Why can’t telcos become OTT’s?

Outspoken Du CEO, Osman Sultan is of the opinion that network operators themselves should consider becoming over-the-top providers in their own right, in order to head off the threat of players from outside the telco industry entering it and reaping benefits on infrastructure investments they have not made.

“In 2005 telcos were investing70 per cent in ICT infrastructure and receiving back approximately 60 per cent of the free cashflow generated. In 2011, those figures have changed, with telcos still making 70 per cent of the investment in ICT infrastructure, with the free cashflow received down to just 11 per cent,” Sultan said.

“Why can’t we (telcos) become OTT’s as well? Is there anything that is preventing us from doing so,” he added.

Sultan has been one of the most outspoken telco CEOs in the Middle East regarding the need for service operators to band together and forge their own digital services futures. For some time now a number of regional telcos are reported to be close to forming a consortium to combat potential revenue losses caused by the influx of OTT players, and the group, which is likely to include the UAE’s Du, would come together to create a global Arabic social networking platform.

While the concept would likely prove popular – there are over 350 million Arabic speakers worldwide, and many international operators have ties to Middle East providers – it would be ineffective as a project spearheaded by just one operator. Sultan believes a cooperative approach would stand the greatest chances of success, and has been championing the proposition of an operator alliance.

“We need to collaborate amongst ourselves and become stronger and faster,” Sultan said.

The proposed consortium would allow the platform to reach far more users, providing the scale that would allow it to compete effectively. The majority of OTT services and social networks generate network traffic but not so much operator revenue, with Sultan noting: "Network traffic doubles every eight to nine months, but revenue is heading to a plateau, so we need to claim part of the new revenues alongside OTT players."

Sultan has gone on record in the past stating that he does not believe it is practical for individual operators in a given market to build their own app stores, despite the allure of generating incremental revenue through the sale of such applications. Sultan said the industry was still looking to figure out the most effective way for new applications to be purchased and used over mobile channels, with network operators gaining a reasonable share of the revenues.

“Vodafone live!, Orange World and Vodafone 360 are examples of operators trying to develop their own app stores, and I don’t think they have been so successful,” Sultan said. “Social networking is what made data communications successful, and I believe aggregation is what is needed in the Arab world where a partnership between OTT players and mobile operators is established,” he added.