UnTelco Video (1 of 2): The OTT Video Opportunity

Subscribe To Download This Insight

3Q 2017 | IN-4690

This is part 1 of 2 on the UnTelco Video Opportunity. It addresses the UnTelco concept, applied to Video, defines the OTT video service competitive environment, defines specific opportunity types available to telcos, and discusses some early movement in the market. Part 2 describes the interplay between on-demand video, live-linear (24x7) video and events, as well as describing two key roles telcos can choose to play in integrating services – that of a distributor or that of an aggregator.

Registered users can unlock up to five pieces of premium content each month.

Log in or register to unlock this Insight.


The UnTelco Concept in Video


ABI Research coined the "UnTelco" principle where both telcos and vendors break free from their established – but stagnant – connectivity-driven business and enter the B2B market, where they become enablers for several vertical markets. From the video standpoint, an UnTelco strategy is to offer Pay TV services that generally compete against OTT operators, compete in markets greater than existing footprints, or offer services in an unregulated environment to consumers.

From a competitive perspective, UnTelco video services should break out of legacy thinking around business model.  Cable TV providers started with Pay TV offerings and moved into broadband. Traditional fixed-line telco’s have moved from voice services to voice plus data services. Most major have some IPTV services – these have been especially strong in France, but exist in most major markets, especially among the urban footprints with good fiber reach. Many markets, such as Belgium and the Netherlands, IPTV services have substantial market share. Satellite Pay TV operators in a few cases today offer rural broadband connectivity. Further, in North America market leader DIRECTV is now part of AT&T, offering truly converged services as well as the DIRECTV Now unbundled, OTT product. Sky in the UK offers broadband services (using the BT OpenReach network) while in parts of Western Europe (i.e. Germany) Sky offers its full programming package via cable and IP with some operators, in addition to the fully OTT Now TV service. Mobile-first telcos have generally not offered video services recently.  We often use the term “service provider” or “operator” as an umbrella over all types of offerings. In this research, we use the term “telco” to align with the “UnTelco” concept. However, it can be applied equally well to cable operators focused on an all-IP migration.

OTT Video


To understand the UnTelco video opportunity, one must first understand OTT video. The press is full of discussions of OTT video eating into Pay TV.  OTT isn’t one unique business model, nor do OTT players sit within a single class of player.  ABI Research publishes MD-OTMS, and will have upcoming research on the OTT ecosystem.  However, it will be beneficial to briefly break down key elements of the OTT ecosystem here, before discussing opportunities for telcos.

From a business model standpoint, the major revenue streams for OTT video include:

  • Subscription Video - services such as Netflix and HBO Go as well as CBS All Access
  • Advertising Supported – Expected to be increasingly common as broadcasters migrate from “free to air” to “free to wire” (FTW) platforms, as well as with significant amounts of short form video on platforms including YouTube, Facebook, Twitch, etc. Sponsored content is a subset of advertising supported content; it is also growing in popularity due to both the low costs of production of unscripted content as well as an ability of brands to shift from commodity to lifestyle (i.e. Red Bull broadcasting).
  • Transactional Content – including both rentals and purchases
  • Piracy, in fact, leverages OTT technologies and follows all of these business models to generate revenues. Managing piracy effectively within the markets you serve is required to successfully monetize content.

From a business entity standpoint, OTT providers come from several business models or core competencies; the key ones include:

  • Traditional Pay TV providers – such as Comcast’s Xfinity Stream products, ViaPlay and Sky’s Now TV.
  • CE & Retailers – such as Vudu (Walmart), Amazon Instant Video as well as Apple (iTunes) & Google Play
  • Content-oriented players, including broadcasters and cable programmers as well as movie studios, are increasingly looking at a variety of OTT services to distribute their content internationally, gain control over their distribution chain, and enable smaller distributors.

While subscription video on demand (SVOD) services  such as Netflix, Amazon Instant Video, Hulu Premium, transactional VOD services (TVOD), such as iTunes, Vudu, Fandango Now, Google Play and Ad-supported VOD (AVOD), such as Hulu have existed for some time, the newest business models include Pay TV Light as well as broadcaster direct to consumer (B2C) offerings.  (see related research: AN-2381

Understanding OTT Video Operator Opportunities


With that lay of the land, then, the following are the most exciting opportunities for telco to capture in the OTT space are part of their UnTelco video strategy.

