NEWSLETTER | JULY 2014

OVER-THE-TOP (OTT)

A DRAMATIC MAKEOVER OF GLOBAL COMMUNICATIONS

IN THIS ISSUE
From the Chairman
... Page 1
What is OTT, and Why is
it Important? . Page 3
Impact for Telcos/Service
Providers .. Page 4

The Enterprise and

OTT .. Page 10
Understanding Recent
Acquisitions . Page 12
Interesting Trends and
Developments .. Page 12
Wesley Clover Parks
... Page 14
Introducing L-SPARK
... Page 14
The Loss of a Dear
Colleague .. Page 14

FROM THE CHAIRMAN

The ICT (Information and Communications Technologies) market
is undergoing rapid, I might even say dramatic, changes. Many
readers recognize this, many are likely living it. I feel strongly
about the issue. Where there is change, there is opportunity!
I am referring to the recent generation of service and application
companies using Internet Over-the-Top (OTT) networking as a
platform for new product and service offerings. Companies we all
read or hear about, such as Skype, Viber, Rebtel, WhatsApp,
WeChat and many others, have emerged to address the new and
perceived communications needs of both consumer and enterprise users.
Most of these companies are quite small, but they are making
global market inroads that would have been beyond belief just a
few years ago, and they are realizing market valuations that are
similarly beyond belief. The offers from these young firms are
compelling, be they communications tools and services, content
services, storage services or others. Together, these new offerings are driving a commoditization of many of the established telecom and cable services.
In the process, it might seem like these new apps are simply wiping significant revenues from the books of traditional players. The
legacy voice businesses of these players have been in decline for
some time. SMS texting services are under similar attack. Think
also of the ecosystem around these carriers the companies who
supply supporting equipment and services. What of them?

A Sense of the Impact

For some, this evolution could in fact pose a threat to their continued viability. Wheres Nortel? Wheres Marconi? Revenue
sources are shifting. Market capitalization is at risk, and significant new investments are shifting to these upstart players.
Consider what we have read this last year alone:
WhatsApp 55 people, no sales or profits, but a valuation of $19B
U.S. Yes, that is a B! The company has 450M users
Viber Revenues of only about $1.5M, but 200M users of voice

Copyright , Wesley Clover International, 2014 | Page 1

NEWSLETTER | JULY 2014

and messaging services.

A
$900M U.S. valuation as a result!
Skype Video, voice, messaging
and SMS for about 1B users. Acquired by Microsoft at a valuation
of $8.5B U.S.
WeChat about 300M users for
voice, video and messaging services. Valuation?

Add a few more industry data

points and you get a better picture of why new strategies are
critical for traditional providers
and suppliers:
The Internet OTT communications market will be worth
$53.7B
and
serve
2.1B
smartphone users by 2017.1
Nearly 50% of global calls will
be VoIP enabled by 2017, and
up to 80% of the 1.07B users
will be served by OTT players.2
In 2012, more messages were
delivered via OTT apps than
over SMS ; by 2016, that difference will be a factor of 4 to 1.3
Skype already delivers almost
34% of international voice and
video traffic.4

Survival in a
Shifting Market
Internet OTT providers have created functionality and choice that
have disrupted the markets and
served as a wake up call for carriers and enterprises alike. Both
are having to evolve to become
arbiters and consumers of these
value-added, cost-effective applications and services.
For carriers, their voice and SMS
revenues are eroding. They have
already embraced fundamental
strategy shifts (e.g., moving into
content and media), but they
need to continue this evolution to
keep current customers, attract
new ones and drive new revenue
streams. The good news is they
have advantages over OTT players to work from.
They have the wireless infrastructure, with its network- and device-

agnostic services. This asset will

require investment to sustain
ever-increasing demands, but it
has been and will continue to be
a key revenue contributor.
They also have the phone number, which can be extended to
new devices (e.g., PCs, tablets,
smartphones) and other networks (Wi-Fi) to harmonize services. Skype, Viber or WhatsApp
cant offer this easily.
Carriers can use these advantages to meet immediate customer needs while leveraging
standards-based
technologies
and protocols into new offerings.
We are seeing good examples of
this paying dividends, as you will
read later in this Newsletter.

As a result, we have dedicated

this copy of the Newsletter to
OTT. We have contributions from
a number of the Wesley Clover
companies whose technologies
are well positioned to help enterprises and carriers take advantage of what is clearly an industry revolution. We have also
included opinions from a number
of industry experts who were willing to share their valuable perspectives on the subject. I trust
you will enjoy the read.
Kind Regards,
Terry Matthews.

We are also seeing Enterprise

OTT services take hold. User applications now tie legacy voice
service to newer messaging and
video services.
Linked to ITdeveloped apps, these services
can be offered in minimal time.
They can elevate both employee
and customer user experiences
significantly, as well as help cut
costs and/or generate new ways
to grow the business.
IT departments are using premises and cloud-based OTT services
to overcome the security standards, licensing, deployment and
client management hurdles in the
provisioning of new mobile devices for a BYOD environment.

Where to From
Here?
Significant changes create significant business opportunity. And
as I often say, grab those opportunities! What an upheaval in
the ICT sector. This is the type of
environment in which I thrive!
In my view, this is a time when
getting business strategies right is
critical. For those who get their
act together and evolve, the upside could be extreme. For those
who stagnate, or get it wrong,
well

1. MobileSquared.
2. TeleGeography, Juniper Networks,
Gartner.
3. Jupiter Networks.
4. TeleGeography, Juniper Networks,
Gartner.

