This article appeared in the November 2013 issue of The Gulf.

From the analogue systems of first generation wireless telephony to fourth generation high speed connectivity currently being introduced across the Middle East, and on to the fifth generation long term evolution (LTE) advanced tier that the industry is fine-tuning for release, telecoms has come a long way.

At last month’s Telecoms World Middle East summit in Dubai, regional telecoms chiefs debated where they had lost ground, and in which areas they could make inroads.

Delegates heard that voice dominates the revenue streams of regional operators, and that they are worried about the stagnating usage of short messaging services (SMS) as over the top content (OTT) content providers have slowly but steadily cannibalised the market space.

OTT content is simply audio and video content than one can view on a smart device or personal computer without involving traditional multiple system operators.

Infotainment forms a major chunk of all broadband usage in the region, with over half of all internet users in Saudi Arabia, for instance, watching videos everyday, according to telecoms research and consultancy company BuddeComm.

Watching YouTube videos through apps which enable streaming of multimedia content as well as exchanging messages on applications such as Whatsapp or Viber, which bypasses the SMS service provided by telecoms operators, has become the new, faster and cheaper way to communicate.

While this may be good news for consumers, this sentiment is understandably not shared by the operators.

“You have services such as SMS that uses the cheapest form of network, which gives the highest margin and on demand. It has been declining across this region and ours is down 38 per cent from last year alone,” Omantel chief executive Dr Amer bin Awadh al Rawas told the summit.

“It has been decreasing for a couple of years. When you try to compensate for that revenue, the single service that is growing is mobile broadband, which is the most expensive form of service.”

Countries such as the UAE have taken the extreme step of banning applications such as Skype, which allow users to talk to each other for free through Voice Over Internet Protocol service.

Saudi Arabia has long threatened to bring about a ban on encrypted messaging services such as Viber, Whatsapp and Skype, citing security challenges brought about by lack of regulations.

The consensus at Telecoms World Middle East was that operators must work in tandem with OTT providers to provide the best value added offering to consumers.

“If someone wants to use Whatsapp, then our job is to make the Whatsapp experience as good as it can be,” said Kyle Whitehill, Vodafone Qatar’s recently-appointed chief executive.

Telecoms operators should avoid being on a collision course with OTT content providers, warned Andrew Hanna, chief commercial officer at VIVA Bahrain.

“OTT players are a reality and the longer we pretend they don’t exist is going to be a danger for us. They’re offering a lot of customer value and customers are trusting them as a source of content and put all of them together and there is no reason why we should not be partnering with them,” he said.

According to information technology research consultancy Gartner, the telecoms services market in the Middle East continued to be the biggest spender worldwide, with the sector representing more than three-quarters of all IT spending regionally this year.

Growth is predicted to exceed five per cent this year, with “mobile voice services reaching $88.5 billion and mobile data services at $23.2 billion,” Gartner noted.

While broadband and big data dominate the innovation strategies of regional telecoms operators, voice still dominates revenue streams for most.

“More than 60 per cent of our revenue comes from voice,” said Rashid Abdulla, chief executive of Bahrain Telecommunications Company (Batelco). “However, a lot of that comes from international mobile roaming. We know it cannot last that long. A big chunk of our revenue comes from internet roaming, but it is under tremendous pressure from regulators to make it cost-oriented, and that cannot be milked for a long time. So we will be more and more dependent on getting more dollars out of broadband,” he said.

While vouching for voice and developing infrastructure to support regional enterprises, Abdulla also called on telecom players to support the development of localised content.

“Short term we have to embrace the OTTs, but long term we have to work on more localised content,” he said.

Another issue discussed was customer engagement - whether online or through retail outlets - which, admitted Dr Daniel Ritz, chief strategy officer at Etisalat, remained rather poor.

Telecoms operators do not offer an enriched experience and online outreach compared with mobile phone manufacturers such as Apple, he pointed out.

“The online and store experience that you have in Apple is ten times better than the store or online experience that you have with telecoms operators. We need to be very, very careful and innovative in the way we structure our online and offline customer experience, so as not to lose the link,” he said.

The only interface telecoms firms have with their customers should not be at the billing stage, warned Omantel’s Dr Al Rawas.

“Where people enjoy seeing YouTube, which is Google, they associate very positively with it. But Google doesn’t bill them - they get the bill from the local operator, and if you’re an incumbent, it’s worse,” he said.

“When you’re travelling, you see Google everywhere but when you are travelling from one country to another, you see different operators, different brands, so that’s where the confusion really comes from.

“We’ll be reduced to the role of a debt collector if we don’t do something about it now. We’ll become the guy who sends you the bill for all the nice things that everyone else gives you.”

The industry leaders also looked to the future where telecoms can shape the way devices can communicate with each other, a concept that is more popularly known as the ‘Internet of things’ or machine to machine (M2M).

Whitehall cited Vodafone’s collaboration with German carmaker BMW, in which cars are implanted with a subscriber identity module (SIM) card, which enables data gathering and communication between devices.

VIVA Bahrain’s chief executive Ulaiyan al Wetaid however, reminded the gathering that while the industry must catch up with trends, the ‘Internet of things’ was a rather small value generator.

“M2M is very low average revenue per unit (ARPU) and it’s capped. You really cannot get much out of it, so it’s us adapting to doing more and applications maybe getting to the next level where we can provide consultancies for M2M.”

As the industry leaders debated the road ahead, Etisalat’s Dr Ritz said the issue of OTTs was ‘give and take’.

“We need to take bitterness and negativity out of the discussion because they [OTTs] are there. Without these guys, who will be buying our broadband access?” he said.

“We also need to talk about business models - there are players out there who are getting a lot of money from these OTT players. Maybe we should learn from them on how to extract value and money on these OTT players.” – TradeArabia News Service