Mobile operators hope the cloud will hide their networks from OTT vampires

This year's Mobile World Congress has been particularly notable for the series of political demonstrations that have taken place outside the venue at the Barcelona Fira and, within the hallowed halls themselves, by the frank admissions that OTT players are having a severe adverse effect on the fortunes of the likes of Deutsche Telekom, Telecom Italia, Bharti Airtel and many other network operators.

After suffering the effects of sporadic disruptions on other show days, yesterday afternoon and well into the evening (Wednesday, February 29), delegates were effectively imprisoned in the Fira as a mass of students and the public (together with attendant riot police) gathered outside the venue, bringing total gridlock to central Barcelona and stopping visitors from either entering or leaving MWC 2012.

The protests, about the state of the Spanish economy in general and rate of unemployment Catalonia in particular, literally brought the the tens of thousands of visitors to the biggest mobile comms show on earth to a standstill. They couldn't get in or out of the place and, given the crush, it was equally impossible to shake it all about.

Within the Fira itself, where the sounds of the revolting masses were reduced to little more than a dull background rumble and the braying of the police klaxons barely disturbed the even tenor of life in the conference sessions, Franco Bernabe, the CEO of Telecom Italia, was having a go at the OTT players who, he claims, are little more than leeches clinging to the veins and arteries of the world's telcos, sucking the blood out of them without even having the courtesy to offer to pay for the bandwidth transfusions that they they are unable to live without.

In a keynote speech, Mr. Bernabe (who is current chairman of the GSMA, the industry body that organises Mobile World) railed against the many OTT companies (they went un-named by him) who are, he says, piggy-backing on infrastructure deployed and paid-for by 'real' tecos whilst, simultaneously, hi-jacking the revenues derived from content and apps being delivered over those self-same networks, that should, rightfully, go to the operators.

He said the OTT upstarts don't know how mobile networks actually work, don't care about constantly overloading them and "hinder competition" by using "non-standardised technologies." He added, "This imposes a big burden on mobile operators... and means business models need to revisited." In other words, OTT players must be made, somehow, to pay their fair share for the network resources they use.

To add emphasis to his message, Mr. Bernabe noted that, in Europe, ARPU per month has fallen from the €26 it stood at in 2006 to the €20 it was at the end of 2011.

Furthermore, this decline has happned as mobile operators spent big money on network upgrades and enhancements made necessary by the increased traffic being generated by consumers using OTT services.

Another keynote speaker, Rene Obermann, the chairman and CEO of Deutsche Telekom, weighed -in to the debate, saying OTT companies, whilst failing to pay to use infrastructure  bought, paid for and operated by established traditional operators, continue to make increasing profits by selling to consumers over them.

Mr. Obermann said that the head of one OTT organisation (which he declined to name) told him, "In this new game, you make the investments and I take the profits." The CEO observed, "I didn't like that."

In another speech, Sunil Mittal, chairman and managing director of Bharti Airtel, was equally trenchant, saying profit margins are being hammered by OTT services and that this, in turn, damages every aspect of the global telecoms industry because operators, deprived of revenues that now go to the OTT sector, no longer have the money to pay for expensive network upgrades. This, in turn, impacts the infrastructure suppliers who, so Sunil Mittal said, are "selling equipment at a loss in order to sign up business."

He concluded, "If you look at the virtuous cycle, it is crumbling... because Internet OTTs are not paying their fair share. It really is a paradox, despite investing billions of dollars in their networks, mobile operators are getting blamed for capacity problems caused by OTT players sucking-up the bandwidth."

So, is there a solution to this seemingly intractable problem? Well, perhaps there is. Both Obermann of DT and Bernabe of TI reckon the cloud could be the answer. Rene Obermann told his audience that "traditional telcos" should "invest in customer-friendly cloud services to win the hearts of consumers." and noted that "The cloud is a new opportunity for operators and cloud computing is just more efficient and cheaper."

Obermann reckons that proper telcos are in pole position to make the cloud their own by offering both enterprises and consumers services from soup to nuts - or from the devices, on through the network via the operator's massive databases anyway. And he believes that if operators are sufficiently innovative they will be able to guarantee seamless cloud connectivity via both wieless and wireline wide area  networks, Wi-Fi, small cells, femtocells and other access points. Operators are also perfectly placed to be able to provide simple billing services for cloud offerings and for potentially massive (and massively profitable) M2M cloud services.

We all knew that so-called traditional mobile network operators have hated and feared OTT players since they first appeared in the marketplace.They still hate them but are coming closer to a grudging acceptance that they are here to stay and so far no OTT upstart has managed to destroy one of their number. They have taken some solace from this and are now more aware both of their limitations in the brave new world they now must, perforce, inhabit, but have also come to realise that they have some very real strengths too.

A workable and working armistice now seems to be the most likely end to the battle of attrition that has been raging for so long, but there'll be some more bloody battles and some serious a casualties before an armed truce comes into effect.