How Communication Service Providers Can Find Value in Over-the-Top Video

By TechZone360 Special Guest
Tom Loozen, Managing Director, Accenture Communications Industry Lead
June 25, 2015

Internet streaming media, also known as over-the-top content (OTT) is a part of our everyday reality and affecting every entertainment medium. OTT-TV services have a steep growth potential, as a growing number of people worldwide already watch Internet video on their TV sets—and more regularly.

With the growth in digital services, video content is available on more devices through more services than ever before. Consumer demands are evolving on an almost daily basis.

This growth in OTT services presents a major challenge for communication service providers (CSPs), since mobile data revenue isn’t enough to make up for the decline in legacy services such as voice and SMS, as a growing number of customers shift to applications such as the WhatsApp, Skype and Lync. Increasing competition is resulting in a need for CSPs to deliver convergent services and look for innovative ways to integrate previously separate technologies, such as voice, data and video. Additionally, OTT content providers are becoming more aggressive about acquiring and creating content. Netflix, an Internet-based video-on-demand service, for example, recently outbid more traditional players to become the exclusive outlet for  movies from The Weinstein Company—a multimedia production and distribution company—beginning in 2016.

Another type of threat comes from major high-tech and software players that are creating offerings that combine devices and services. An integrated stack of services, applications, operating systems, devices and chipsets is one of the biggest challenges to the plug-and-play distribution model today.

Image via Shutterstock

Given these profound changes, how can service providers compete? As programming costs inexorably rise, the traditional response has been toraise prices. However, raising prices as a strategy has the potential to backfire, since it can alienate subscribers who prefer to purchase selected content that meets their needs, delivered on their device of choice, whether it’s a tablet, smartphone, laptop, or even TV.

There is, most definitely, an opportunity for CSPs to stake a claim in the world of OTT. In fact, according to the Accenture report titled, Engaging the Digital Customer in the New Connected World  an impressive 79 percent of respondents said they would prefer a single provider to manage all of their communications and entertainment products and services. Based on these metrics, it’s clear that consumers are considering CSPs as their facilitators for the digital goals they want to achieve in the digital ecosystem—including their goals for entertainment products and services. In that survey, in the category of entertainment services, CSPs nearly match consumers’ rankings of TV broadcasters as providers of pay TV; 37 percent named TV broadcasters as their top choice, followed by CSPs at 35 percent. For video-on-demand, 31 percent of consumers picked CSPs as their top provider, with handset and PC makers at 25 percent, and TV broadcasters at 24 percent.

Clearly, communication service providers still have the opportunity to manage, deliver and monetize digital video content and services in a fast-changing market, especially if they follow these approaches:

Be First to Market. Communications service providers need to more quickly identify, incubate and commercialize new products and services that integrate legacy assets with mobility— for example, over-the-top applications that ride on others’ wireless data networks, or new offerings leveraging machine-to-machine or voice-to-machine capabilities. “First to market” is what makes the difference between leaders and laggards in an already crowded marketplace.

For example, to defend market share in the broadband space and gain a leading position in the interactive TV (iTV) market, one telecommunications provider launched a new offering in linear and nonlinear video distribution over broadband networks using an Accenture Video Solution. The service is helping the provider differentiate itself in a very competitive market, improve customer loyalty with high-quality “anytime and anywhere” access to content, increase revenue per user, attract new customers, and increase advertising revenues through improved customer profiling.

Deliver an Integrated Customer Experience. CSPs have a significant opportunity to seize a high-value role at the center of the super platform trend by integrating the customer experience across multiple devices, platforms and users within a household or account. The maturation of digital technology, online self-service and social media has paved the way for what Accenture calls “Customer Care 2.0.” Social media, for example, gives customers a way to communicate experiences and needs directly to a company and to get customer service that is faster and more convenient. Effective online self-service is also a prerequisite. Beyond the use of social media and online capabilities, companies must also integrate analytics into their customer service processes to better understand—and more quickly understand—the root causes of customer issues and resolve them quickly.

Understand Market Differentiators. For example, a solution for a prepaid-dependent operator in a maturing market may not work for one with a global footprint. Also, each country has specific rules governing how companies can partner, pricing regulation, and even technology infrastructure differentials.

Consider competitive pricing models. In light of evolving consumer behavior, some CSPs are increasing allowances for voice and SMS and lowering data levels in their customer plans. One North American communications company launched postpaid plans with unlimited talk and text, that moves almost all monetization from traditional revenue points to data use. The benefits of these pricing actions are at least twofold: besides adapting to the changing customer patterns, it also reduces the attractiveness of the offering of a new entrant providing voice or SMS service free or cheaply.

Some final thoughts

Delivering a complex, multiplatform, live streaming and video-on-demand digital service is a complicated and challenging proposition. However, it’s clear that OTT services are what consumers want. For CSPs, the inescapable reality of the digital ecosystem provides challenges, but also opportunities. Growth, and ultimately survival, is only available to the companies that understand the ecosystem’s landscape and map their path to the future accordingly.

About the Author: Tom Loozen leads Accenture’s global Communications industry practice within Accenture’s Communications, Media & Technology (CMT) operating group. In this role, Tom oversees the development of Accenture’s strategies and capabilities for serving the wireline, wireless and cable segments, including most of the world’s largest service providers. Additionally, Tom serves as the CMT Europe and Latin America (EALA) Communications Industry lead, driving the industry agenda across these markets, working with key clients.

Edited by Dominick Sorrentino

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