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  4. > Over-the-Top is the Future of Consumer Communication Services

This year’s report focuses on the changing dynamics of the OTT market. What is resonating? What do consumers like and, more importantly, want from OTT service providers? What is required to achieve a fully competitive OTT service package, and who are the players closest to achieving it? While the news is not necessarily bleak for network operators, a revolution in consumer consumption patterns is occurring at hyper-velocity. Operators are well positioned to take advantage of this dynamic, but only if they accelerate their OTT efforts. This report will be of interest to both the network operators and their new OTT competitors.

Executive Summary

The world of consumer communication services is evolving at an accelerating rate. In the last year, Stratecast has documented the decline of traditional discrete communication service offerings such as plain old telephone service (POTS) and subscription video, in favor of a new model comprised of broadband access and over-the-top services. Although this trend is in its infancy, consumers are demonstrating waning interest in traditional quad play packages, and growing interest in the new dual play.
Obviously, a dual-play model only works if there are compelling and useful services available over broadband connections. Consumers need to feel that dropping more conventional services will not deny them the ability to communicate as they wish, or consume the content they want. Consequently, it is encouraging that innovation is alive and well on the Internet: new services are being developed daily that enable a full panoply of consumer-friendly offerings.

Yet, consumers do prefer service packages: every consumer survey that Stratecast has conducted over the last five years has indicated that consumers prefer the convenience of a single bill for all of their communication services. They also prefer packages that work well together: video services that also incorporate social media, as an example. In the past, these integrated service packages were not available over-the-top. Now, however, such packages are beginning to be developed.
In fact, Stratecast predicts that integrated service offerings that include every aspect of the quad play—voice, video, data and wireless—are right around the corner. Over-the-top players, like Google, are very close to delivering such service packages; and other social media sites are closing the gap. When integrated service packages become available, it is likely that network operators will be pressed to offer similar over-the-top offerings themselves.

Of course, regulators are hovering on the side lines to attempt to manage the delivery of services on the Internet; and such interference could be disruptive in this evolving market. However, Stratecast, although believing that regulatory intrusion in the Internet is inevitable, also believes that a competitive market is likely to occur before regulators can catch up to developments. Market and service developments are evolving much too fast for public policy makers: short of simply putting a stop to over-the-top competition, it is likely that regulation will ultimately be just another overhead of doing business on the Web.

Over-the-top, as a service delivery paradigm, is the wave of the future, and will likely accelerate in the coming years. As packet-based technology simplifies service integration, and as consumers come to expect access to their service packages regardless of location or device, over-the-top will become the only viable way to serve the consumer market.

Network operators will initially be challenged by this evolution, but will ultimately have to play in this space as well. Highly probable in the near future, consumers will have their favorite service packages that they can take with them wherever they might travel. In time, a personal telephone number and a password will likely be the keys to a personally-mapped service environment—just as cell phone numbers and SIM chips now enable a cellular user to effortlessly migrate between wireless carriers.

Table Of Contents

Over-the-Top is the Future of Consumer Communication Services
Table of Contents

Executive Summary .. 5
Introduction ... 6
The Growing Allure of OTT . 7
What do Consumers Want? ... 8
Major OTT Players . 13
Google: Branding an Experience 14
Facebook: The Largest Telecommunications Company on Earth 15
Amazon: Infrastructure Enabling OTT .. 15
OTT Market Opportunities and Unmet Needs . 16
The Last Word . 21

List of Figures

Figure 1: Branching Out OTT Service Market (Representative Players) . 7
Figure 2: Global OTT Video Market (2013-2019) .. 8
Figure 3: Use of OTT Services .. 9
Figure 4: Video Media Consumption Daily (North America 2014) 10
Figure 5: Time Spent on the Internet (North America 2014) .. 11
Figure 6: Cloud Service Awareness (North America 2014) . 11
Figure 7: Cloud Service Usage (North America 2014) 12
Figure 8: E-gaming Use (North America 2014) .. 13
Figure 9: Google Services 14
Figure 10: Facebook Growth ... 15
Figure 11: Amazon ... 16
Figure 12: Business Support System Orchestration for Customer and Supplier/Partner Support . 17
Figure 13: Does Data Connection Speed Impact QoE? (North America 2014) . 18
Figure 14: Owning the Hotspots . 19
Figure 15: Owning the Home Network .. 19
Figure 16: Consumer Desire for Home Network Support (North America 2014) .. 20

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