Operators need to rethink their Internet business models from a revenue generation and investment perspective

SAMENA’s Content Committee identifies various Internet models that Operators can adopt to cater to the future internet traffic resulting from the rapid growth of video and data traffic and increasing popularity of OTT applications

SAMENA Telecommunications Council, the South Asia, Middle East and North Africa region’s telecom operators’ representative body and European Telecommunications Network Operators’ Association (ETNO), the European telecom operators’ industry association, earlier today discussed various ways of ensuring the sustainability of the Internet and the need to find a new equilibrium in which all players of the value chain contribute to the challenge ahead.

Stating that the demand for increased network capacity, higher bandwidth, and innovative services and applications among others has never been higher, Eng. Saud Al Daweesh, Group CEO of Saudi Telecom Company & Chairman of SAMENA Telecommunications Council said, “The current Internet models that network operators have in place are sufficiently meeting the current demand for video and data streaming. However, internet traffic is expected to increase rapidly in the foreseeable future. Global IP traffic has increased eightfold over the past 5 years, and will increase fourfold over the next 5 years. Overall, IP traffic will grow at a CAGR of 32 percent from 2010 to 2015. Telecom operators clearly need to rethink their economic model both from a revenue generation perspective, as well as from an investment perspective. There is no doubt that we as operators need to continue investing in broadband infrastructure; the question is though: How do we adjust our business model to ensure that this is sustainable.”

Hakam Kanafani, Group CEO of Turk Telekom added, “Geographically, Turkey plays a very important role acting as the link between regions and continents, and Türk Telekom Group has the same vision for the telecommunications industry. We are glad to have facilitated this synergy and cooperation between SAMENA Council and ETNO, which we believe is the first step towards developing policies and strategies for building a sustainable Internet business model between telecom operators and over-the-top providers. Apart from a range of other attributes, operators have a distinct advantage of owning and managing their network. As Türk Telekom Group, we approach this issue through a convergence strategy, which includes convergence of services like voice and data, as well as convergence of IT and Telecommunications.”

SAMENA Telecommunications Council’s Content Committee has identified a number of possible future Internet models that Operators can adopt to cater to the future internet traffic resulting from the rapid growth of video and data traffic and increasing popularity of OTT applications. Some of the models include introducing commercial schemes to generate additional revenues by adjusting revenue structured schemes, Traffic dependent charges for all traffic, enhanced Quality Services over the public Internet, enhanced Quality Services based on bilateral agreements, Net Neutrality and tiered pricing to provide differentiated services, tapping into the advertisement industry and becoming an OTTP by capitalizing upon the operator’s assets, Network Abstraction, tapping into Vertical segments, and developing a national or regional model jointly with telcos, content providers and OTTPs.

Luigi Gambardella, Chairman of ETNO’s Executive Board said, “The evolution of broadband infrastructure and of online services and applications, as well as the related policy developments, need to be looked at from a global perspective. The sustainability of the Internet is not only an issue in Europe but also in the rest of the world. This is why ETNO values very much increased cooperation with SAMENA, which represents some of the fastest growing ICT and telecom markets in the world. There is currently a disconnection between traffic increase and revenue growth of operators who have to make the necessary investment. This calls for a broader reflection on the economy of the sector and its impact on the future of the Internet. A new sustainable environment must be found through which all players of the Internet are encouraged to contribute to the challenge of investing in additional Internet capacity.”

Thomas Wilson, CEO and Executive Managing Director of SAMENA Telecommunications Council said, “Telecom Operators can upgrade their current networks to cater to the ever-increasing consumer demand, but is it a sustainable option? If the network operators upgrade to high capacity networks without developing additional revenue streams, they will encounter major shortfalls not so long into the future. Each of the models proposed by the Content Committee has its advantages and suitability or applicability depending on traffic growth, revenues, regulatory requirements, etc. Currently, such is the pace of change, whether in terms of consumer demand or innovation, that we have to be ready to face the challenges of an Internet economy.”

SAMENA Telecommunications Council in partnership with ETNO will also be organizing the “CEO Leadership Dinner 2011” hosted by Türk Telekom Group on June 9th in Istanbul. More than 45 chief executives and chairmen from leading telecom operators are expected to convene together and discuss the leading issues prevailing in today’s high growth yet highly challenging environment. This strict C-level annual dinner gathering, provide the world’s telecom leaders with an opportunity to have a dialogue on the leading issues they face, as well as discuss the theme “Facing Challenges: The Internet Economy”.

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