Before I explain the cryptic title, I have to give thanks to Dean Bubley for another acronym. UTFP stands for “Under the Floor Provider”, better known as our current Telcos. The future for Telcos is being referred to as the plumbing and dumb pipe providers. Let’s add another acronym to the mix.

While attending the Telco 2.0 Conference in Nice, Dean posed a question about “Under the Floor Providers” implementing the “Over the Top” (OTT) services and a unified API strategy. I’m not sure he ever answered his question, as I was too busy writing down the new acronym. This question was raised during a session about APIs, the best way to monetize, deliver and standardize, which led to a very lively discussion — perhaps the most spirited of the conference.

Most of us have seen the chart of the two-sided business model. I’ve modified it slightly to illustrate Dean’s point. There are many examples of services to be delivered, so I will leave those out of this post. Telco integration of OTT services creates the true two-sided business model, providing value on both sides of channel. Telcos must change the legacy thought process that states “They’re our consumers and will remain our consumers as long as we give them want they want.” That’s all well and good, but there is only so much blood (cash) you can squeeze out of that turnip (wallet). It is not a technology discussion any more (look at BT, Orange, DTAG, etc.) – rather, it is a new business mentality that is required to make the two-sided model work and a commitment to executing the plan. It could be argued that the thought and business leaders for the next generation of telecommunication companies will come from outside of the telecommunications industry. Imagine what Amazon or Yahoo could do with telecommunication assets and the data to be farmed and exposed. Let’s not get into the regulatory issues — that bridge is easily crossed by providing opt-in services the consumers want. Most of us do it every day on the Internet or on our cell phones.

OTT Services Graphic

Many Tier 1 Telcos have begun the process of migrating their networks to support the business models of the future. The next step is to evangelize the process within an organization to ensure its success. Changing old habits is hard, but in the case of the Telcos it is a necessity. If the projections are correct regarding the soon-to-be $100 billion Communication Enabled Business Process (CEBP), $125 billion Value Added Services (VAS) and the $250 billion Service Delivery Platform (SDP) markets, the Telcos cannot believe that when the revenues and profits from such markets are high enough to enter, that they will simply be able to dominate by throwing their hat in the ring?! History dictates that the Telcos will have a large hill to climb.

Consumers and enterprises are currently looking beyond current relationships to fill the needs for OTT services and leaving the Telco with razor thin margins by delivering the service on behalf of the OTT provider. Does anybody know or care who OTT providers such as VoiceSage, Voxeo or Jaduka use to terminate their services? The consumer or enterprise doesn’t care how the service is delivered — they only care that it solves their personal or business need. After the immediate need has been fulfilled is when the real creative juices start flow. New opportunities open up to those who solve the first problem. They are regarded as partners or advisors. When was the last time you thought of your telecommunication provider as a partner or advisor? This pattern is evident in today’s enterprise software markets. Enterprises with BPO, BPM, ERM and CRM packages ask their current providers to help solve existing problems further solidifying the relationship between the software providers and their customers.

Those companies delivering the OTT services now are in a land-grab mode, developing relationships that will last long beyond the Telcos entrance into the market. The UTFPs are going to have to speed up to stake their claim.

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