Mint Explainer: Why telcos are seeking fair share from OTT apps on top of bundled plans
Summary
- The bundled offering has raised a question: Should content providers still give a “fair share” of their revenues to telecom firms that have invested billions into the network needed for users to stream the content? Mint examines:
NEW DELHI : Bundled tariff plans that include access to content-streaming apps are in vogue. They generate additional revenue for the telecom operators as users tend to upgrade to higher-paying plans for more data. And for consumers, they mean sheer convenience—they get only one bill for mobile services, internet and all over-the-top (OTT) app subscriptions.
But the bundled offering has raised a question: Should content providers still give a “fair share" of their revenues to telecom firms that have invested billions into the network needed for users to stream the content? Mint examines:
Why are telecom service providers bundling OTT packs in your monthly tariff plans?
For starters, it's additional revenue for telecom players. As streaming requires more data, users are likely to upgrade to higher-paying plans that provide more or unlimited data usage. The latest tariff hikes have already made the starting unlimited 5G data plans costlier by at least 46%. Bundled plans also increase consumer stickiness, or in other words, consumer retention. It is also an attractive selling point to gain new customers as they would have to manage fewer subscriptions if they switch.
Also Read: Mint Explainer: Why SpiceJet repeatedly struggles to announce earnings on time
Does it benefit consumers?
For consumers, it's a matter of convenience as their service provider gets billed for all subscriptions, and they get one bill. Bundled plans can sometimes be cheaper than subscribing to mobile data and OTT services separately. This is because telecom companies might negotiate bulk discounts with OTT platforms and may pass on some of the savings to customers. In June, Vodafone Idea introduced its new subscription plan with access to 17 OTT apps, including Disney+ Hotstar, SonyLiv and Zee5, and 350 live channels through its Vi Movies & TV Plus app at ₹248. It claims the proposition is cheaper by almost 50% than subscribing to 17 OTT platforms separately. These plans are being offered not only to the higher-paying postpaid consumers but also to the prepaid consumers, who make up 95% of India’s nearly 1 billion smartphone users.
Also Read: Mint Explainer: How Sebi is cracking down on unregistered investment advisors
But does this not dilute telecom firms' demands for a fair share of OTT platforms’ revenues?
Though some might say telecom operators are already getting a share of OTTs' revenue through the bundled plans, industry executives believe OTT apps should give telecom firms a “fair share" of their revenues as they invest trillions of dollars to build 4G and now 5G networks.
This network has to be beefed up regularly so that users can smoothly stream the content. And with the advent of 4K resolution, which requires high-speed internet for streaming, telecom firms have to keep investing in upgrading the network technology. Yet, OTTs do not pay the carriers anything to compensate for this investment. The debate has also intensified in other parts of the world, like the US and Europe. A precedent has been set in South Korea with such a revenue-sharing agreement.
