Service Providers Face Competition on Their Own Networks

This article original appeared in the Sept. 2012 issue of Next Gen Mobility.

Communications service providers today find themselves in a unique dilemma. Many global technology brands best known for Web services, applications and marketing strength are staking claims in the communications business by providing innovative over-the-top services on third-party service providers’ data networks. These OTT services, which often include video calling as a standard integrated feature, provide subscribers an alternative to the service provider’s core messaging and voice communications services.

For incumbent service providers, this challenge presents the very real prospect of becoming a broadband utility service (like an electric company), even though they have many resources at their disposal to succeed and prosper in this new competitive environment. To defend and expand core revenue sources, service providers must embrace the same methodology as their OTT competitors and deliver communications services as an application on top of their broadband data networks.

Although many of the service provider’s communications services are delivered via next generation IP networks, much of the services that are available today are narrowband voice-centric. Meanwhile, OTT providers have innovated using both proprietary and standards-based IP communications protocols (e.g. SIP); adding presence, IM, chat, video, conference, HD voice codecs, screen sharing, and other, richer communication functions to their services. This innovation has accounted for a big slice of the global real-time wire-ine communications pie in terms of minutes (if not revenue) and threatens to expand its reach as the demand for mobile broadband and app-ready devices increases.

What are Video Communications Services?

Video communications services leverage end-to-end IP networks to combine many interactive communication types into an integrated service that allows users to establish communication sessions and promote the level of interaction on demand. For example, a user can initiate an SMS or chat session, turn it into a voice call, promote it to a video call, invite other users into a multi-party videoconference, and add streaming video and other content to share in the communications session.

How Service Providers Can Proceed

The competition now is for the next generation of real-time communication services and the associated revenue – and the stakes are enormous across the globe. Since services such as Skype (News - Alert) have been so successful in the global market, it may be difficult to envision how service provider-based VCS could be brought to market as competitive alternatives to OTT services. Still, many service providers are in a strong position to deliver VCS to their customers today. Consider the following assets they can use:

• Service providers have a direct service, billing, and marketing relationship with their customers.
• In many regions, service providers maintain direct control over the client devices operating on their networks, including factory-installed application suites.
• Service providers can control and prioritize real-time communications traffic to improve QoS/QoE through network, endpoint, and NOC (News - Alert) monitoring and management.
• Service providers have a history of peering with fellow service providers and developing interoperability across networks.
• Many service providers have access and licensing agreements with content providers, enabling streaming video content as a key component of VCS.

Service revenue models for VCS that are competitive with OTT services will need to be established by service providers. Core services such as peer-to-peer voice or one-to-one video communication sessions may need to be given away for free as they are with prominent OTT services. The real revenue from VCS may end up coming from the upsell of value-added communication amenities, i.e. conferencing, collaboration tools, video messaging, and video ring-back tones.

Video Communication Services Come of Age

This is an exciting time for communication services. The limitations of narrowband voice networks are being shed via ubiquitous broadband IP networks and an exciting array of intelligent and powerful mobile endpoints. There is a huge opportunity to deliver a more effective way to communicate with these networks and devices. However, with this opportunity comes a clash of interests, including competition for real-time communications market share between traditional service providers and OTT providers.

To defend and expand core revenue sources against OTT providers, service providers need to leverage their existing strengths and assets to offer consumers real-time communications services that they’d be willing to pay for. It is shaping up to be quite an interesting competition.