Copyright , Wesley Clover International, 2014 | Page 2

NEWSLETTER | JULY 2014

WHAT IS OTT, AND WHY IS IT IMPORTANT?

From the ubiquitous Wikipedia, Over-the-Top content (OTT) refers to the delivery of video, audio and
other media over the Internet without a multiplesystem operator (MSO) being involved in the control
or distribution of the content. MSOs are further
defined as operators of multiple cable or directbroadcast satellite TV systems. Comcast, Time
Warner, Rogers, Shaw, Videopole, Cable One, BT,
Virgin and many others are the usual names that
come to mind for these services, but we know the
lines are blurred as Telcos globally have, and continue to, diversify into content ownership and delivery.
Wikipedia goes on to say that these providers may
be aware of the contents of the IP packets, but are
not responsible for nor able to control the viewing
abilities, copyrights, and/or redistribution of the
content. The ISP is responsible only for transporting the IP packets. This is in contrast to the copyright, piracy and other regulations applied to the
purchase or rental of video or audio content from
ISPs, including pay television, video-on-demand or
IPTV video services, such as AT&T U-Verse.
OTT content is content that arrives from a third
party, e.g., parties such as Crackle, Hulu, Netflix,
NowTV, MyTV, WhereverTV, WWE Network and a
growing number of others today. Similarly, OTT instant messaging services, which work over the Internet instead of the wireless or cellular networks that
SMS texts travel on, are provided by third parties as
alternatives to services provided by mobile network
operators.

In both content and messaging, third parties are

evolving and owning the applications in a domain
once reserved for traditional providers. Consumers
gain access through any of todays connected devices (smartphones, tablets, gaming consoles, set-top
boxes), and the necessary apps are available from
on-line stores. Accessible, fast, easy to use.

Because these apps are so easy to make work, he

says, they can become viral and build broad fan
and user bases quickly. Legacy products may be
deeper on features and functions, but the frictionless deployment and ease-of-adoption of most new
applications enable rapid market penetration.

Source: Gartner OTT Segmentation Grid

The companies behind these apps typically use

different business models than the traditional suppliers, providing their products free-of-charge or at
very low cost. In most cases, they are not encumbered by legacy product migration, old standards
compliance, enterprise customer roll-out, and sales
channel management. They also have a very different take on things like operating P&L performance,
as they deliver shareholder value in new ways.
They leverage the availability of the Internet, the
portability of mobile devices, and the scalability of
the Cloud, often putting no constraints on consumers in terms of getting access to the product.

As a result, says Don Smith, General Partner with

Wesley Clover, the majority of OTT success to date
has been driven by companies other than the established Service Providers, creating applications
that target consumers rather than enterprises.

Because these apps are so

easy to make work, they can become
viral
- Don Smith, Wesley Clover

Copyright , Wesley Clover International, 2014 | Page 3

NEWSLETTER | JULY 2014

As a result, per Mr. Smiths point, some are able to

build an incredible global following very rapidly. For
example, WhatsApp was able to grow to more than
400 million users worldwide in just 4 years a
growth rate nearly 3 times that of Facebook, the
company who bought them earlier this year! That
success, coupled with fears about Facebooks own
privacy practices, is spurring copy-cats in China and
elsewhere to spring up rapidly.
And the phenomenon is definitely international.
According to ner Tekin, ICT Development Leader
with Netas, a Wesley Clover partner and the largest
Telecom and IT manufacturer, integrator and services company in Istanbul, Turkey, OTT plays a key
role in our market today. Interest in mobile communications has increased rapidly everywhere.
Since traditional operators didnt address these
needs quickly, OTT companies now own this role.
OTT offers easy mobile and web services for free,
using only data networking. Customers can download an app when they want, try it out easily, and if
they decide they dont like it, just delete it from their
client. Theres no more complexity to it than that.

It frees users from artificial walled

gardens, and ensures they have access
to best-of-breed tools ...
- Ben Morris, AirVM
Ben Morris, Vice President, Sales with AirVM, a Wesley Clover affiliate company, says, OTT offers choice
and flexibility in services. It frees users from artificial walled gardens and ensures they have access to
best-of-breed tools and services on-line.

Mr. Morris continued, For example, OTT enables a

user in North America to have a local telephone
number in the UK. Think how attractive that is to
someone doing business overseas, who requires a
cost-effective option for promoting their local presence when theyre located thousands of miles away.
Peter Wilenius, Vice President of Business Development for CANARIE Inc., Canadas Advanced Research
and Innovation Network, adds, OTT represents the
ability to leverage existing Telecom infrastructure to
support the delivery of value-added new services.

It has created an opportunity to

democratize the nature of a service
provider.
- Peter Wilenius, CANARIE
He added, It has created an opportunity to democratize the nature of a service provider. The availability of tremendous bandwidth and cloud infrastructure reduces barriers for entirely new providers
of services. Those with a good idea and some
smarts in application development and marketing
can create a successful business based around the
traditional service providers infrastructure.
Tony Busa, Director of Marketing for Benbria, another Wesley Clover affiliate, sums it up this way, The
real value I see in OTT is the innovation it brings to
the edge of the network. Innovations such as enhanced voice service, video communication, presence applications, social chats, location sharing all
provide real benefits for consumers and businesses
today, from a cost, convenience, flexibility and
connectedness perspective.

