Tag Archives: OTT

Why as a consumer you prefer OTT

DigitalConsumerSpending

Digital Consumer Spending for a cord-cutter.

I spend $40 a month on fixed broadband. That includes a bundle for voice minutes that you can’t opt out of.

On mobile I pay another $40 a month. You get a bundle of 500 minutes and mobile broadband for 500MB. I’d like to opt out voice, but I do not dare to because mobile networks coverage is far more reliable for voice than for data, and because of the cap in mobile data. That might change one day with LTE.

But I digress, let me go to he point. At $80 a month, you pay almost $1000 a year to a telco for connectivity —although that includes voice too.

How much do you pay for the services that connect you to friends, store your files, let you share your photos, videos, ideas? In other words, how much do you pay for Gmail, Dropbox, Google Drive, YouTube, Maps, iCloud, Whatsapp, Instagram, Skype, Twitter, Facebook and Linkedin? Most likely you pay zero, unless you are one of the few paying premium upgrades.

And the best part about all these Internet Services from the cloud, is that no matter what telco you choose to churn into, all those services follow you. Without any migration, without you noticing any impact.

Why would you want any of these services to be attached to a telco? Why would you want to hinder your bargaining power for the bulk of your digital expense, connectivity?

If your services are over-the-top (OTT), decoupled from any telco, you are free to bargain for a lower price for those $1000 a year you pay them. As a consumer, you prefer the telco to be a commodity. That gives you buying power.

Add to that a history of telcos abusing on roaming fees or with the expensive mobile data packages of early days. For many people, the perception is that telcos charge you for what Internet players give you for free. Leave aside that Internet startups have beaten corporate R&D departments on innovation, seen from the consumer angle.

Consumers see OTTs as a way to counter balance the historical telco power. Same goes for Cable.

This is bad news for telcos, in the long run. As of today, telcos still grab the biggest piece of consumer spending in Digital. The problem in the long run is that as connectivity gets commoditized, all the new services with their promising revenue will be OTT.  For a telco there are two options, either playing the OTT game too, or prepare to run the business as a pure utility.

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Will Internet TV Kill IPTV?

Internet TV has definitively arrived and it is here to stay. YouTube crossed the chasm for video on the Internet, and Internet TV is now steadily going mainstream. Here is some piece of evidence:

  1. Lean-forward TV gets traction. Mainstream users now feel comfortable watching videos on the PC. First it was the few minutes clips, but more and more people have no issue sitting in front of the PC for long videos of one hour or more. With bigger displays, many are getting used to watching video while browsing and chatting in the same screen.
  2. Broadband bandwidth keeps increasing, and video compression techniques keep decreasing bit-rates for the same quality. This trend is not going to stop any time soon.
  3. PC2TV concept has not crossed the chasm, but it is easier than ever to connect small-form, silent, low power PCs to HDTV-ready LCD TV sets with DVI/HDMI connections. The Mac Mini, the Vaio TP-1 or even the EEE Box PC are easy to connect and make Internet TV enjoyable from the sofa. Wii, PS3 and Xbox360 can also make the Internet TV connection, as well as some specific set-top-boxes, such as Apple TV,  new Tivo models, or even LCD manufacturers adding an Internet connexion (see Sony Bravia Internet Video Link).

YouTube and Hulu are gaining a leading position in advertising-supported Internet TV. YouTube has reached an agreement with CBS to offer complete TV shows with inserted video ads, which is a different game from current UGC and short clips from TV shows.  On top of that, many TV channels are developing their own Internet sites to deliver Catch-Up TV, i.e. broadcast TV-shows offered on-demand. Spanish TVE site is one fine example.

If all this is already posing a serious threat to IPTV and Cable, other over-the-top players are also strongly positioning in Video-On-Demand. Apple TV, Amazon Unbox or even Netflix offers of movie downloads, compete seriously with the VoD that IPTV telcos and cable operators offer.

How can IPTV telcos fight back and win?

  • Embrace Internet as another channel for their offering. Provide users with access to their subscription channels on the PC (and mobile) , with a one-stop-shop offering for catch-up TV for all channels they offer. Enrich the lean-forward TV experience on the PC screen, and add interaction to main social networks.
  • HDTV. Bet on better video quality and immediacy. iTunes can offer HD movies, but it will take a while to download. IPTV streams the content and the user watches immediately. With increasing bandwidth the advantage will erode with time, but the telco can always be ahead with newer ultra HD formats.
  • Content is King. Exclusive content deals make the difference. IPTV telcos should focus on Live premium content (sports events, concerts). No Internet TV player can support millions users concurrently streaming a live HD broadcast of the Super Bowl. Only multicast IPTV can cope with it.
  • Manage the complexity of the Home network on behalf of the user. Bet on set-top-boxes with PVR features and open to support Internet TV, including competitors offering for video downloads. Make YouTube and iTunes just another TV channel in your catalog. Position your set-top-box in the living room before someone else does and makes yours replaceable.

IPTV is a platform for a next-generation Pay-TV service. Exclusive content and a wide offering of channels is a key success factors for IPTV, as it was for Cable/Satellite pay-TV operators. Embracing Internet TV as part of IPTV offering is another one.