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Over-the-top providers make your dumb pipe smart

In the battle to be the top telecom provider, bringing in over-the-top services may be the best bet.

Over-the-top providers can make traditional, geographically bound phone numbers ring anywhere in the world. They sell mobile, toll and direct inward dialing (DID) telephone numbers wholesale for telecom providers to package with other services like hosted PBX or unified communications offerings. That has been Voxbone's business model from the start: to provide global DID inventory on a white label basis to other service providers. Why should providers care?

In the interview below, Hugh Goldstein, VP for Strategic Alliances of Voxbone explains the threat that  over-the-top providers pose to traditional phone services and how OTT brings in a whole new era of customers and consumer behavior.

How do you define an over-the-top service?

Hugh Goldstein: I think it's fair to say that over the top can mean different things to different people. Over the top has the most meaning for access providers providing Internet bandwidth and traditional local loop services that were normally bundled with voice or voice-like things -- like fax. [While a telco will] provide bandwidth to a customer, not only can that customer take defined services like voice with that access service, but they can also take something 'over the top' or any application that is voice- or fax-like that runs on top of that bandwidth. I think it's a term most used with bandwidth providers or integrated communications providers to refer to the stuff that rides, quite literally, on top of their services.

Where might you hear 'over the top' most used today?

Goldstein: The term over the top is widely used in net neutrality debates. Can access providers determine or influence what their customers do with the bandwidth that they provide? Can they introduce networking factors that are disadvantageous to other competitors? They can prioritize their own services, for example, versus services that run over the top, like Netflix, Vonage or Skype.

How are over-the-top providers posing a threat to traditional phone service providers?

OTT services limit the traditional provider to being a bandwidth provider.
Hugh GoldsteinVP for Strategic Alliances of Voxbone

Goldstein: They've been a threat from day one in the sense that OTT services limit the traditional provider to being a bandwidth provider. There was an essay written more than 15 years ago by a telecom analyst who suggested that the telecom companies were going to become dumb pipe providers. This was in contrast to the marketing term of that era, which was "intelligent network services." They started talking about dumb network services because OTT implies that all you need to have is some bandwidth to your business, home or to your phone, and then you can run whatever you like on top of it, whether it be Netflix, Skype or Facebook. That's how OTT services have been seen as a big threat, because you can use Facebook or Netflix as alternatives to the communications and entertainment services telcos had normally provided as an integrated service with that access. That's where the net neutrality debate comes from. Can these traditional phone service providers engage in defensive tactics against over-the-top services? But, for every customer segment that OTT services have, they may or may not be the best solution, so they don't always win against traditional integrated services. But in some cases, they take in tremendous market share, as the examples I suggested indicate.

Why wouldn't OTT services win over traditional phone services?

Goldstein: Every customer has specific requirements. There's a lot of anecdotal evidence out there that certain people, called the cord cutters, don't have anything other than Internet access and a mobile phone. They talk on their mobile phones and they stream their entertainment over the Internet. Yet, there's still a segment of people who use copper wire telephones in their homes or like to watch TV on cable. So, there's a complexity in the market where, even if there's been a disruption from OTT services, there's still a legacy market for the traditional services that [OTT services] theoretically replaces.

Next Steps

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