"Over the top" is a trend mobile and fixed network service providers have confronted for a couple of decades. But that trend also operates in the wide area networks business. To understand the trend, recall that "over the top" means disintermediation.
“Disintermediation” is a term some attendees at the PTC Academy event in Bangkok, Sept. 20 and 21, 2018, heard for the first time, as a substitute for the term "over the top" (OTT). The term simply means that product and service providers go direct to end users and customers, rather than using distributors.
Since communications service providers are distributors, that has key implications. Think “over the top” and you get the point: apps go direct to customers and end users with no direct business relationship between the app/platform and the user.
To an astonishing degree, market demand for wide area communications has shifted away from telcos and to application and platform providers.
The amount of undersea traffic carried by the largest U.S. application and platform providers grew to 339 Tbps between 2013 and 2017. International capacity supplied by internet transport companies grew to 350 Tbps.
“15 years ago, 100 percent of my clients were telcos,” said Sean Bergin, APTelecom president. “Now 80 percent of my customers are OTTs,”
So platform and app companies Google, Facebook, Microsoft and Amazon do not yet move more bits than service providers do, but arguably will do so in the future. And that “function substitution” has happened in telecommunications before.
Though you are familiar with mobile substitution--the use of mobile networks to displace use of fixed networks--the substitution happening elsewhere is “over the top” substitution for carrier services and value.
In the undersea and wide area network business, that means enterprises of a particular type (tier-one application and platform suppliers) are creating and owning their own transmission networks, and no longer buying capacity from transport providers. And that also means disintermediation of the communications service provider.
Put another way, wide area networks now are experiencing product substitution, as did fixed network service providers, where mobile services are preferred to fixed services. As "over the top" apps, platforms and services often displace carrier services and apps, so enterprises (app, platform, device providers) increasingly have found it makes sense to own their own global networks.
And that means the demand for capacity services from "public" networks (telcos) is diminished. In other words, as bandwidth demand grows, the amount of growth available as "revenue for service providers" diminishes.
That trend can be seen clearly in the growth of transoceanic capacity that is supplied directly and internally by app and platform providers directly, on their own private networks.
In other words, OTT now covers a much-wider range of business cases, all based on disintermediation, where producers go straight to their customers or users, without relying on distribution partners.
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