THE IMPACT FOR TELCOS/SERVICE PROVIDERS

On the surface, OTT can appear threatening to telecom and cable companies.
Per the data in Terrys opening remarks, OTT services are expected to continue growing rapidly, displacing services that came before them. And as we
noted, the business models behind these services
are quite disruptive.
Ken Davison, S.V.P., Marketing and Sales for Magor,
another Wesley Clover affiliate, puts it this way:
Because many OTT apps are offered for free, they
destroy the commercial value of similar products

Significant Market Disruption

Copyright , Wesley Clover International, 2014 | Page 4

NEWSLETTER | JULY 2014

across broad industries. Why would users pay for

existing or competing products when they can get
these cool new apps, often for little or no charge?!
He added, This also has the effect of shifting mindshare away from the traditional providers, competing for the consumer relationships they have enjoyed for years.

Further to this last point, traditionally, carriers have

been able to develop strong customer relationships
and profit margins by bundling applications together with the access required (e.g., business line bundles, wireless service plans). OTT leverages the one
network the IP Network, or the Internet where
access is decoupled.
Driving ever more traffic to the commoditized Internet will put more pressure on margins for the carriers, says Jim Davies, CTO with Mitel. Breaking the
previous linkages between application and access
removes their control, and increases competition.
Behind all this, the carriers are expected to invest
significant capital upgrading and maintaining their
networks to support the dramatically increased
loads the broadly popular OTT services are creating,
plus incur the considerable costs of optimizing
things like video traffic.

And if they fail, these same nontraditional players are stepping in to

catch the fall-out ...
- Donovan Jones, CounterPath
All hardly seems fair, does it? And if they fail, these
same non-traditional players are stepping in to
catch the fall-out, says Donovan Jones, CEO of Wesley Clover affiliate CounterPath. Leveraging massively scalable server farms running high-CPU, highRAM COTS platforms, they are forcing a serious rethink of the purpose-built gear carriers have typically thrown at this problem.

Decisions to Make
Inevitably, Telcos and service providers must address OTT in a way that benefits both them and
their customers. But how?
They could take an aggressive approach, doing what
they can to block OTT content or services from their
networks entirely. While this could contain costs by
eliminating or at least delaying the need for increased infrastructure investment to support those

services, and in theory, it could help preserve customer loyalty for their own services, the reverse is
actually true. Those who have tried this approach
have suffered loss of revenue and brand value
thanks to media scrutiny and customer backlash.
Value is definitely shifting from physical infrastructure to services delivered says Peter Wilenius with
CANARIE. Legacy voice and data/ISP services are no
longer where the value is. Its now all about what
rides on top. Incumbents will need to create relationships with new players or invest in or acquire
their own apps to drive this value.
These thoughts are echoed by ner Tekin with
Netas in Turkey. The biggest risk I see for service
providers is becoming just a dumby pipeline. It will
only become harder to keep up if their portfolios
include only voice, SMS and data. They need new
services, value added services, delivered through
mobile devices and web clients.

The biggest risk is becoming just a

dumby pipeline.
- ner Tekin, Netas
To achieve this, they could charge a premium for
OTT services (e.g., offering VoIP services with premium data plans only). On the positive side, it could be
argued this would:
discourage use of OTT services and make the incumbents own services more enticing.
generate new revenue and balance profit margins
by charging objectively for customer data usage.
delay network saturation and slow down SMS and
voice service substitution.
Unfortunately, this is just as likely to cause customer
dissatisfaction, as they will not like having to buy a
more costly data package just to use the latest, viral,
cost-saving VoIP and OTT messaging apps. They will
smell protectionism and a money grab.
OK, incumbents could be more accommodating,
using a strategy that takes advantage of measures
such as traffic management, throttling and optimization to moderate the impact of OTT services, especially those requiring high bandwidth.
Once again, this would reduce strain on the network
and delay the need for infrastructure upgrades. And
it would provide revenue up-lift to ease losses from
services being substituted by third parties.
A big risk with this strategy, however, is regulators
who, in a number of countries, have frowned on the

Copyright , Wesley Clover International, 2014 | Page 5

NEWSLETTER | JULY 2014

use of traffic manipulation in this way. The popular

concept of Net Neutrality and equal access/service
for all was meant specifically to deter such moves.
In the U.S., it looks like this battle is far from over. In
January of this year, carriers including Comcast and
Verizon succeeded in convincing a US appeals court
to void the existing FCC net-neutrality regulations
that ban internet fast lanes (accompanied by increased fees), putting the whole issue back under
public and government review.
While this would open the door for bandwidthhungry app providers (e.g., video and movie providers like Netflix) to pay more for added broadband to
support their services, a real worry over contrived
congestion has been tabled.
Interestingly, Netflix could be accused of hedging its
bets on this one. It has already moved to sign deals
with three large US Service Providers to ensure its
customers get the speed they need to fully exploit
their on-line video service.
But they are also lobbying hard in favour of net neutrality, saying in an extensive report that the proposed new rules would create an Internet
characterized by legalized discrimination and
gamesmanship. They go further, calling out several carriers for already slowing their customers video
streams. Allowing ISPs (read: carriers) to monetize
congestion will likely create more congestion,
threatening the current model that has made the
Internet so successful, their submission states.
Big OTT provider versus big Telcos - we will all be
watching with interest as this one unfolds.
New regulations may be brought forward over time,
but to date, attempts at significant restrictions
around OTT have only happened in places like China or Turkey (with You Tube and Twitter), and these
much-publicized moves led to nasty resistance within those countries and critical scrutiny beyond.

these much publicized moves led to

nasty resistance within those countries
and critical scrutiny beyond.
Another strategy Telcos and service providers could
respond to OTT with is the creation of their own
competing services, developed in-house, obtained
through partnerships and private labelling, or added through acquisition.
The benefits would be continued ownership of the
customer relationships, generation of incremental

revenue streams and a platform from which to expand into new markets.
The challenges, on the other hand, include the fact
that many providers lack the development resources
and skills to design and deploy such applications.
Also, as we have established, the ROI on these apps
is often unclear for the Telco, because the market
models are very different, and that can make the
business case difficult.

