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Telcos seek role in mass of OTT experiments

Telcordia exec predicts train wreck as telcos look to replace linear programming with monetizable online TV

Change in the over-the-top (OTT) world is accelerating at a rapid pace, forcing communication service providers (CSPs) to figure out how they will play in a market that will certainly look drastically different within a few years time. Right now, most online television and video implementations are experimental, but if CSPs aren’t careful, a train wreck could be inevitable, according to Grant Lenahan, Vice President, Strategy, Chief Strategy Office of back-office specialist Telcordia.

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Consumers want to move from linear to non-linear programming, but Lenahan said they do not want to pay twice for the same content, an opinion shared by many (but not all) in the industry. When forced to choose, he anticipates that consumers will opt for online content in lieu of a standard cable package – but that’s not necessarily bad news for the CSP.

“We are encouraging our customers, CSPs, to look carefully at providing a service,” Lenahan said. “If they are going to provide a non-linear alternative to cable, it has to be a good enough alternative to cable that you can give up your cable subscription. If not, all you are doing is paying again. That’s a limited market. If you put together a good enough alternative that the consumer doesn’t need cable, just this set, that’s a whole different situation.”

There is where CSPs will have to navigate carefully to avoid crashing. While it might be intimidating to CSPS that have embraced – and profited from – the cable TV model, Lenahan suggested that rather than fear video cord-cutting, they embrace it. By reliving their customers of a $50 to $60 monthly fee, they can instead look for revenues from a pay-per-use model, much like Apple’s iTunes.

For the service provider, Lenahan said this style of content over broadband service could look one of two ways: a telco 2.0 model in which CSPs incorporate a set of value-added services to existing online content through open APIs or an aggregator/proxy model in which the telco acts as the hub for all content on the Web, including sites such as Amazon, Netflix and iPlayer. While the aggregator model provides more revenue, it is also a more drastic step and one that the content providers might not let the CSPs make just yet. The content providers are reluctant to give up their branding, likely resulting in a tug-of-war between the value-added features consumers want and the balkanization of content.

“[Content providers] are foolish not to, but it’s still not clear they will allow them to,” Lenahan said, adding that politically, the telco 2.0 path is more likely. In the role of content aggregator, subscribers would have a single log-in to access the service provider portal, which would house content from across the Web. No credit card would be required, and consumers could set parameters such as the kind or amount of content consumed. These value-added functions could include charging and promotions, user policies and controls, bandwidth and quality of service guarantees, ad control and privacy-protected user profiles and APIs for the operator functions of cataloging, assurance and fulfillment.

Lenahan’s message to CSPs was to start thinking now about ways to help the content industry. The worst case scenario would be content providers feeling forced to build their own technology because CSPs didn’t give them the right solution at the right time with the right business model, he said. The ability to send content to any device is a network capability and the domain of CSPs. Regardless of the merits of sites like Hulu or the criticisms of OTT ventures like the cable industry’s TV Everywhere, CSPs need an OTT play that would allow them to compete in new markets and maintain their revenue streams. The opportunity, and perhaps the need, to do it – and do it right – is too significant for them to ignore.

“That is why I think the important message is there are things telecom can do for you, probably better and more uniformly than you can do it yourself,” Lenahan said. “It will make you more profitable. I don’t think [content providers] see that and understand it today. We need to communicate it effectively, but not dictate to them how their business will run.”

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© 2014 Penton Media Inc.

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