it took the unilateral decision to block voice OTTs on its entire network. A bold decision certainly but one which did not take into account the reaction of its users and competitors. Thus in the space of one week, users called for the boycotting of the operator; they organised demonstrations demanding the Ministry to lift this restriction and also launched a series of #hashtags denouncing the restriction. The main competitor, being in a strong position, organised an online campaign positioning itself as the preferred network of young people and social media networks. After three weeks, the operator apologised and lifted the ban but found that its ‘multi-SIM’ users were no longer using their SIM cards for data.

  • Example 2: when users bypass the obstacle

The second example concerns an operator with a monopoly. Following a government ruling, it was forced to block all mobile OTT voice and messaging applications. After six months, a study on the network’s international traffic revealed  the economic pointlessness of this measure. Incoming and outgoing traffic was still continuing to fall. It was found that OTT users (Viber, WhatsApp, WeChat) were not automatically going back to the operator’s network to make or receive their international calls. It was found they had stopped making or receiving international calls or had bypassed the ban through spoofing and VPNs.

Applying an effective method: 5 key steps

The response must be carefully planned. Based on my varied experience, I have identified five key steps.

1. Set an objective

The primary element of the response strategy is to set a clear and costed objective as this impacts which tools will be used. For example, faced with mounting revenue losses of almost 25% per year on domestic messages and 30% on international voice, operators need to provide a global response to slow down and compensate for this loss of income.

2. Understand new communication flows

The second step consists of conducting an in-depth analysis of this loss of revenue. It is necessary to analyse how outgoing communications are changing (texts and calls from a local network to an international operator), as well as incoming and roaming communications.

For each flow, it is necessary to look at possible alternatives. It is also necessary to identify new uses and user trends. In this respect, it would be interesting to have some ‘identikit’ profiles of typical users. These profiles make it possible to individualise behaviours and to make the loss of turnover more understandable. Is ‘User X’ communicating internationally via another national operator, an OTT, prepaid cards or has he/she simply reduced or even stopped this type of consumption?

3. Analyse (in-depth) the source of losses for each flow

It is important to ask the right questions.

  • Are profits falling due to a lower volume of calls and texts? In other words, is it the number of calls that is decreasing or the unit value generated on the same number of calls?
  • Zone identification: are some zones or countries more affected than others?
  • Are the losses coming more from landlines or mobiles?
  • Is the situation cyclical or structural? Is the pattern repeating itself each month or are the losses due to a specific event?
  • For roaming losses (incoming and outgoing), it will also be necessary to analyse (in-depth) all the traffic, the impacted areas, the countries of origin, and the type of data impacted (Voice, Text or Data).

Looking at the problem in a precise way makes it possible to better identify possible solutions. OTTs are often, and rightly so, considered as the leading reason for the loss in international turnover. However, as explained by Neural Technologies[1] in its 2016 survey, internal and external fraud, as well as non-recovered international revenue also contributes significantly to this loss.

4. Choose which solutions to implement

After conducting a detailed analysis of the impact and sources of this loss of revenue, operators can decide which solutions to implement in the short- and medium-term (see article . “Telecoms vs. OTTs: the time to fight back is upon us” with a range of possible responses.)

5. Create a cross-cutting task force

Finally, the operator will have to organise itself accordingly by creating a specific task force to implement all the solutions in a given time frame.

The task force must include actors from all departments:

  • Marketing to create and launch offers;
  • Wholesale to monitor inter-operators’ negotiations;
  • Finance to assess the economic impact of each offer and examine the risk of cannibalisation;
  • IT and networks to assess (upstream) the feasibility of offers and define necessary changes;
  • Advertising to ensure that the offer launches reach key targets (national and international);
  • Distribution and customers relations to provide specific support, a successful customer experience and ease of use.

It goes without saying that it will be necessary for this task force to be ‘sponsored’ by a member of the management committee in order to speed up decision-making and guarantee an agile way of working.

If ‘Operator X’ is attached to a group, a global methodology will be necessary to standardise part of the country response and guarantee a strong solution. As mentioned above, OTTs take a supranational approach thus it is appropriate to respond with a similar solution.

In conclusion

If there is a solution to OTTs it is multi-dimensional. It will require better coordination within the operator’s organisation. It will also require greater consensus between all the operators.

If it is a question of simply accepting a decline in traffic, the solution also lies in innovation and forward planning. Operators must work in parallel to create new revenue through high value-added solutions with a lower risk of substitution. The massive and continuous investments of operators in the Internet of Things, Artificial Intelligence, very high speed networks, fibre and 5G, prove that the future of telecommunications will be in the hands of operators or it will not happen at all.

Madjid Babaci

Senior Consultant