End users wont wait 6 9 months or

pay very much for a service.
- ner Tekin, Netas
As Tekin puts it, Unfortunately, integrating valueadded services with the operator is slow and costly.
End users wont wait 6 9 months or pay very
much for a service. Price performance and time-tomarket are key in the face of todays competition.
Lastly, theres the collaborative strategy, where
Telcos and service providers partner with OTT players in mutually-beneficial working relationships.
Telcos leverage their core competencies (network
and network control, distribution channel and marketing, existing customer relationships, customer
support) to add value to the partners' services.
The result is a sharing of customers and revenues.
The benefits of this model, says Davison, are the
acquisition of new customers attracted by the OTT
brand, and the generation of new revenue. The
risks? The OTT brand is the consumer-facing brand.
Customers may identify with and develop a loyalty to
that OTT player anyway.

Customers may identify with and

develop a loyalty to that OTT player
anyway.
- Ken Davison, Magor
But, as much as many carriers have focused on
eating each others lunch, so to speak (i.e., cable
companies launching voice services, Telcos acquiring
TV services), they now share the OTT challenge.
Those earlier shifts in strategy have hopefully provided experience in partnering and diversification which
should enable them to move forward again.

Copyright , Wesley Clover International, 2014 | Page 6

NEWSLETTER | JULY 2014

The Mobile Revolution

Continues
We cant discuss OTT without tabling a key enabler,
and that is the unending adoption of smartphones.
OTT growth is intimately linked to the dramatic penetration of these devices devices that barely existed just 10 years ago. It is a little like the proverbial chicken and egg scenario, as smartphones and
OTT leverage each others value equally.
Smartphones are the easiest, most immediate way
to reach OTT services today, literally delivering them
to the palm of your hand. That makes them musthave devices, and undeniably drives the rush toward mobility.

Not surprisingly, the trend is being led by young

households the same people behind the OTT
wave. In 2011, about 2/3 of households ran by people aged 15 to 29 relied on cellphones only, compared with 28% for the broader population.

Just Text Me
Clearly, smartphone adoption is a catalyst behind
this industry transformation. The proliferation of
mobile messaging services is also playing a key role.
And the largest new players are only getting larger.
Apple's proprietary iMessage service long-since surpassed the 2 billion messages-per-day mark, and
we have already mentioned WhatsApp and its growing user base. Smaller mobile messaging services
geared toward younger audiences, like MessageMe
and Snapchat, also enjoy significant popularity.
The next steps for these OTT players is to effectively
monetize their products, be it by embracing advertising or through paid premium services and subscriptions. It is worth noting the primary software
for all those smartphones comes from Apple and
Google, who also have the largest App Stores and
aim to be present in every aspect of our lives. Given
that OTT services are delivered to us as Apps from
an App store, both Apple and Google will likely profit
from the move to monetize OTT services.

According to a Census Bureau report last fall, about

one-third of U.S. households have now abandoned
landline telephones. Less than 71% of households
had landlines in 2011, down considerably from
more than 96% in 1998, the first year of the survey.
Conversely, cellphone ownership reached 89% in
2011, up from about 36% 15 years ago.

This is affecting Telcos and cable companies alike.

Not only are they now competing with each other in
the field of content delivery, but newer players like
Netflix, YouTube and many others are now a shared
threat. As an example, Amazon Prime is a recentlyintroduced, full-service TV streaming network. No
longer just a book store

Revolution or Evolution
Couple this ongoing proliferation of mobile devices
and new Messaging offers with the incredible volumes of content now available from Apple, Amazon,
Google, Microsoft, Netflix, YouTube and many others, and it is understandable why carriers are challenged to support huge new bandwidth demands,
particularly for video streaming, while not participating in the monetizing of third party OTT services
either directly or indirectly.
But remember, points out Ben Morris with AirVM,
the core business of any Telco remains connectivity. As long as they keep delivering that key value
very well, they can focus on their OTT strategy. But
they cant take their eye off that ball. They still face
real risk in terms of continuing to provide evergreater bandwidth at cost-effective rates.

Copyright , Wesley Clover International, 2014 | Page 7

NEWSLETTER | JULY 2014

So how are they actually doing?

The reality is, while Telcos continue to make considerable investments in their infrastructure to maintain
service quality and attract/retain customers, the increased usage by those same customers is leading
to new bundling opportunities and revenue streams
(take Comcast, for example).

14 consecutive quarters of yearover-year ARPU growth ...

