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How OTT VoIP Apps will Impact Large Vs Small Telecom Operators ?

March 19th, 2014

Impact of OTT on large Vs Small Telecom CompaniesOver The Top (OTT) Mobile Apps like WeChat, Viber, Skype, WhatsApp are all set to disrupt the Telecommunications industry as they virtually create one Big Worldwide Telecom network without the hassle of any regulatory body or cartel akin to something like the Internet (indeed these Apps use the Network Data Layer for communication).

We’d like to Demonstrate the OTT impact on larger and smaller operators. Pre-deominantly, in the telecom industry, Interconnection regime still exists but as seen in developed countries we are in a Fading Interconnection regime.

Impact of OTT on Small Operator / Challenger perspective
The Small Telcos have Higher proportion of calls / SMS terminating off-net given the scale disadvantage. This typically resulted in net interconnection expenses and Had to offer cheap off-net tariffs to retain customers and fend off advances from larger competitors. In an era of OTT dominated communication (Voice & Data) , Lower off-net traffic as users will more likely gravitate to OTT usage for their off-net connectivity needs. This lowers interconnection expenses. Thus the Net effect will be Positive given better market share and lower interconnection cost prospects.


Impact of OTT on Large Operators / Incumbents
Presently, they derive Lower proportion of calls / SMS terminating off-net given the scale advantage. They are also beneficiaries of Higher proportion of outside calls / SMS terminating in its network allowing it to benefit from high margin interconnection revenues. However, in medium term as 3G /4G networks stabilize Interconnection revenues could decline with usage migration to OTT services. Competitive advantage on scale fades as users on smaller operators can now call /message cheaply across all other operators which is a Net Negative on Large Operators.

Doest his mean we head into an era of Convergence where Services and Telecom companies marriage is inevitable ?

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