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Kick out the OTTs! LG U+ demands satisfaction

As the telecom industry plunges headlong into the era of digital services, one of the perennial questions facing mobile operators struggling to transform themselves into digital players is how they should respond to the OTT players who are driving that transformation.

The advice from Korea’s LG U+: shut ‘em out.

“Someone said earlier that the cloud generation will flourish soon,” Changkul Jo, VP of the technology development center of LG U+, said during a panel on new operator business models at LTE Asia Tuesday. “Maybe this is personal, but if the commercial P2P world flourishes as it does now, the cloud generation will not move forward any further.”

Jo said that half the his network’s fixed traffic comes from commercial P2P usage, which is causing big problems for the operator. “Because of this we have to enhance our network every year, investing a lot of money, but we don't increase any products and sales from that investment.”

And while telcos are forced to upgrade their infrastructure, he added, OTT players “do not invest in any facilities for their services except for a couple of servers. They just use the vast infrastructure of telecoms operators and make their profits on top of it. They are exploiting our resources and making money from it and taking business from us – this is like stealing money from our industry.”

Jo called for operators to join together to take a stand against OTTs. “We should not provide them services like CDN and [internet data centers].”

The two other operators on the same panel weren’t quite as fierce, but they did say that while operators have fallen behind in the digital services race, they still had the means to get back in the game.

“Operators still have key strengths such as higher trust levels and a strong billing relationship with the customer,” said P.S. Tang, founding director of Packet One, adding that operators can make use of RCS and analytics platforms to develop competitive platforms and provide a better user experience.

Devid Gubiani, CTO of Indonesian 4G upstart Bolt, pointed out that in prepaid markets like Indonesia, operators have the advantage of experience when it comes to developing new business models for customers who don’t have credit cards.

“The OTTs can’t do that,” Gubiani said. “For example we have companies like iFlix offering services in Indonesia, but it’s subscription-based, and you have to have a credit card to use it. Our strength is that we have a billing and charging model that is different from the all-you-can-eat model that enables OTT services.”

One example, he said, is Bolt’s cable TV offering which allows users to buy cable TV access in one-hour blocks for less than a dollar.

Another example, described earlier in the session by Ruchir Kalra, head of client development at McKinsey and Co., is Vodafone Egypt’s Fakka micro top-up cards, which mom-and-pop stores are handing out instead of small change for transactions.

Meanwhile, Tang said that operators also need to make more effort to share and learn from each other – not just in terms of technologies, but platforms and business models – and even big data.

“We should figure out how to aggregate big data from different operators and create a stronger, shared cross-regional database,” Tang said. “That will put us in a stronger position to negotiate with social media players.”

Bolt’s Gubiani admitted that level of cooperation would be a serious challenge going forward. “Operators have been reticent to cooperate with each other.”

On the other hand, he added, “When I talk with LG U+ and see what they’re doing, I find that inspiring, even if I can’t apply everything they do in my home market. We need to expose more of our capabilities and models to inspire other operators.”