I’ve been spending some time out in the Gulf again on various consulting gigs.
There are currently three pretenders to the crown of biggest regional Telco. Saudi’s STC, Qatar’s Qtel and the Emirates Etislat. STC has a pretty impressive footprint in its own vast country, but the other two make up for a lack of a large local market with capital participations in dozens of other operators, mainly throughout Africa and Asia.
The situation resembles Europe before a combination of regulation and market forces toppled the national incumbents off their pedestals. Most agree any losses the incumbent suffered in those years starting in Thatcher’s 80s but more in the 90s and 00s for the rest of Europe were a small price to pay for the improvements and value consumers saw in triple play services.
But that was before Apple, Google or Netflix loomed so threateningly large on the horizon. Now, with their weakened positions, a common defensive strategy against these behemoths from the USA is to go and cry in front of regulators and governments for some form of protectionism. That might ease the pain, but not cure the problem. The more ambitious ones may seize the opportunity and remember grandpa’s old line that if you can’t beat it, join it. I’m finishing a white paper sponsored by Broadpeak, that explores how and why local operators should embrace OTT providers by selling them their own CDN services, which will always be better than anything from a global provider.
Imposing data caps seems unrealistic in current competitive market conditions, as the operator that initiated them would lose out badly in market share. In France, Free has been fighting Google over YouTube traffic to their subscriber’s detriment for over a year now, the situation is escalating out of control with consumer groups complaining the regulator.
But out here in the gulf the situation is different. Incumbents haven’t yet started their downward spiral and there is an opportunity to do something great.
I believe these three companies have left it too late to succeed alone.
It took Belgacom nearly 10 years to become the content heavyweight it now is in its home market, but nobody had ever heard of Netflix when they first started and Apple was still trying to recruit content into iTunes Music Store.
So where the Belgian incumbent took a decade to get things right, the Gulf Telcos only have one or two years before the global OTT players turn their focus here.
With its subsidiary Intigral, STC has taken a clear lead in terms of content aggregation and probably in video infrastructure too. Opening the capital structure of Intigral to let Etisalat and QTel in may seem counter intuitive at best and probably downright crazy to many. But together the 3 operators could muster enough clout to finally beat some sense into the reactionary content owners.
This triumvirate would need to cooperate on technical CDN issues (but that's a story for another blog), but that still leave a wealth of areas to compete head-on, from user experience to hardware, packaging, pricing, bundling, marketing, business services, etc.
The Middle East is rife with video piracy and Hollywood majors should remember the music labels had all but killed themselves in their wars against file-sharing. They hung on by the skin of their teeth, and some are again a bit hopeful that the likes of Deezer or Spotify might pave the way for the industry’s return to at least part of its former glory. Incumbents like Orange are desperately trying to get into deals with these companies (see Orange - Deezer here).
Hollywood and the TV content rights-holders had been steadfastly maintaining their divide and conquer strategy to content licencing, making any attempt to aggregate content beyond a local play aimed at a specific device impossible.
That attitude has started to crumble, not least because the content owners want to initiate their own OTT strategies without limitation of device or geography.
A stakeholder with enough financial backing could flash a check with enough zeros on it to buy the exclusive rights in the whole region. This could be for a major sporting event or maybe the latest Hollywood blockbuster.
If I go along with this pipe dream, maybe the best of the Rio Olympics in 2016 will only be visible on IP networks in the Gulf, with traditional broadcast left with the crumbs…