Impact was minimal on telcos’ revenue…
At first glance, OTT communication services look like a real threat to telcos to the extent that they are offering the same messaging products (SMS and MMS), as well as voice and video calling. IDATE DigiWorld nevertheless estimates that the growing popularity of these services is not having any significant impact on the revenue earned by telcos, who are already locked in fierce competition with one another (all selling virtually unlimited plans) and suffering from the overall economic and regulatory situation (notably with roaming).
… but this was a necessary reaction to changing user habits
Faced with these newcomers, telcos have developed five new types of strategy: blocking, bundles, partnerships, developing their own OTT services, and joining the RCS initiative. Blocking, which annoys users and raises net neutrality concerns, is now quite rare in the West. A few countries in Africa and the Middle East still have restrictions in place even if, in most cases, the authorities tolerate OTT services. Bundled and/or virtually unlimited plans that include voice calls and texting appear to be an effective strategy, which to some degree counters the advantage that OTT service providers enjoy from offering free services. Products sold in partnership with OTT companies also enable telcos to differentiate themselves, especially by stimulating data consumption. Several MNOs in Africa have taken this tack. Some carriers, such as Telefónica, and a consortium of telcos via the RCS initiative in partnership with Google, have attempted to develop their own OTT services, but these initiatives appear to be losing steam.
OTT companies’ diversification taking its cue from Asia/Pacific
In addition to competition with classic telcos turning into coopetition, OTT companies are focusing on building out their line of services to consolidate their business model, which still relies very heavily on advertising (60%). Asian players are among the furthest along in this area: in China, WeChat launched its own m-payment services that generate revenue via commissions on transactions. The platform also positioned itself back in 2014 with a view to the future growth of the IoT market. Tencent has forged several partnerships with equipment suppliers, and built a platform that allows them to launch their connected products, especially household products, that can be managed via WeChat. In South Korea, Kakao is working on developing blockchain solutions, including the creation of its own cryptocurrency. These emerging innovative markets are thus ushering in growth opportunities for OTT communication service providers.