Over-the-top (OTT) services such as Skype and WhatsApp are among today’s most popular communications services, and their providers are among the information and communication technology (ICT) sector’s most innovative and profitable companies. Network operators and OTT players, despite having quite different business models, sometimes find themselves in competition in fields where they provide equivalent services. This has given rise to a long-running debate around whether or not this competition is on a level playing field.
ITU-T Study Group 3 (SG3) is leading ITU’s analysis of the ‘economic impacts of OTT’, encouraging ICT stakeholders to coalesce around a common understanding of the new industry dynamics introduced by OTT services.
To learn more about the aims of this work, ITU sent some questions to the leader of SG3’s Rapporteur Group on OTT, Ahmed Said, Head of Economic Affairs at the National Telecom Regulatory Authority of Egypt. The answers below were prepared with the support of Associate Rapporteur, Abraão Balbino e Silva, Competition Superintendent at the National Telecommunications Agency of Brazil (Anatel).
As yet there is no widely accepted definition of OTT. It is important that this is addressed by ITU, given that the definition will affect the scope of ITU’s analysis of OTT. Our current discussions consider OTT to be any Internet application that may substitute or supplement traditional telecommunication services, from voice calls and text messaging to video and broadcast services.
We need to approach this question from two angles. OTT services are well appreciated by end-users and this drives demand for data. While the operator is responsible for investment in the network infrastructure that carries OTT traffic, this OTT traffic also contributes to increased revenue for operators. In analyzing the impact of OTT on the business of network operators, it is important to acknowledge that declining demand for traditional voice and text messaging services is counterbalanced by increasing demand for data.
Yes, definitely. The relationship of network operators and OTT players is one of interdependence. OTT players need a reliable high-speed network, and network operators need good applications to stimulate demand for data traffic.
Traditional voice and text messaging services compete with OTT-provided voice and text. Supplementary services would include the sharing of content and social networking.
Are network operators and OTT players on a level playing field when it comes to competition? Do they target the same customers? Do they have access to the same markets? Essentially, we are asking if they are operating in the same market, playing the same game. We do not yet have definitive answers to these questions.
As such, we do not yet have a definitive answer to the question of whether or not network operators and OTT players should fall under the same regulatory framework.
It is important not to view OTT players as network operators’ main competitor. Network operators aim to provide secure, reliable, high-speed networks that deliver services valued by end-users. Network operators will gain competitive advantage by investing in the expansion and improvement of their networks, helping OTT players to reach new customers and deliver high-quality services.
If a network operator’s main business is voice, that operator will face strong competition from OTT voice services. However, if a network operator’s main business is data service provision, that operator will view OTT players as collaborators. The situation today is that most network operators’ main revenue stream comes from voice and text messaging services. A win-win collaboration model will emerge only if network operators’ main revenue stream shifts towards data service provision. Governments could play an important role in encouraging this transition by creating an enabling environment for the deployment of data networks, ensuring an appropriate level of regulation and applying measures that enable competition on a level playing field.
SG3 is evaluating the impact of OTT on network operators with a view to brokering the international agreement of standards able to assist the creation of a win-win situation for network operators and OTT players. We are developing standards that promote fair competition, consumer protection, dynamic innovation, sustainable investment and infrastructure development, and accessible and affordable international services.