OTT or ‘over-the-top’ services are usually those delivered using the Internet and not depending on the service provider. So you have OTT messaging apps like WhatsApp for mobile and Netflix for television. OTT messaging apps have been growing in popularity over the years, often at the cost of traditional SMS. They offer a richer experience for the user by not limiting them to 140 characters and also by providing extra features like rich messaging, file transfer and groups chats.
The BlackBerry Messenger was the first big OTT, or instant messaging, success story. Markets like Netherlands and South Korea where the first to adopt OTT services at a large scale, soon leading to a fall in SMS revenues for its service providers. The growth of OTT messaging apps is usually tied to the adoption of 3G services, as they are heavily dependent on a good internet network to feed off. In India too the phenomenon has got impetus with adoption of 3G over the past couple of years. Interestingly, some OTT services like Korea’s Kakao Talk offer much more than messaging with a very successful in-app e-commerce platform. That is the ultimate goal for most OTT apps.
The adoption of OTT services is also incentivised by the cost of SMS services in a market. With the perception strong that OTT is free, or almost so, many users prefer using them to sending SMSes billed at a much higher rate. However, people do not realise that they end up paying for the data usage, unless they are logged on to someone else’s Wi-Fi network. OTT services also have a social quotient that helps make them go viral and have the kind of numbers they have — WhatsApp now has over 800 million downloads. In fact, in India one of pulls for people to move to an affordable smartphone is the ability to chat with a relatively free OTT messaging service.
If service providers are now keen to charge OTT services at a different rate that is because after eating into their SMS revenues for many quarters, these services have now started impacting voice revenues too. Almost all large OTT messaging services, including Whatsapp, now offer voice calls that can be made over the web. While it might not hurt the service providers if the calls are made withing the same circle, that is not the story if someone chats with a friend in the US by paying just data charges.
In March, the Telecom regulator, TRAI, released a consultation paper on OTTs, asking, among other things, whether it was too early too regulate these services in India as Internet here was still growing? This was the trigger for the net neutrality debate in India, which snowballed following the launch of Airtel Zero a few weeks later.