Charting the rise of OTT services, and what they mean for altnets

Altnets and OTT providers will find greater success in working together as the investor landscape shifts and customers look for reasons to change providers.

Not engaging with OTT could spell revenue loss for altnets with over 40%+ of switchers coming from broadband and TV packages. In the same breath, subscription services are suffering from not bundling, with Netflix continuing to lose subscribers. 

Gladstone Gonsalves, Founder of Octoplus Internet, said: “OTT providers need to jump on board with altnets and bundle the packages to better sell their packages and retain the customer base.”

“Recently we have seen a huge drop in Netflix subs, If Netflix would have collaborated with altnets this would not have been the case.”

Investor’s view

The maturation of the market and the uncertain economic picture in the UK means that the investment landscape is changing for altnets.

Investors interviewed in ISPA’s recent ‘What Lies Ahead Report’ claimed that their early drivers for entering the altnet market had changed in the last year.

Early investors focused on the lack of fibre services in the UK and looked to support experienced management teams with a clear rollout plan to ensure they were part of this infrastructure project.

Investors are now taking more of an interest in the relationship between providers and customers, looking at how the asset is being commercialised through the metrics of profitability, customer stickiness and ARPU.

James Warner CSO at FullFibre said: “Across each of our retail partner ISPs, we see different approaches to maximise customer value and ARPU.

“Some partners are using OTT services and value add offerings to boost lifetime customer value and profitability with each customer acquisition.”

OTT services such as content-as-a-service or voice are increasingly being adopted by fibre providers, in fact, all tier one ISPs in the country now offer TV.

Content-as-a-service

Shan Eisenberg, CCO at Netgem TV states that remaining a pure player of fibre broadband is a harmful choice.

“The incremental sales which TV would allow are what could make a difference at a time when overbuild is starting to appear whilst investors are getting more cautious.,” he said.

“TV helps in marketing, keeping the ISP messaging fresh, and raises the ARPU, but the main reason why ISPs are working with us is because it helps them sell more fibre.”

Voice

VoiceFlex COO Paul Taylor shares the opportunity presented by voice services, claiming that in most cases, the OTT service will double profitability.

He said: “With 2025 looming, there is still a lot of legacy voice out there, prime for ripping out by the altnets who we see as an integral part of the communications landscape.”

As well as investors, the bundling of one or two extra services on top of broadband could work to attract more customers.

End-user’s view

From a user perspective, the adoption of fibre can be self-justified by the bundling of services that gigabit broadband can facilitate.

As stated above, 40%+ of switchers came from broadband and TV packages, suggesting that customers will better understand the services that fibre can unlock, if those benefits are presented side by side with the broadband service.

This pressure from both sides of the market is creating a symbiosis between altnets and OTT providers.