- Joe Natale, Telus
Also, instead of declining, a key metric called Average
Revenue Per User, or ARPU, has actually been increasing in the face of this upheaval. For example,
Joe Natale, President and CEO of Telus, stated on
their Q1 2014 earnings call, "Our industry-leading
churn and 14 consecutive quarters of year-over-year
ARPU growth support continued leadership in lifetime revenue per subscriber, up again this quarter to
more than $4,400, the highest first-quarter result in
seven years and 20% better than our peers."
In terms of some of those peers, Verizon in the U.S.
reported an 11% year-over-year increase in ARPU as
part of their 5th consecutive quarter of double-digit
operating income and earnings growth in their
Q1/14 earnings call.
The bigger picture is even more telling, as shown in
the following chart from Bell Canada:

While wireline voice revenues do show an expected

decline, overall revenue has grown significantly over
the last 5 years. Of note, wireless revenue has grown
both as a percentage and in terms of total contribution, from approximately $4.5B to $5.75B. A growth
of almost 30%, all while OTT services were displacing
SMS messaging, for example, says Don Smith with
Wesley Clover.
The effects of an evolution to content and delivery
services are also evident. Media services contributed
more than $2.3B in new revenue last year. TV and
video streaming grew to 11% of revenues.
And Bell is not unique. Recent AT&T data shows TV
and video at 9% of revenues. And if they are able to
complete their announced acquisition of DirecTV,
content will become 41% of overall revenues.
All these facts raise the question of how threatened
the service providers actually feel about OTT, and
whether they are not quite happy with the benefits
of creating new offerings and service bundles on top
of their fat new bandwidth pipes.

OTT plus Smartphones

Beating a Path to an All-IP
Network
Another positive for the Telcos could also be on the
horizon. The trends established above have opened
the path this year for the FCC to explore for the first
time dropping the circuit-switched landline network
in the U.S., in favour of an all-IP Network the same
network technology the OTT players use.
This move is being driven by large U.S. Telcos, and far
from giving up a competitive advantage, it would actually provide them key economic benefits. Their legacy technologies are ever-more costly to upgrade and
maintain, and usage is declining, as shown. The future is mobile and IP, and the sooner investments in
current landline networks can be stopped, the better.

Abandoning circuit-switched
technology for IP packet switching
means no more purpose-built
hardware
Abandoning circuit-switched technology for IP packet switching means no more purpose-built hardware. All-IP-based phone services operate on more
competitive server farms and off-the-shelf hardware, as the third-party OTT providers exploit.
Telcos will be able to save money and leverage bun-

Copyright , Wesley Clover International, 2014 | Page 8

NEWSLETTER | JULY 2014

dles of bandwidth and services. Opportunities for

OTT offerings, particularly from the Telcos themselves, will increase.

Quality Service will

Remain Key
Inevitably, there will be a transition period, and a
mix of technologies. Legacy networks, Mesh Networks, mobile traffic being handed off to Wi-Fi networks or small cells/femtocells they will coexist
for a time. And through it all, the need to maintain
service quality will remain paramount.
Hunter Macdonald is President and CEO of Tutela
Technologies, a Wesley Clover affiliate firm focused
on exactly that carrier network quality monitoring, but with the unique benefit of crowd-sourcing
and presenting back the user-experience.

Wi-Fi, 2G, 3G, 4G/LTE, even

competitors networks we dont
care.
- Hunter Macdonald, Tutela Technologies
OTT network monitoring solutions benefit the service providers because they are network agnostic
says Hunter. Beyond the value of reflecting the
users perspective on quality, Tutelas software can
be used to monitor any network technology. Wi-Fi,
2G, 3G, 4G/LTE, even competitors networks we
dont care. This is unique, and especially appealing
today for service providers who do not want to, or
are unable to, introduce additional complexity to
their network back-ends.

This service gives customers a new single number

for use with their PC, tablet and smartphone, providing traditional voice and texting features and also enabling new services like converged inbox or video
communication. The service creates clear differentiation for users as well as the carrier.
Visit
www.counterpath.com to take a closer look.
While on their site, notice also the press release announcing their recent patent for enabling service providers to offer OTT communications with trusted mobile-based user authentication, simplifying mobile
services over non-mobile devices.
This development makes it easier for people to use softphone
client applications on any device, any platform and
over any network, by eliminating the need for other
non-mobile-centric authentication technologies.
In moves similar to the Rogers One Number, intended to win market share from OTT providers as well as
differentiate themselves from other Telcos, the large
Spanish broadband and telecom provider Telefnica
successfully introduced their TuGo OTT service. And
in France, the Libon app was recently launched by
Orange. Early results suggest this new service has
reduced Apple FaceTime app usage by 22%, Skype
use by 10% and Tango Telecom app use by 56%!
It is truly a global arms race. In a current report by
Infonetics Research, Japan-based Line has now
topped Skype as the market leader in the very dynamic over-the-top mobile VoIP (mVoIP) market, capturing roughly 25% of worldwide active users in
2013. The report suggests, Line has been able to
successfully think outside the traditional voice box,
offering paid services through application add-ons
like games and stickers that not only create a revenue
stream, but also increase usage of core services.

Similarly, Martello Technologies (another Wesley

Clover affiliate) provides network fault and performance management software as a service (SaaS).
OTT, helping better monitor and manage Unified
Communications (UC) and prevent downtime by
detecting issues before they can cause a problem.
These are just two examples of OTT apps that have
been designed to help service providers manage
their risks and continue to compete effectively in
this brave new world.

Further Signs of Success

We are also seeing examples emerge of Telco success with their own OTT applications. A strong one
comes from Canada, where CounterPath partnered
with the largest Canadian mobile operator, Rogers,
to launch their One Number OTT service.

The OTT mVoIP and VoLTE markets are some of the

latest to emerge, and provide an interesting snapshot
into the dynamics of the overall industry:
In 2013, there were already 1.5 billion mVoIP subscribers worldwide, most via OTT apps.

Copyright , Wesley Clover International, 2014 | Page 9

NEWSLETTER | JULY 2014

The use of mVoIP is skyrocketing in China, South

Korea, Japan, India and Indonesia in particular.
There were 12 million VoLTE subscribers worldwide in 2013, mostly in South Korea.
By the end of 2014, Infonetics expects an additional 30 commercial VoLTE networks to launch
and VoLTE subscribers to increase to 51 million.
Despite a 12% 20132018 CAGR for mVoIP service revenue, most providers in this space are
making limited money per user an unsustainable model for many independent companies.

