Kathy Gibson reports from AfricaCom in Cape Town – By hesitating to provide over the top (OTT) services, mobile telecommunications operators in Africa could be missing a valuable business opportunity.
Pierre Cloete, head of TV, media for engagement practices for sub-Saharan Africa at Ericsson, points out that while the operators don’t specifically offer content services, their users are finding other ways of getting the data they want.
“It’s my opinion that the mobile operators haven’t fully understood or unlocked the value of media and content in their networks,” he says. “But if you look at an analysis of network usage, they are already serving huge amounts of data, mainly YouTube, BitTorrent or pirated content. So video is being used, we know it is, but the operators haven’t come in line with the full value chain and content chain.”
Cloete offers an analogy of a car: “They have built the engine, but someone else is driving the car. They are missing a huge amount of value that is sitting in the content space. Companies like YouTube and Netflix has been successful because they have unlocked that value.”
The problem is that many operators still consider content to be an expense, instead of treating it like a commodity with its own value. “People buy the cold drink, not the bottle,” Cloete points out. “And content is the product that people want to consume.”
While operators are obviously protective of their revenue streams – which currently derive from providing connectivity – Cloete warns that data is going to become cheaper anyway. In other parts of the world, content is what’s driving revenue for operators, with data revenues having come right down.
“The revenues are generated from data not as lucrative any more as the content revenue,” he says. “This is part of the reason why telcos are buying content companies.
“Yes, the network is a broadband play, but the real thing that’s driving broadband is video.”
Many operators in Africa are still discussing how to optimise their voice networks to offer data, Cloete adds, but they should maybe look a couple of steps ahead.
“The discussion at the moment is about voice versus data, and how they can migrate to good data networks. But my opinion is that they should go one step further. The network is becoming a video network rather than just a data network. Video is what’s driving data, so operators should look to future-proof their networks now.”
Cloete warns that competition for media and video content could come from unexpected quarters, and leave the mobile operators scrambling to catch up.
The imminent roll-out of digital terrestrial television (DTT) could be one avenue where what he calls “left field entrants” might come from.
“DTT is a bit of an unknown entity that people haven’t unlocked properly. There seems to be a lot of superficial thinking about DTT, and we should probably be thinking a bit deeper about it.
“If you think about DTT as simply changing an analogue signal to a digital signal, that’s not a positive experience for anyone. But if you think of it as having the potential to unlock many more services, it can become a truly connected environment. When you can send back accurate realtime data to the operator which allows them to personalise the experience and send on-demand requests, content and other services to the consumer, that is when the value of DTT will be unlocked,” Cloete says.
“DTT could be a potential game-changer if someone grasps the opportunity.”
However the mobile networks are still where the real potential lies in Africa, he says. While only 20% to 40% of African households have television, up to 90% of them have got cellular phones, and these will soon be converted into smartphones.
“In five years’ time there will be half-a-billion smartphones in the market. That’s a huge opportunity,” he says.
While consumers will always prefer to watch video on the biggest possible screen, they will default to the best screen available, be that tablet or smartphone, Cloete points out. So if smartphones are what people have, that’s where they are going to consume video.
“For operators, the question should be about coming up with smart ways to get the content through the network; to reduce the costs of the data and delivery of the content; and finding the right content for the right market. That is the key to success: understanding the market and understanding what they want; then you can unlock the commercial elements of the content.”