Economic impact of OTTs on national telecommunication/ICT markets

Giovannetti, Emanuele, Plossky, Arseny, Kettani, Nasser, Hemmerlein, Christopher, Neto, Geraldo and Martinez, Jorge (2020) Economic impact of OTTs on national telecommunication/ICT markets. In: Session on the Economic Impact of OTTs on National Telecommunication/ICT Markets, Geneva, Switzerland.

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Abstract

The big move to data - Changes in network technology and the transition from voice and SMS to a more data-centric business model have paved the way for OTT success, transforming the way people access resources for health, transportation, education, agriculture, government and financial services. Increasingly, mobile network operators (MNOs) are embracing data-centric business models as data drives the ongoing digital revolution in virtually every industry vertical. How are OTTs impacting MNO demand, revenue and cost? Demand: The exponential increase in data traffic and use of OTTs results both in new subscribers for broadband services and existing subscribers upgrading their subscriptions for greater speed and bandwidth. In terms of voice and SMS services, the picture is less clear with some countries in Africa showing stable use or even an increase in voice traffic. These trends reflect the reality that network traffic, and demand for legacy services, depend on a multitude of variables, not simply on the prevalence of OTTs. Revenue: Data services are increasingly important in MNO revenue streams but can business opportunity and risk mitigation boost profitability? How far do OTTs contribute to MNO revenue indirectly by boosting demand? Are changes in business model the way forward – for example OTTs and network operators co-investing? Cost: Data traffic accounts for a significant share of network costs. In Europe, for example, MNOs are expected to spend hundreds of millions of Euros per year to handle Internet traffic – in addition to incurring costs required to provide traditional services. How can OTT investment be boosted? Complementary relationships exist between OTT services and network services. Hyperscale OTT service providers are increasingly investing in infrastructure and connectivity projects to support the availability of highspeed broadband, and many collaborative initiatives exist between operators, development agencies and Internet companies aimed at coinvestment in network infrastructure. Despite these gains in connectivity, there is a continuing need for increased and improved broadband network infrastructure. How can OTT investment into extending network connectivity be boosted? The huge promise of partnership OTTs and network operators need each other to thrive in today’s communications marketplace. OTTs provide the content that drives demand for telecommunication operator services. It is not a ”zero-sum game” but rather a symbiotic relationship. OTT applications increase revenues for operators’ core access services by driving demand for data services. So direct commercial partnerships between operators and OTTs have vast potential: research suggests such partnering could increase telco free cash-flow by a massive 50 per cent. OTT platforms: what impact? OTTs have helped usher in economic and social transformation beyond traditional communications services in the ever-growing digital economy. At the same time, this success has brought with it new challenges – such as increased competition between informal vendors on OTT and physical retailers, or the need to modernize tax codes appropriate to the new digital economy. A number of barriers to connectivity exist in some countries, such as the high cost of Internet data; introduction of additional taxes to raise revenue, including content licence fees and excise taxes; fiscal instruments in some countries, including new forms of taxation on the use of OTTs – measures which may have a detrimental impact on women and their ability to access the digital economy. Digital transformation of network communications: challenges for regulators OTTs are a vast and diverse collection of businesses. Regulators need to see the benefits that OTTs deliver while adapting regimes to address new challenges. And while OTT innovation can be rapid, regulation sometimes struggles not only to keep pace but to address large-scale OTT operations outside of the regulator’s national mandate, thus a need for improved international cooperation. In addition, a one-sizefits-all approach to regulating OTTs will not work. When new service delivery models disrupt the old, regulation should be informed by evidence rather than fear of the unknown. Is light-touch, flexible regulation the answer?

Item Type:	Conference or Workshop Item (Paper)
Additional Information:	This paper is the result of the work done by the Rapporteurs and Vice-Rapporteurs of Questions 3/1 and 4/1, who actively participated during the workshop as moderators, panellists and contributors. The following experts authored this analysis: Nasser Kettani, Rapporteur, Question 3/1; Arseny Plossky, Rapporteur, Question 4/1; Christopher Hemmerlein and Geraldo Neto, Vice-Rapporteurs, Question 3/1; Emanuele Giovannetti and Jorge Martinez, Vice-Rapporteurs, Question 4/1. The views expressed in this paperare those discussed during the workshop and reported by the authors. For further information, please consult: Thematic workshop on the topic of “Economic Impact of OTTs on National Telecommunication/ICT Markets”, held on 1 October 2019: https://www.itu.int/en/ITUD/Study-Groups/2018-2021/Pages/meetings/joint-session-Q3-1-Q4-1_oct19.aspx Study groups within the ITU Telecommunication Development Sector prepare reports, guidelines and recommendations to support the development of ICTs around the world. ITU-D Study Group 1: https://www.itu.int/net4/ITUD/CDS/sg/index.asp?lg=1&sp=2018&stg=1 Q3/1 Final Report for the 2014-2017 study period: “Access to cloud computing: challenges and opportunities for developing countries”: https://www.itu.int/pub/D-STGSG01.03.1-2017 Q4/1 Final Report for the 2014-2017 study period “Economic policies and methods of determining the costs of services related to national telecommunication/ICT networks including next-generation networks”: https://www.itu.int/pub/D-STG-SG01.04.1-2017.
Keywords:	OTT, Digital Platforms, Digital Infrastructure, Social Media
Faculty:	Faculty of Business & Law
SWORD Depositor:	Symplectic User
Depositing User:	Symplectic User
Date Deposited:	22 Jun 2020 08:52
Last Modified:	29 Apr 2022 11:37
URI:	https://arro.anglia.ac.uk/id/eprint/705647

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