HomeTelecomsAre ‘OTTs’ making network economics unsustainable?


Are ‘OTTs’ making network economics unsustainable? — 4 Comments

  1. Hi Richard,

    I agree. Instead of being overly fixated on protecting their historic dominance in the “ACE” layer (by way of discriminatory gate-keeper practices like zero-rating own video and cloud services while overpricing generic internet usage, telecoms operators should be focusing on getting the their “Space” & “Place” business models right.

    In the “Space” & “Pace” business it is important to understand that it is to a large extent a fixed-cost business (as you rightly pointed out), and it needs to be reflected in the retail and wholesale pricing models. In “Digital Fuel Monitor”, a service where we track competitiveness of mobile internet access in all EU & OECD markets we break down operators’ pricing schemes to “Base (0 gigabyte price)” and “Incremental price per gigabyte”. Interesting to see that there are huge variations market by market. In some countries charge very little per smartphone SIM but have overly expensive gigabyte prices, in others the base (0 gigabyte) price is quite high but the marginal cost for the end user to use the gigabyte is nearly zero (in some cases zero).


    • Pal: Good thoughts, thank you. I do think that, as you say, the “ACE” layer focus of telco executives is leading to a lack of focus on the Space & Place layer businesses. Interesting comments on your “Digital Fuel Monitor” service. Do you believe more in a “high 0-Gigabyte price/low incremental price” strategy, or vice-versa?

      • Hi Richard, as the base stations gets smaller and smaller, cheaper and cheaper more and more IP,and closer and closer to the end customer, the marginal cost of transferring mobile gigbaytes converges to zero. At the same time the traffic independent costs of serving customers and their devices(technical, like the cost of installing the base station but also other: customer care, marketing etc etc) are unlikely to drop so fast. So in competitive markets (like e.g. Finland) I expect that the reasonable 0-gigabyte price, low incremental price models will prevail — reflecting today’s fixed broadband pricing models.

  2. Whereas in non-competitive telecoms markets (oligopolies, cartels) the constantly decreasing incremental cost per mobile gigabyte (thanks to small cells, all-IP, 5G etc) will not be passed on to the open internet access service but will instead be kept for the telecoms firms own “a la carte” mobile video and cloud computing offerings. This is how telecoms firms can leverage their gate-keeper position and avoid becoming bit-pipes on the bottom of the value chain and instead position themselves on top, as the direct retailers of internet based services.

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