CTO mulls new business model for telcos over $386bn loss

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To cut down on losses being incurred and blend into the new ecosystem created by the proliferation of Over the Top (OTT) services, telecommunications companies in Nigeria may have to evolve into pure mobile broadband providers

The new business model is being proposed by the Commonwealth Telecommunications Organisation (CTO) as a solution to the challenge of OTTs facing the telcos.

The telcos are currently offering a tripartite service of voice, SMS and data. However, OTT platforms, which include applications such as WhatsApp, Blackberry Messenger (BBM), Facebook call, Skype and Viber, among others, are making it possible for people to use their data bundle to chat and make voice and video calls at cheaper rates as alternative to using significantly higher cost of making calls through the traditional voice platforms.

On account of the OTTs services in Nigeria, Average Revenue Per User (ARPU), which is used to measure the average spending by telecoms consumers on airtime, has dropped significantly over the years from $22 in 2005 to $3.81 this year. Also, Ovum, an independent analyst and consultancy firm, had earlier forecast that telecom companies globally would lose $386 billion over a period of six years (2012-2018) to the growing adoption of OTT services.

However, in a report of its study of OTTs conducted across Commonwealth countries, the CTO noted that with the complexity and scope of the regulatory responses that would be required to bring OTTs under control, it would be better for telcos to begin a transition process that will make them well positioned in the new ecosystem.

“The endpoint of this transition process would appear to be one in which mobile operators become pure mobile broadband providers. This does not necessarily mean that their services will have become completely commoditised,” CTO said in the latest report obtained by our correspondent. “There will still be opportunities for differentiation in their consumer facing activities across a range of characteristics including reliability, speed, congestion and contention, customer service, and pricing.”

The organisation, which is currently headed by a Nigerian, Mr Shola Taylor, said disruptions such as the OTT services usually challenge existing business models.

“Existing business models are challenged when an innovator presents an option to consumers that is more attractive than existing offerings. This new option may have improved features compared with existing services, may be an entirely new service that wasn’t previously available or may simply be cheaper than existing offerings, or some combination of all these,” she said.

Speaking with this newspaper on the CTO’s proposition, President of the Association of Telecommunications Companies of Nigeria (ATCON), Mr Olusola Teniola, described the model as “the way to go” for the mobile network operators.

According to him, the telcos have to accept the fact that the OTTs are not going to go away. “That is a good business case for the MNOs and I will advise them to follow that model. To be in control of the subscribers, they have to offer service that put them in control and this is what the proposed business model can offer them,” he said.

Teniola, however, noted that the telcos would need to invest more in broadband infrastructure to be able to operate as pure broadband service providers.

The Nigerian Communications Commission (NCC) might also favour this model, as it recently attributed growth in number of data subscriptions over the mobile networks to the OTTs. With that, the regulator said it had no plans to regulate the fringe players and urged the license telcos to take advantage of the data boom.

According to NCC’s Director of Policy, Competition and Economic Analysis, Mrs Josephine Amuwa, Nigerian telcos have no reason to complain over OTTs because they are also benefitting from the existence of the various platforms. According to her, without data, subscribers cannot use any of the service and that means they also pay the licensed operators to use the OTTS. “When you talk about OTTs, the only way the consumers enjoy OTT services is through data subscription, and who is providing the data, the operators. From our own study in-house, we have seen tremendous growth in data consumption as a result of the increase usage of these OTTS,” she said.

Amuwa added that the Commission, having established the positive impacts of the OTTs on data consumption, was going to take the study further to establish the level of impacts they are making.