OVER-THE-TOP (OTT) - Wesley Clover

The good news is they have advantages over OTT play- ers to work from. They have the wireless infrastruc- ture, with its network- and device- agnostic services.
2MB Sizes 4 Downloads 76 Views
NEWSLETTER | JULY 2014

OVER-THE-TOP (OTT)

A DRAMATIC MAKEOVER OF GLOBAL COMMUNICATIONS IN THIS ISSUE From the Chairman …………………………..…. Page 1 What is OTT, and Why is it Important? ….… Page 3 Impact for Telcos/Service Providers ………..… Page 4

The Enterprise and OTT …..……………… Page 10 Understanding Recent Acquisitions ……. Page 12 Interesting Trends and Developments .. Page 12 Wesley Clover Parks …………………….…….. Page 14 Introducing ‘L-SPARK’ …………………….…….. Page 14 The Loss of a Dear Colleague ……….. Page 14

FROM THE CHAIRMAN The ICT (Information and Communications Technologies) market is undergoing rapid, I might even say dramatic, changes. Many readers recognize this, many are likely living it. I feel strongly about the issue. Where there is change, there is opportunity! I am referring to the recent generation of service and application companies using Internet Over-the-Top (OTT) networking as a platform for new product and service offerings. Companies we all read or hear about, such as Skype, Viber, Rebtel, WhatsApp, WeChat and many others, have emerged to address the new and perceived communications needs of both consumer and enterprise users. Most of these companies are quite small, but they are making global market inroads that would have been beyond belief just a few years ago, and they are realizing market valuations that are similarly beyond belief. The offers from these young firms are compelling, be they communications tools and services, content services, storage services or others. Together, these new offerings are driving a commoditization of many of the established telecom and cable services. In the process, it might seem like these new apps are simply wiping significant revenues from the books of traditional players. The legacy voice businesses of these players have been in decline for some time. SMS texting services are under similar attack. Think also of the ecosystem around these carriers – the companies who supply supporting equipment and services. What of them?

A Sense of the Impact For some, this evolution could in fact pose a threat to their continued viability. Where’s Nortel? Where’s Marconi? Revenue sources are shifting. Market capitalization is at risk, and significant new investments are shifting to these upstart players. Consider what we have read this last year alone: WhatsApp – 55 people, no sales or profits, but a valuation of $19B U.S. Yes, that is a ‘B’! The company has 450M users … Viber – Revenues of only about $1.5M, but 200M users of voice

Copyright ©, Wesley Clover International, 2014 | Page 1

NEWSLETTER | JULY 2014

and messaging services. A $900M U.S. valuation as a result! Skype – Video, voice, messaging and SMS for about 1B users. Acquired by Microsoft at a valuation of $8.5B U.S. WeChat – about 300M users for voice, video and messaging services. Valuation?

Add a few more industry data points and you get a better picture of why new strategies are critical for traditional providers and suppliers:  The Internet OTT communications market will be worth $53.7B and serve 2.1B smartphone users by 2017.1  Nearly 50% of global calls will be VoIP enabled by 2017, and up to 80% of the 1.07B users will be served by OTT players.2  In 2012, more messages were delivered via OTT apps than over SMS ; by 2016, that difference will be a factor of 4 to 1.3  Skype already delivers almost 34% of international voice and video traffic.4

Survival in a Shifting Market Internet OTT providers have created functionality and choice that have disrupted the markets and served as a “wake up” call for carriers and enterprises alike. Both are having to evolve to become arbiters and consumers of these value-added, cost-effective applications and services. For carriers, their voice and SMS revenues are eroding. They have already embraced fundamental strategy shifts (e.g., moving into content and media), but they need to continue this evolution to keep current customers, attract new ones and driv