That said, for Telcos to have success, they need to

think as Line did, packaging offerings outside the
traditional voice-service envelope. And because
their own services are shifting to an OTT environment as well, they have the opportunity to reduce
their own cost bases as part of that evolution.

No one is giving up their phone for

WhatsApp ...
- Owen Matthews, Alacrity Foundation
Importantly, No one is giving up their phone for
WhatsApp, comments Owen Matthews, Chairman
of the Alacrity Foundation, a Wesley Clover entrepreneurial partnership.
They may stop using SMS, but the phone company
will still be getting $100.00 per month from them.

WhatsApp will be lucky to get $5.00 a year! Skype is

lucky to get 3% of their users to pay anything. Its
not all doom-and-gloom.

In Summary
In summary, some carriers have introduced their
own OTT apps. Others are gravitating toward partnerships with OTT providers, and many are leaning
toward charging for data instead of SMS and voice
packages. These are positive signs.
And they must continue. As Tekin notes, For a long
time, Apple refused to support a number of popular services on their iPhones and tablets. This
caused their end-users to do a jailbreak to get at
those features. Even Apple realized they had to
change some of those strategies, and you know the
customer loyalty they have gained today.
If Telcos do not address the needs of their end
customers quickly enough, those customers will get
what they want from OTT players. End-users have
alternatives today, and they will use them.
Telcos and service providers do have to walk a bit
of a fine line, adds Mr. Smith, in that it is hard to
maintain a good customer relationship, let alone a
revenue stream, when someone else offers an easily accessible capability for free! Its likely better to
make their money in other ways, and not be seen
to be inhibiting the progress of OTT. And so far,
those other ways suggest to me that they don't
seem to be suffering too much from OTT!

THE ENTERPRISE AND OTT

THE CHANGING FACE OF OFFICE COMMUNICATIONS
Enterprise OTT is about valueadded services and apps that are
changing the expectations, even
the demands, of users within an
enterprise environment. In other
words, it is what workers are
coming to expect from the companies that employ them.
Employees are increasingly sophisticated end users. They now
view their smartphone or Tablet
as a multi-purpose device built
for work and play, regardless of
the device type, phone number
or physical location. They want all
apps and services to provide
consumer features ease of

installation and use ; untethered

voice, video, messaging, content
access ; little need for back-end
support.
Users have benefited from OTT
in their personal lives for some
time now, comments ner Tekin.
They enjoy messaging or chatting
via social media, sharing pictures
and videos, using free calling services. They dont see why that
must change at work.
Ben Morris adds, Enterprise
communications is changing, driven by what people deem to be
the easiest and most effective

ways to exchange ideas and information and actions. Today, for

many employees, this includes
not just phone and email, but
also text messaging and embedded video clients.
While Skype comes quickly to
mind with this last point, Magor
has taken the concept of advanced enterprise communications and collaboration to another level, combining video, voice
and messaging services and
offering the ability to integrate
Skype users into hybrid environments that include those inevitable external parties.

Copyright , Wesley Clover International, 2014 | Page 10

NEWSLETTER | JULY 2014

As a result of all these new business drivers, CIOs and enterprise

IT teams are in the cross hairs,
says CounterPaths Jones. They
are having to rethink policies
around standards and security
and compatibility and face the
new realities of BYOD (Bring Your
Own Device) and MDM (Mobile
Device Management).

It amounts to the
consumerization of
IT ...

Particularly as enterprises embrace flexible work forces, workfrom-home staff, remote employees, teleworkers. No big iron in a
wiring closet means all the enterprise features are available with
full mobility. Even two-way radio
is going OTT in terms of its messaging functions, situation alarms
and 4-digit PBX dialing. Check out
another one of our affiliates, Teldio, and their focus on Motorola
radio technologies for more information (www.teldio.com).
One more point before we move
on from our stressed IT friends:
OTT will also have the spill-over
effect of further changing the role
of IT within the enterprise.

- Donovan Jones, CounterPath

SaaS/cloud-based
applications
from
companies
including
Google, Amazon and many others
are becoming the new kings.
Even though many of these services operate in a silo-ed fashion
(no interconnectivity), they have
become comfortable to, if not
expected by, users based on their
success in the consumer domain.

Traditionally, IT was the gatekeeper of all enterprise applications

due to the broad solution approach that was usually taken.
Because they ultimately owned
the solution, IT helped select, implement and support all the software, devices, servers, networks,
storage, etc. required to address
the users needs.

It
amounts
to
the
consumerization of IT and
many enterprises are struggling
to adapt as fast as their employee
expectations are evolving, added
Jones. IT teams are now under
pressure to offer those same services to employees, for example,
tied to a corporate PBX.

With OTT, the same value can be

delivered with a lot less complexity, infrastructure and cost, meaning the key decision maker in the
process can change. As Davies
points out, The success of
SalesForce.com had as much to
do with being able to change the
decision maker for a CRM purchase to the VP of Sales instead
of IT, as it did with any great new
functionality or price point.

Fortunately, enterprise OTT players recognize this. They design

their Cloud-based services so that
there is never a need to adjust or
change the corporate infrastructure (e.g., data center, LAN/WAN,
Firewall, directory, etc.).
Mitel is a great example. As Jim
Davies puts it, OTT changes the
economics for an enterprise, enabling practical solution delivery
for communities of their users
instead of requiring a horizontal
solution to underwrite costs. Taking the traditional PBX into the
Cloud as we now do provides far
more flexibility around enterprise
voice, video and chat features.

