Few telcos have started the process to become a media company,” says Nigel Bruin, principal consultant at Huawei Technologies. In the Middle East and Africa, this shift is less common, but Bruin foresees that the shift will be needed to keep on offering to the customers what they demand.
“In the Middle East and Africa we are not there yet. We have both sector and companies, which is the original set to start this process. The lack of confidence behind handling this tool [create content] is something that they need to address a bit more,” he adds.
According to Bruin, the UAE is one of the countries where the telecommunications sector is ready to embrace this video opportunity and sets Etisalat as the example. He also names Qatar and points out that the country had a “slow start”. “This slow start can be addressed. It was more a marketing problem than a technology or organisation issue,” he says.
In order to enter this business, telcos need to think about the business model that they want to follow. “One business model is the video telco big bang, which requires lots of money, for instance what BT and Telefonica have done. Other companies will invest and start growing the business little by little, which is slower than the big bang model,” he explains.
Bruin believes that the region will see both business models and telcos will have to pay attention to the market and the capital availability to make a sustainable investment.
“Content at the moments tends to be premium, which is content at a very high cost. What we really need to do to make the transition is to offer the product to the mass, so that the content costs less. Instead of trying to squeeze the premium product with high prices in the market, you have to take the opportunity to do it the other way round and price the mass market,” Bruin explains.
He adds that building video services through exclusive content is a not the ideal business model for telcos, as it gets too expensive too quickly, but he also highlights the importance and the need of premium content for consumers and operators.
The high level of investment required is just one of the challenges that operators face when developing video services as they will also have to think of how the OTTs are offering content to its subscribers.
“If you talk about video opportunity, you are talking about content. When I say content, I am not only saying video related to TV, I mean all shorts of video content and digital content, such as video games or any other digital media,” he explains.
“You cannot ignore OTT, this is not going away, the diversity and long tail means that OTTs have to be part of the proposition. The best way might be revenue share agreement. In the end, the fastest we get broadband, the OTTs will be there. We have to make peace with it. We have to promote business plans that allow us to be successful while OTTs exist,” Bruin adds.
For Middle East and Africa, it is a must to promote Arabic content, but only the biggest telcos can manage to do it on their own, explains Bruin. “We need to think what the opportunity when offering relevant local content. However, we cannot forget that Hollywood rules. The majority of the people is looking for this content. Also we have to look to address the Netflix, the Amazon, as they have the exclusive content. There is not going to be just a single strategy, but in this region localised content is clearly a thing to be address.”
“What telcos and service providers should be doing is trying to give consumers what they want. Whether that action is providing the consumer Netflix or somehow making that content available. For the regulators, I would like to see a market driven approach. I would prefer that the market find its own level. Banning things is a market problem, instead of a market solution,” he concludes.