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  3. > The Impact of OTT Providers on the Telecommunications Sector : A Fight for Communication Service Dominance

Key Findings

•Over-the-top (OTT) services refer to communication, hosted, and entertainment services that are delivered over Internet Protocol (IP)-based broadband networks.
•OTT services include voice, text, content, and applications. The key differentiating factor is that the OTT service provider need not be the owner of the network over which the service is offered and these services are not restricted to a single operator.
•The OTT market is still relatively small; however, it is expected that the market will grow to challenge the traditional telecommunications participants for both subscribers and revenues. This is particularly relevant in the light of increasing broadband access.
•OTT providers typically emphasize a core service and then gradually expand their presence across the telecommunications value chain.
•Most OTT services are targeted at consumers and a few have been able to break into the enterprise market. However, the enterprise market is likely to be the next target market of OTT providers.
•The major OTT providers are trying to position themselves as the primary portal through which people access the Internet. Operators should leverage their current position and access to the customer.
•Monetization will remain one of the key challenges for OTT service providers. Adopting the right revenue model will be key for the success and sustainability of the provider.
•Since the commercialization of the Internet, there has been an ongoing debate as to the extent of ‘net neutrality’ and how it should be implemented within legal frameworks. Net neutrality is based on the principle that all Internet traffic should be treated equally.
•Some international operators have been successful in lobbying for legislation that protects their operations from the threat of OTT providers. However, consumers have generally reacted negatively to such actions; besides, the long-term sustainability of such action is likely to be limited.
•A key argument made by operators is that they need to share in the revenues made over their networks to ensure continued investment in infrastructure upgrades and maintenance.
•Developed countries, including the US, EU, and Japan have focused on securing net neutrality with greater transparency, and regulators globally are expected to follow suit.
•Strategic options for operators to respond to the development of the OTT market include offering own OTT solutions, OTT acquisition, the extension of revenue streams, and preferential treatment.
•However, taking the risk and revenue factors into consideration, partnership between organizations has been identified as an effective option to enter the OTT market.
•The development of the OTT market represents both a threat and an opportunity for telecommunications operators globally.

Objectives

To contextualise the OTT market and provide an overview of the different OTT technologies and services
To provide an overview of the different OTT service providers and their different business models
To highlight the key regulatory developments that have affected the OTT market development and telecommunications sector
To provide strategic recommendations for operators to effectively respond to the rapidly changing market

Table Of Contents

The Impact of OTT Providers on the Telecommunications Sector : A Fight for Communication Service Dominance
Executive Summary 3
Research Objectives and Scope 6
Market Definitions 10
Market Overview 14
Drivers and Restraints 21
OTT Service Providers—Business Models 26
The Regulatory Landscape 31
Strategic Options for Operators 38
Conclusions 47
The Frost and Sullivan Story 50

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