Successful companies have leveraged the power of internet to drive significant growth in their businesses. On the other hand, companies that have not embraced the opportunities created by the net or have delayed to leverage the same have disappeared as well. In both these categories one can list several names. It’s been a few years since the net has moved beyond being just the basic part of the infrastructure. It brings newer opportunities every single day. With the onslaught of mobile online, cloud, big data social etc., it also creates new service delivery models and newer ways to monetize them. In the process, driving massive transformation yet again, across all constituents of the industry.
Mobile and cable industries have significant and direct impact from the net. The cellphone industry has traditionally relied on monetizing use of individual talk time and text messages. The advent of smartphones changed this model, where service providers started charging additional to provide the internet services. The fixed monthly amount for the data plan allow users to onboard any application and be assured of the service levels, as there is no discrimination due to net neutrality. Over a short period of time, the mobile devices have become powerful with far enriched and better UI. It provided tremendous opportunities for several applications on messaging that have become hugely popular and are rapidly growing. Recent acquisition of WhatsApp by Facebook and Viber by Rakuten have brought messaging to be a critical part of overall growth strategy by the net biggies.
Similarly, the cable television business has witnessed significant transformation due to online services like YouTube, Netflix, Hulu etc. These services have overcome one of the key challenges that cables have; they can be accessed from anywhere, anytime and on any device. Add to that, the fact that YouTube is virtually free and Netflix costs just $7.99 a month, makes the business case for them even more compelling. A recent Belkin and Harris Interactive survey indicated that ~30% of US cable subscribers would consider ending their cable plan in favor of online video streaming; that’s 17+ million subscribers! Most of the cable companies are also internet service providers, the load on their data services has increased without much additional revenue. In addition, the online companies are now also getting into creating their own contents rather than just distributing from the traditional media companies. Immense popularity of original contents like House of Cards from Netflix is a great example of how the online services company are rapidly evolving to own complete consumer experiences.
The important question is, how can the service providers monetize their services effectively without any detrimental impact to their customer experiences? The recent Netflix Comcast deal might be an early indicator of how that’s going to play out. Netflix is the among the largest global players for online video streaming services. During evening peak hours it amounts to a staggering 30% of all US internet traffic, which clearly puts significant pressure on the ISP bandwidth provided by companies like Comcast, ATT, Verizon etc.. Netflix usually channels this traffic through backbone providers like Cogent, L3 etc., who have peering relationships with backbone providers and ISPs. However, the larger ISPs have increasingly been pressurizing Netflix to share the cost of managing such high traffic. With more original contents being created and produced by online companies, far more enriched user experiences and ability to stream across devices anywhere anytime, this traffic is going to increase at an accelerated pace. Netflix agreement to go direct with Comcast and pay them instead of going through third party peering companies, will significantly improve the performance for their common customers. This is not only unique, but also indicates a fundamental shift in the market. With the deal, Netflix would now pay indirectly for the bandwidth it occupies and the cable service providers will be able to monetize provisioning directly.
It effectively sets a precedent for similar relationships between cable, ISPs, online and content providers. This will also drive changes across the ecosystem of mobile world and will eventually impact the Internet of Things (IoT) segments. As the explosive growth of IoT takes shape over this decade where everything starts to connect with everything else, this massively connected world will find new ways to collaborate, compete, analyze and charge. In a symbiotic world, this certainly opens up massive transformation possibilities. With significant increase of connected devices, and massive adoption of secure analytics through big data, the backbone providers will have extreme level of fine grain information that can be monetized directly or indirectly through content or apps providers. For example, viewing online streaming on smart tv or mobile devices may cost more, the connected white goods at home may cost less. The connected cars may get charged more for better connectivity on infotainment and telematics, the smart watch may not.
Symbiotic world of net will continue to drive new possibilities….