The hard decision of mobile operators : a dumb pipe or a value-added service provider

With progress of communication technologies, it enables rapid development of all kinds of services over the Internet, and we call these services with a name as over the top (OTT). The penetration rate of 4G has increased rapidly and also increased mobile operator's revenue. With the increase of digital convergence demand and other video platforms appear, it can be predicted the level of complex and competition will rise in whole market. The business expansion from scale of economies and the popularity of flat rates all have provided some convenience for people to surf and enjoy OTT services with no worry. However, the mobile Internet service providers (ISPs) have increase the number of market penetration rate quickly and have to deal with huge mobile traffic generated from OTT services. Video streaming accounts for 58 percentages in all mobile data traffic from a recent survey and it indicates that OTT videos streaming services convert mobile operators to be dumb pipes. If mobile operators have to maintain quality of service, they need to invest more money to upgrade their communication infrastructure. Although voice of IP (VoIP) services provided by Facebook, line and Skype do not consume huge amount of mobile bandwidth, it decreases mobile operator's' voice revenues and average revenue per user (APRU) significantly. Moreover, the revenue of SMS from mobile operators decline dramatically, too. Therefore, the paper addresses whether mobile operators are capable facing the impact of OTT videos and VOIP, to cope with emerging challenges from OTT services. In Taiwan, all mobile operators have developed their OTT platforms, and some mobile operators bundle their OTT services and mobile Internet service together to make more attractive for reducing churn rates and increase ARPU. In addition, cooperation with content providers and mobile operators are necessities and large scale of merger and acquisition (M&A) between AT&T and Time Warner to enrich their OTT capacities also emerged. This paper discusses different options of mobile operators to cope with OTT challenges. 1. Mobile operators choose to be dumb pipes and upgrade their infrastructures aggressively, and adopt strategic alliance with OTT service providers. 2. Mobile operators aggregate contents to develop OTT platforms by themselves to compete with other OTT services providers. In addition, the paper also how do asymmetric regulations between BISPs and OTT service operators affect the competition between mobile operators and OTT service providers. One is network neutrality and the other is data protection of personal privacy. Network neutrality has been discussed and debated for many years with different kinds of interpretation, but restrictions of selling personal data for mobile operators can produce more notable effect...