Competition, Cooperation, and Pricing: How Mobile Operators Respond to the Challenge of Over-The-Top

Xiaobing Xu,Rong Chen

doi:10.5539/ijms.v7n6p1

Abstract

<p>Considering the threats from OTT (Over-The-Top) services, this paper examines whether the mobile operator should charge OTT services access fees and how to. By using a dynamic-gaming process, we find that: 1) under non-cooperative strategy, the mobile operator would charge OTT a mobile Internet access fee, which is positively correlated to OTT platform’s future commercial value and the price of direct communication service, and negatively correlated to the indirect communication service price. 2) under cooperative strategy, the OTT service price that the joint venture charges end users is negatively correlated to OTT platform’s future commercial value. 3) despite choosing cooperative or non-cooperative strategy, the pricing of mobile operator’s direct communication service has a negative correlation with OTT platform’s future value and a positive correlation with the platform’s quality; while the pricing of the indirect communication service is positively correlated to platform’s future value and negatively correlated with the platform quality.</p>

Highlights

Today, we have seen explosive spread of high-speed mobile Internet access which enables mobile subscribers to consume a variety of applications over the Internet
Considering the threats from OTT (Over-The-Top) services, this paper examines whether the mobile operator should charge OTT services access fees and how to
By using a dynamic-gaming process, we find that: 1) under non-cooperative strategy, the mobile operator would charge OTT a mobile Internet access fee, which is positively correlated to OTT platform’s future commercial value and the price of direct communication service, and negatively correlated to the indirect communication service price. 2) under cooperative strategy, the OTT service price that the joint venture charges end users is negatively correlated to OTT platform’s future commercial value. 3) despite choosing cooperative or non-cooperative strategy, the pricing of mobile operator’s direct communication service has a negative correlation with OTT platform’s future value and a positive correlation with the platform’s quality; while the pricing of the indirect communication service is positively correlated to platform’s future value and negatively correlated with the platform quality

Summary

Introduction

We have seen explosive spread of high-speed mobile Internet access which enables mobile subscribers to consume a variety of applications over the Internet. OTT (Over-The-Top) refers to voice, video and data services that arrive from a third party service provider (SP) and doesn’t require any business or technology affiliations with the network operator (Southwell, 2011). These OTT services, such as WeChat in China, Line in Japan, and WhatsApp in the US are believed to have usurped the basic voice and SMS and cannibalized the revenues of mobile operators. A consultancy specialized in telecommunications, estimated that OTT social messaging applications had cost worldwide mobile operators $ 13.9 billion at the Year 2011 and this will rise to $ 54 billion by 2016 (Doran, 2012). Competition with Internet enterprises would be more severe and tougher than that with their traditional counterparts

Objectives

Results

Conclusion