Lets look at some other vertical

enterprise examples. Customer
service centers are not inbound
call centers anymore. OTT services enable you to see your customers experience problems, and
work with them to hash them out
on the web.

the cross-platform
compatibility issues are
dealt with in advance.
- Peter Wilenius, CANARIE

I was impressed in the uptake of

Office 365 for iPad, says Peter
Wilenius. Something like 12 million subscriptions in the first
week. Why would enterprise customers go this route? Its a Cloudpowered business app that
streamlines the process of supporting existing staff, adding new
ones, etc. And in this case, all the
cross-platform compatibility issues are dealt with in advance.
For Benbria, Enterprise OTT represents the opportunity to better
connect businesses with existing
and potential customers in the
key user experience moment.

The customer and

the enterprise both
benefit ...
- Tony Busa, Benbria
Benbria leverages OTT for mobile
customer engagement, says Tony
Busa. Consumers connect with
vendors in real-time through their
mobile phones or tablets. Not to
make a purchase, but to interact
about the product or service they
might or did purchase. The customer and the enterprise both
benefit.

A study by Google revealed that

84% of smartphone users today
use their mobile device and apprelated services for shopping.
Other studies show this same
high level of consumer mobile/
social usage when dining at a restaurant or staying at a hotel.
Successful businesses recognize
the connection between customer engagement and top-line success, and they want to capitalize
on this cultural shift to connect
with these mobile consumers.
OTT enables that.
Mobile engagement gives retailers the opportunity to connect
shoppers with associates, establish a real-time dialogue and address any questions or concerns

Copyright , Wesley Clover International, 2014 | Page 11

NEWSLETTER | JULY 2014

before they leave the store, says

Busa. Similarly, it gives front-line
hotel staff the ability to enhance
the guest experience, improve
satisfaction and foster positive
online reviews by acting on
guests requests on the spot.

They can alert staff to any issues

and enable them to make changes to improve the experience. All
these examples of OTT apps that
are designed to improve customer relationships and drive enterprise revenue.

Restaurants too can offer diners

a low-risk, non-confrontational
means of sharing feedback as
their dining experience unfolds.

In summary, OTT provides enterprises with more choice of services. They are no longer limited
to those offered by an incumbent

service provider. They have the

ability to leverage cloud services
that create significant benefit in
terms of scale, agility and economics (including pay-per-use).
These services reduce investments in internal infrastructure,
operating costs, support staff,
and more. We think we can assume they are here to stay.

UNDERSTANDING RECENT ACQUISITIONS

AND THEIR VALUATIONS
Why are companies like WhatsApp, Viber and others
commanding so much money in the investment and
mergers markets? Well, we called out most of the
key points above, but to summarize, it comes down
to the fact that OTT users are creating the largest
communication networks (not infrastructure in this
sense, but communities) the world has ever seen.
Take a look at how quickly companies like Netflix,
SalesForce, Dropbox or WhatsApp, for example,
have been able to build massive customer bases,
says Peter Wilenius with CANARIE. We are talking

the potential to create long-term

value through customer stickiness.
- Peter Wilenius, CANARIE
millions of users, in relatively short time frames and
with pretty small teams. Its difficult to assess how
sustainable all these guys are, but I believe the valuations speak to how the markets view the potential
of their platforms to create long-term value through
customer stickiness.

Most of these valuations are hyped to

an incredible degree.
- Jim Davies, Mitel
Jim Davies with Mitel has a similar, if not slightly
more cynical, take. Most of these valuations are
hyped to an incredible degree. The only justification
I can see for paying such dramatic premiums is the
fear of missing out on a transition that is just so
large. I expect there will be a great deal of consolidation between now and when the markets settle.
The teams at Wesley Clover pay great attention to
the OTT evolution and participate in the areas of
most interest and opportunity. We have many companies that are playing either directly in, or at least
on the edges of, this OTT market.
We are not in it for the quick kill, like some, but we
are confident our strategies and our model are
sound. As Owen Matthews with the Alacrity Foundation puts it, We are and will continue to position
our technologies against emerging opportunities in
this valuable space.

INTERESTING TRENDS AND DEVELOPMENTS

While we cant say with certainty where this OTT stuff will all end up, Ben Morris with AirVM suggests the following likely scenario. I believe the trend to adopt consumer-type applications (e.g., Skype) within the enterprise
will only continue, further blurring the lines between business and consumer tools. In time, its possible there
will be no real distinction between these two segments at all.

Copyright , Wesley Clover International, 2014 | Page 12

NEWSLETTER | JULY 2014

ner Tekin with Netas adds, At one point, service providers will be able
to offer high-quality Enterprise OTT applications of their own. These will
be accessible from any device, anywhere, and will be carrier-independent.
Small- and large-scale organizations will embrace them for their functionality and their cost savings.
He continues, Mobile payment systems, messaging, streaming services
are all improving rapidly. Service providers are looking at how to compete
by providing some of these at low cost or even free, including cloud data
or TV services.

Small- and large-scale

organizations will
embrace them for their
functionality and their
cost savings.

