Technicolor’s Jim Brake Offers Insights on How Mid-Sized and Rural Network Service Providers Can Respond to the Over-the-Top Trend

• Mid-sized and rural network service providers in North America are facing a series of challenges as OTT-only operators enter the market.
   
• Mid-sized and rural operators can meet these challenges and benefit from the rise in demand for OTT services by developing strategies for extending their services and addressable market beyond traditional geographic limits.
   
• Technicolor is working with these operators to harness technology and market trends to develop strategies that balance and integrate legacy and new content services.

Jim Brake, Senior Vice President of Technicolor’s Connected Home is in charge of the small and mid-sized operator market in the North American region.

In this discussion, he addresses the challenges they face from the OTT-only players like Netflix, and how Technicolor is helping this segment of the service provider market meet the challenges.

Mid-sized service providers are an interesting category of operator. Can we explore the challenges and opportunities that have been created as over the top providers enter the market quite aggressively? How are mid-sized and rural operators affected by the rapid rise of over-the-top offerings?

Brake: There are really three different forces changing the dynamic between the mid-sized and rural operator and the end customer.

Historically, content – and the delivery of that content – have been married through the operator. Now, with the over the top players coming in so strongly, separation is occurring between content and content delivery. This means the operator does not necessarily have control over the content that the end subscriber is seeing.

The second thing is that the price the end consumer is willing to pay for content is under pressure because they do have alternatives for how content is brought into their home. They can look at the operator simply as a medium of access. Then the revenue from content goes direct to the content provider rather than through the operators.

Finally, we are seeing changes in the dynamics of how the operator actually secures content. The direct relationship between the operator and the content provider is diminished when the content provider can bypass the operator and go direct to the end subscriber.

So, there is a lot changing for the small and medium operator, and how they deal with this change will determine the nature of their relationship with subscribers, content providers, and their financial fortunes going forward.

So what can these mid-sized service providers and some of the rural players in the North American market do to take control of their destiny and respond to this new OTT presence in the home?

Brake: That’s a great question. The operators themselves are faced with a decision. They can either embrace the migration to OTT, they can resist the migration, or they can come up with a hybrid approach.

According to just-released industry estimates the market for OTT content is expected to have annual compound growth of 14 percent over the next 10 years. So, OTT is a force to be reckoned with.

If an operator chooses to resist OTT, they will be able to maintain a certain level of subscriber base with the traditional approach to content delivery. If they choose to embrace OTT they may want to consider migrating their own offerings to more of an OTT play.

Many operators in the industry are looking at such an alternative right now. They are kicking the tires, so to speak, to evaluate the business model between themselves and the end user on offering OTT plays, and many of them are experimenting and evaluating such offerings.

Of course, the hybrid approach would require them to understand which customers are going to migrate to OTT and which customers want to stay with the traditional method of delivery of content. They would then need to find a happy medium to maximize the revenues for their company and maximize subscriber numbers for both types of customers, because in today’s world, one size does not fit all.

In this hybrid model you describe, there is a possibility for operators to – in essence – compete with themselves while expanding their market. If they pursue some form of OTT strategy, they are not as geographically bound as they might be when providing a more traditional service. Would that be correct?

Brake: Absolutely. With OTT all you need is an access medium, and that opens the opportunity for a service provider to expand beyond their traditional geographic footprint and offer services in other parts of the country.

In the hybrid approach that I have described, many operators are looking at exactly that scenario; if they were to offer an OTT play, could they start gaining additional customers outside of what they would expect to be their customer pool.

That really means entering a new business altogether, which has its own implications. There are so many players now in the OTT game...beyond the big organizations like Netflix, Hulu, and Amazon Prime.  Many more are entering the market. There is a case to be made that this might be confusing for consumers who just want to access their choice of programming. Is there any opportunity for service providers to help consumers manage this often-confusing landscape?

Brake: Thats an excellent point. As you separate the content from the service provider you run into a situation where each avenue of content, whether it is Netflix, Hulu, or somebody else, has its own look and feel.

For many end subscribers that becomes frustrating. So, there is going to be some opportunity for the service provider to unify those different interfaces and offer an integrated look and feel. That type of unification will maintain stickiness between the operator and the end subscriber that might have been lost by the end user going direct to an OTT player.

That unification of the experience is the carryover from today’s traditional content delivery model that can help the service provider maintain customer satisfaction and maintain their subscriber base.

Jim, you are managing a team for the small and mid-sized market. What is Technicolor doing to work with mid-sized operators as they navigate their options and begin executing strategies to address the OTT opportunity?

Brake: Technicolor is a leading OTT product provider. We have very strong relationships with Google and with Android TV. We have a number of products on the market today and a number of others in the works that allow the operator to provide an HD service, even a 4K service into the subscriber’s home.

These products allow a level of customization that enables the small and medium operator to customize the look and feel of their services. When the user first turns on their OTT product it can have the look and feel that the end customer has experienced in the past. It can have the splash screen and the navigation they have come to expect from their provider.

That enables a warm transition from the traditional to the new mode of content delivery. This provides an advantage to the operator in that they get to maintain the customer relationship; they get to create and maintain a common look and feel and ease of use and at the same time offer new content and new avenues of content for the end subscriber.

What feedback do you get from the mid-sized players about this? Is this a battle they are ready to take on...an opportunity they are ready to pursue? What’s the sense you get about how this segment of the market is moving forward on this issue?

Brake: This segment is absolutely exploding. There is an estimate from ITBusinessEdge that the OTT market in the US will exceed $18 billion by the end of 2018. That means there is a huge shift in the money being invested in the capability to deliver OTT. The operators, as a whole, are very excited by the growth in this area.

By contrast, the general video market -- and video-on-demand – is not fast growing. But this particular segment, OTT, is absolutely dynamic. As a result, the operators are all very interested in how they should be migrating their networks and how they should be migrating their customer offerings in order to maximize the opportunity to grow their subscriber base and grow their incomes.

The operators almost universally are very interested in evaluating product from Technicolor, in understanding from Technicolor what the trends are and understanding how to best balance between the traditional and the new. That is where I believe Technicolor can offer value. Our industry insights and our ability to offer services to help them make that transition can really add value to an operator.