Presentation from the Commonwealth Digital Broadcasting Switchover Forum 2015 by Loren Braithwaite Kabosha

1. Over the Top
and
Pay TV Opportunities:
How are operators
and
content providers working
together to create
innovative platforms?
By Loren Braithwaite-Kabosha
CEO: South African Communications
Forum

2. 2
Clayton Christensen, Harvard Professor, observed how big very
successful companies sustain their successes for long periods,
and then fail with all their significant resources, when new
smaller “disruptive innovators” think of better ways to compete
with them on their own turf.
Disruptive Innovation: Innovator’s Dilemma
The Global ICT Industry is particularly prone to disruptive innovators – they are the
drivers of the industry’s growth: All ICT industries should take note:
 Successful disruptive innovators become large, develop deep pockets, high
profits, processes that keep their customers happy, and corporate cultures
aimed at sustaining these advantages;
 These sustaining processes soon become so entrenched that even if they are
aware of minnows eating away at their businesses, usually from the bottom less
attractive market segments, they find it difficult to change;
 Some disruptive minnows grow up and replace them – the cycle continues……….
Christensen described this age-old phenomena in theoretical
terms: the dilemma of sustaining successful business models
against an onslaught of numerous creative minnows that eat
away at those successful businesses and create new markets…..

3. 3
A quick review of OTT and its impacts
OTT Services are here to stay, and to grow: they will be disruptive:
Operators must develop effective responses and strategies

4. 4
Impact of OTT on traditional broadcasters
1. Traditional broadcasters are less prone to revenue losses by OTT services where
broadband infrastructure remains under-developed:
 Traditional broadcasters control all content on their chosen transport paths;
 OTT services do not use traditional broadcast networks.
2. In countries where broadband infrastructure is reasonably well developed, OTT
services can become a threat to broadcaster revenues:
 Alternative content access via broadband networks and smart TVs or PCs.
3. In the context of South Africa, with less than 5% penetration of fixed broadband, OTT
remains a future threat to broadcasters in general, however……..
 One major broadcaster in South Africa perceives the opportunity for alternative
content delivery – set up a broadband subsidiary in readiness;
 Traditional “telecommunications” companies have identified new business
opportunities and are building broadband infrastructure specifically to compete
with broadcasters for content delivery – some in carefully selected “cherry-
picking” pilot areas.
 Fibre to the Home services enabling competitive content delivery with prices
ranging from R570 for 100GB to R2899 for uncapped at 100Mbps
Convergence, a key topic under consideration in South Africa, will become a game
changer for broadcasters: They should begin the development of competitive
processes that will ensure their sustainability, with or without OTT.

5. SA Internet Access Market
According to PwC Annual Report on Entertainment and Media Outlook
2014 – 2018:
• Internet Access in South Africa will generate more consumer spend
than any other media product or service in the next five years
• SA’s Internet Access market is dominated by the mobile platform
• 72% of SA’s mobile phone users by the end of 2018 will be mobile
Internet users (35.2 million people)
• A growing number of South Africans are able to be connected through
mobile Internet connections including WiFi.
• It is expected that by the end of 2018 there will be an estimated 53.7
million HSPA subscriptions in SA. 3G and 3.5G will drive Internet
Growth as legacy GSM is phased out.
• Globally, mobile will generate 60% of every dollar spent on Internet
Access by 2018.
• Increasing affordability of mobile broadband devices will contribute to
the growth of the internet market.
5

6. SA Internet Access Market continued
Factors impacting Internet Access Market
• High LTE roll out costs and other challenges with delays in 700MHz and
800MHz digital dividend spectrum limit high speed network expansion
• Delays in assigning high demand spectrum
• Relatively high data prices limiting consumer’s ability to engage with OTT
services
– In recent years data revenues have been subsidizing the losses in voice
revenues BUT data prices are also dropping due to competitive
environment.
Regulatory Challenges
• Self regulation and globally fragmented structure afford OTTs a competitive
advantage over telecommunications operators
• Unregulated mergers and acquisitions for OTTs compared to licensed operators
that undergo competition reviews
• Telecommunications operators are subject to network coverage obligations,
spectrum fees and quality of service regulations which OTT players are not.
• OTTs do not comply to privacy and protection regulations nor do they comply
with switching and data portability requirements
6