- ner Tekin, Netas

In the unified communications space, two things come to mind for Jim
Davies with Mitel:
WebRTC, which will enable voice and video communication from within a web browser without the requirement for a plug-in. This will make soft communication clients far more practical to deploy, says Davies.
More importantly, it will allow context to be included to drive richer communication experiences. For example, click-to-talk features will marry-in the web page context so the person being contacted will know
what website page the call was made from (e.g., currently looking at your page for alpine backpacks).
LTE and the Internet of Things (IoT). It is possible that LTE and IoT will successfully decouple mobile access
from mobile applications. For example, by running all voice traffic over LTE (VoLTE). Todays ubiquitous
Cloud technologies were the result of asking the question, Why are you running your own datacenter, in
this case, when there are companies who are focused on nothing but doing that?. We can and should virtualize all that stuff. In a similar way, LTE and IoT may enable the question, Why are you running your own
WAN/LAN, when you can let AT&T Mobile, perhaps, be your network? Time will tell
All over the globe, we are seeing an industry in flux. For example, in the UK, British Telecom now offers free
entertainment products with their broadband service. A carrier competing with the likes of Rupert Murdoch
and his news conglomerate

Personally, I think OTT

could create opportunities
for a revitalization of the
Canadian ICT industry.
- Peter Wilenius, CANARIE

From a nationalistic perspective, Peter Wilenius with CANARIE comments, Personally, I think OTT could create opportunities for a revitalization of the Canadian ICT industry. We have always been able to develop great products, but unfortunately there are examples where we
have not been that good at building global businesses. In OTT, there is
a new opportunity to leverage the technology infrastructure that is
already in place to create more high-growth businesses and reassert
some of Canadas elevated position.

We already see a lot of interest from the university CIO and research
communities, who recognize an opportunity for a new generation of
services that enable global collaboration with their peers, or provide better services to their stakeholders (i.e.,
their students). All while they face budget compression and the need to do more with less. For example, the
Net+ initiative has already been spearheaded by our US counterpart (Internet 2). Theyre creating a bundle of
OTT services for their members in the research and education community in the US, and are looking to globalize it through relationships with other NRENs around the world.
We have to agree with Peters first comments. OTT has changed the way businesses and consumers all over
the world communicate. As smartphone and application use only continue to increase, so do the opportunities to provide enhanced new services and products to further enable this global trend. Wesley Clover is committed to doing its part, as we continue to evolve in the world of ICT.
12TH ANNUAL LUMIRE CHARITY GALA
THURSDAY, SEPTEMBER 25TH, 2014
ALL WITH A SPLASH OF RED.
IN SUPPORT OF

OTTAWA CANCER FOUNDATION

WWW.BROOKSTREET.COM/LUMIERE

Copyright , Wesley Clover International, 2014 | Page 13

NEWSLETTER | JULY 2014

WESLEY CLOVER PARKS

IS LAUNCHED
As an initiative under the Wesley Clover charitable
Foundation, this spring saw the launch of Wesley
Clover Parks an Ottawa community hub for outdoor education and recreation.

Leasing an existing city equestrian facility, the multi-year vision is to continue the focus on equestrianism, expand those activities and grow beyond
to serve a much larger community, with activities
ranging from outdoor sports and education, to
arts, culture and sustainable agriculture.
Visit www.wesleycloverparks.com for more ...

INTRODUCING L-SPARK
This summer, together with key
government, education and industry partners, Wesley Clover is
introducing a unique new
incubator and accelerator program to better-enable entrepreneurs focused on
innovative new enterprise software products to
found, fund and grow their new businesses.
Watch for more details as we announce them ...

Wesley Clover News is published by Wesley Clover International Corporation. For more information on this
publication, please send an email to
news@wesleyclover.com.
We recognize the following individuals for their valuable contributions to this issue of Wesley Clover News:
Don Smith, Wesley Clover International
ner Tekin, Netas (www.netas.com.tr/en)
Ben Morris, AirVM (www.arivm,com)
Peter Wilenius, CANARIE (www.canarie.ca)
Tony Busa, Benbria (www.benbria.com)

THE PASSING OF A
DEAR COLLEAGUE

Ken Davison, Magor (www.magorcorp.com)

Jim Davies, Mitel (www.mitel.com)

It is with regret that we end this issue with a tribute to Simon Gwatkin. Simon helped start Wesley
Clover News and managed the publication since
the beginning. He was a long-time, senior member of the Wesley Clover team, and he lost his battle with illness in April of this year.
Simon continued to
perform duties until
his final month. What
a great team member,
and what a loss! He
was a bright and creative executive, invariably cheerful with all.

Donovan Jones, CounterPath (www.counterpath.com)

Hunter Macdonald, Tutela
(www.tutelatechnologies.com)
Owen Matthews, Alacrity (www.alacrityfoundation.com)

Managing Editors: Steve Langford, Terry Matthews

Corporate: Wesley Clover International Corporation |
390 March Road, Suite 110, Kanata, ON, K2K 0G7,
Canada | +1.613.271.6305
United States: Wesley Clover International Corporation
| 3800 Concorde Parkway, Suite 1500, Chantilly, VA,
20151, U.S.A. | +1.703.318.4355

Simon is missed by his

family, his friends, and
those he worked with,
including the many
professionals in marketing, analysis and partner
roles around the world whose paths he crossed.
He fought hard and passed too early, surrounded
by those who loved him.

Europe: Wesley Clover International Corporation |

The Manor House, Newport, South Wales, NP18 1HQ,
United Kingdom | +44.0.1633.410383
www.wesleyclover.com
Copyright 2014, Wesley Clover International. This document is provided for information purposes only. The information it contains is believed to be accurate as of the date of
publication and is subject to change without notice. Wesley
Clover assumes no responsibility for errors or omissions. All
trademarks are the property of their respective owners.

Copyright , Wesley Clover International, 2014 | Page 14