Given the proportion of data that is used for video distribution and the fact that growth in annual data consumption is almost wholly attributable to video, it is no longer reasonable to strategise purely for data. Video has become an integral component of the operational strategies adopted by most telecom players. Operators must leverage their unique position as network owners and the keepers of subscription relationships with end-users. As controllers of the network and technical infrastructure underpinning video delivery, operators play a critical role in driving the creation and growth of the video ecosystem. The critical transformation that operators must undertake in the near term is to move from treating their networks as conduits for data to video-centric networks.

Distributing video over cellular networks

As the share of video rapidly increases in the overall data traffic through 2020, the mobile video market will pose challenges for network operators as they must handle the traffic, delivering freely available ad-supported video-on-demand and live streaming video services. As more content gets delivered through live over-the-top (OTT) broadcasts, the networks will be burdened. Thus, operators need to invest in their networks for supporting the increased demand for mobile video services, without compromising on the qual­ity of service. This will keep customers happy and reduce churn.

Mobile video traffic (excluding Wi-Fi) will increase tenfold by 2020. This is something network operators need to address both at the business and technology levels. The bulk of traffic carried over operator networks is generated by third parties. If operators cannot fully monetise this huge growth in external traffic, they must at least take measures to optimise their networks, enabling a more efficient and cost-effective distribution of video.

Video calling hits the mainstream

The voice- and video-calling services offered by OTTs are also being used extensively. The penetration of app-based voice over internet protocol (VoIP) and video calling will increase in line with the growing penetration of fixed and mobile broadband, and smartphones. While the consumer app-based video chat penetration is already slightly higher than VoIP, the frequency of usage remains significantly lower for video chat, which though popular among early adopters is yet to become a mainstream activity. Video calling, for which volumes across the consumer and business segments are projected to grow at a cumulative annual growth rate of 10 per cent between 2015 and 2025, has the opportunity to go more mainstream, if pushed by the communication service providers. The current most popular video-calling services are Skype, Face­Time and Facebook Messenger, but other players are likely to enter the market. Operators will inevitably need to respond to this and add video into their converged communications services in order to remain relevant to the end-user.

Video in the enterprise

Video applications are being used by enterprises for an increasing range of functions across the full spectrum of industry verticals. While communication remains the primary use for video in an enterprise, a number of additional functions are gaining traction among businesses of all sizes.

  • Enterprise video communication: Once the preserve of only the most senior levels of enterprise executives, video communication has effectively broadened its usage from the boardroom to the entire office. By far the longest-established and most widely used video application am­ong enterprises is videoconferencing.
  • Video surveillance: One of the most widely used machine-to-machine (M2M) applications is surveillance video dep­loyed as part of managed security solutions, whereby cameras are connected wirelessly and alarm systems use internet connections to alert users when sensors have identified an incident. Besides dedicated smart home and enterprise security solutions providers, operators too are increasingly seeking opportunities in the video surveillance space which, along with wider managed service adoption, improved camera resolutions and higher video signal quality, account for an ever-increasing volume of fixed and mobile data traffic.
  • Evaluating enterprise use cases for virt­ual reality (VR): VR also has a potential role in a number of industry verticals, where it will provide enhancements to existing video communication solutions. The health sector in particular can benefit from VR applications that may be used for various functions such as surgery simulation, remote surgery and telemedicine.
  • Digital signage: M2M digital signage is a key application in which video plays an ever-increasing role, particularly for the retail sector. Operators may either provide the network infrastructure to support customers’ digital signage needs in partnership with third-party specialists, or alternatively, they may also offer end-to-end turnkey signage solutions. These products include both in-store video and large outdoor displays.

Consumer video consumption in evolving markets

The biggest growth area for mobile video expansion will be in currently low-penetrated evolving markets, including India. In these significantly less developed markets, the broadband user base is skewed towards early adopters. Here, interesting applications are widely available before broadband access, with many users purchasing broadband specifically for using video services. These evolving markets host a huge potential user base and hence, substantial latent opportunities for mobile broadband and content service development. While the relatively evolved Chinese market already contains the biggest single 4G population, the evolving markets of Asia will provide an additional 4G base (and hence an addressable mobile video base) of nearly 1 billion by 2020.

As controllers of the network and technical infrastructure underpinning video delivery, operators play a critical role in driving the creation and growth of the video ecosystem.

Outlook

  • Transforming data networks into video-centric networks: Operators own and operate broadband networks, through which third-party OTT and mobile video services reach users. They can help third parties build audiences by bundling or cross-marketing services to their own subscriber bases. From this perspective, operators should embark on the transformation of their own networks as soon as possible, making the provision for future networks that are both more suitable for video transmission and more readily adaptable to a variety of business scenarios.
  • Innovating data monetisation: Operators can innovate data monetisation, reducing the potential for bill shock and driving higher levels of video consumption over cellular networks in particular. The entire question of how data and entertainment can be monetised in an integrated fashion is still being settled. Currently, data is charged separately from entertainment, which is a constraint on usage. If the commercial needs of network owners and entertainment providers can be more closely aligned, there is potential to accelerate the entire business of online video distribution. In the short term, network owners can facilitate commercial arrangements between themselves and third-party entertainment providers in ways that focus on the value of the entertainment proposition, while obfuscating the cost of data in bundled consumer propositions.
  • Driving video ecosystem cooperation: The cooperation of all companies in the video ecosystem is critical for delivering not just any video experience but a high-quality, differentiated video experience that can justify higher ARPU levels. Given the complexity and number of players required to deliver video streams via IP, proactive cooperation is critical for ensuring that the video user experience meets user expectations. In addition, a high degree of clarity regarding where bottlenecks lie and how these can be addressed is re­quired. These attributes enable operators to differentiate themselves on the quality of user experience and offer opportunities for ecosystem collaboration with third-party content and communications video service providers looking to ensure the reliable delivery of their products and the long-term growth of their user bases.

Based on a white paper by Ovum, “The Evolution of Big Video: Examining Telco Transformation Video Opportunities”