7. 7
How do/must operators respond?
1. Ban or strongly regulate: A few countries, mostly developing, have shielded
their operators through national regulations (e.g. China, Middle East). No
outright bans, but breathing room for operators to react;
2. Link OTT to Net Neutrality issues:
a. FCC linked OTT to net neutrality debates: “a level playing field where consumers
can make their own choices about what applications and services to use, and
where consumers are free to decide what content they want to access, create, or
share with others.”
b. EU Committed to an Open Internet and Net Neutrality: Customer empowered to
choose;
c. Latin America and the Caribbean: First line of defence is “bundling strategies” –
offer bundled services that compete with OTT services as part of broadband
services. This approach limited by poor broadband infrastructure.
3. Another defence is compete directly producing proprietary OTT – costly
4. If you can’t beat them, join them: The majority developed operator and
regulator views are that regulatory interventions are unlikely to be effective,
nor are they desirable. Best approach is to let the market determine operator
responses.

8. Innovative Partnerships by Broadcasters
• SA Broadcasters approach: If you cant beat them,
join them.
• South African Broadcasters are in a variety of
discussions with content producers/ distributers to
partner in offering OTT services
• Accessibility of local content and top international
content will be key drivers in success of broadcaster
digital platforms
• Brief summary of some applications of this model in
South Africa follows.
8

9. OTT Innovations in South Africa
• Telkom identified media partners to complement
VDSL and FTTH roll out.
• Demand for video services and streaming drives
adoption of high-speed Broadband.
• Telkom position as pipe and portal player vs media
house.
• Talks with Netflix failed to materialize due to content
distribution restrictions.
• Telkom partnered with DSTV (Naspers) to offer on-
demand services
9

10. OTT Innovations in South Africa
• Vodafone UK offer 6 month Netflix subscription with
4G service
• Netflix subscription can be used on xDSL connection
• Vodacom SA pursuing similar deal with Netflix (once
available in SA)
• Vodacom currently offering zero-rated data streaming
on DSTV mobile product
10

11. OTT Innovations in South Africa
• MTN in partnership with Frontrow
International
• Offering Subscription Video on Demand
(SVoD) at R179 per month
• 2 Tier film rental structure from R15 to
R27
11

12. OTT Innovations in South Africa
• Altech Node
• Video on Demand and Home
Automation services
• Pushes encrypted content to a STB via
Satellite connection
12

13. OTT Innovation in South Africa
• Times Media Group owned video
streaming service
• Offers television and film content on
demand for R149 a month.
• Latest blockbusters rented for R15 to
R27
13

14. In Summary
14
Source:
mybroadband.co.zahttp://mybroadband.co.za/news/intern
et/116606-netflix-vs-frontrow-vs-vidi-vs-node-in-south-
africa.html

15. Conclusion
• The market is becoming more competitive for Multichoice, Platco
Digital, with its OpenView HD platform and other pay-TV and video-
on-demand operators. A range of operators looking at launching
OTT / on demand offerings.
• The launch of OTT and other services such as Netflix in South Africa
is likely to stimulate competition in the local pay TV market
• OTT players are producing original content as part of competitive
strategy. This represents a significant threat to obtaining exclusive
broadcasting rights to top international TV shows through deals with
international distributors.
• Who owns sports holds the trump card in South Africa
• New entrants (Siyaya and others conditionally granted pay TV
licenses) need to consider establishing IP platforms in their offering
to effectively compete.
• Linear channel content will still be key for on demand platforms in
drawing audiences.
15

16. 17 February 2015
Loren Braithwaite-Kabosha
loren@sacomforum.org.za
www.sacomforum.org.za