  • The Mobile First Video Opportunity – A number of demographics are “mobile-first” or “mobile-only” in terms of their content consumption. This audience varies significantly in size and demographic by region, however, these consumers are very interested in mobile video services. The key trends driving the mobile video-opportunity include subscriber-centric packages, as opposed to household centric packages. This implies the packages can be smaller, less expensive and be built with some restrictions to focus them on individuals (i.e. device or consumption limitations). Another key driver of these services is self-installation and lack of contracts, which stands in stark contrast to existing Pay TV categories. Finally, consumers appear to be more flexible in terms of content offerings – this is likely self-selection rather than less-selective. (i.e. a consumer who loves the NFL would choose DirecTV now, while one who looks for more international content may focus on Sling TV). Telcos can enable consumption via zero-rating, choose distribution partners to resell, or launch their own captive services to tap into mobile video consumption.
  • International and Linguistic Offerings – Carriers with distinct regional, cultural, ethnic or content genres will likely find excellent opportunities to syndicate their content internationally as an SVOD or ad-supported services. These packages can include ad-supported, subscription and transactional components, and can typically extend the value of any content holdings as well as provide increased leverage in content holder negotiations.
  • The Multiscreen Solution – Some operators may simply want to upgrade existing Pay TV services to reach every screen; this is best done by re-architecting the entire solution to be OTT-ready, although in practice many operators create an OTT platform alongside the legacy broadcast platform and work to slowly migrate legacy devices and content over. However, the more quickly the business logic can be integrated into the core offering the more business flexibility will generally be available to the carrier in terms of monetization and new offerings.
  • Short Form Syndication – Short form content is increasingly consumed throughout the day. Unscripted content (i.e. from multichannel networks / YouTube) often offers fairly straightforward revenue sharing opportunities
  • Wholesaling - Broadcaster Direct to Consumer offerings create a simpler business model for operators, compared to traditional Pay TV services. An UnTelco could simply offer co-marketing and perform billing integration with their carrier billing platform to launch the service. Later on, some traffic / CDN integration to ensure a high quality of experience, and/or integration of carrier authentication can improve the service and business relationship. Data sharing agreements could also be important for product managers to evaluate product success, diagnose problems, and identify gaps in the service.
  • In-Home via OTT – Many operators are looking at low-cost OTT boxes and OTT platforms to bring these same video services back into the home. Roku, currently raising money for an IPO, is one significant player in this market, with funding from Liberty Global and Dish Network, for example, delivers the boxes for Sky’s Now TV. Netgem, based in France, has good offerings as does Nagra (IntuiTV), Cisco (Infinite Video) and Verizon’s VDMS.

Early Successes and Problems


A few years ago, in evaluating the opportunity for OTT services, ABI Research concluded that the first services to market would attract the most attention among consumers, and have the best chances for success.  There remains some truth in that, although we have seen that good content and willingness to invest in marketing are also critical factors in these services. 

In both Europe and the United States, a number of services have already launched and are starting to reach scale.  Netflix’s international rollout in 2016 accelerated the plans of many companies trying to put out regional services to compete.  Of course, Netflix is struggling with regulators determined to give their own local video services political in a few geographies (Thailand, Russia, China and to a lesser extent even France). 

Cannibalization of existing services clearly exists; in general, launching your own video service may accelerate this trend a little, but the benefits outweigh the costs of losing to other providers.  Pricing in this early market is another problem.  Consumer expectations are that OTT services are very inexpensive.  However, this can’t justify content acquisition costs in some markets.  In addition to aggressive promotional pricing, OTT operators have been aggressively increasing package pricing through removing lowest cost packages, shifting some channels into premium bundles, etc.  In other cases, operators appear to be subsidizing the service with hopes that they prevent churn of other, profitable services (i.e. mobile plans). 

Carriers also must carefully choose their launch strategy.  Some partners offer turnkey platforms with very fast time to market, however, these may not have as much customization or flexibility is required.  In the middle sit some platforms which have prototypes, but can be fully customized.  Finally, some operators develop fully customized and integrated products.  This has the longest lifecycle, but may best meet long-term needs for complex multi-market carriers.

All in all, however, its impossible to ignore video as a driver of the next phase of carrier monetization, and IP-based and OTT strategies are the way to go. Telcos must carefully look at their assets, business model, and competitive / media environment to craft an appropriate strategy for OTT video.