New Courses for New Horses: Alternative Approach for an OTT-based Broadband Ecosystem



The rapid development of information and communications technology (ICT) has led to the emergence of Internet-based "over-the-top" (OTT) services. Broadband policies that have traditionally focused on dealing with monopolistic network operators have to adjust to the presence of this new service category and the service providers in it, that is, OTT firms.

These OTT firms are flourishing players in the broadband ecosystem, and can exert significant competitive pressure on existing network operators, if properly nurtured. For example, telecom OTTs can be a direct threat to incumbent carriers, whereas application/content OTTs can be alternative platform providers that may replace the portal functions of incumbent network operators. Since market competition is the most efficient and favorable resource allocation mechanism provided certain conditions are met, it is important not to interfere in the development of OTTs unless they pose a clear and immediate threat to the competitive ecosystem. Policy makers can utilize these new competitive players as a tool to discipline the anti-competitive behavior of telecom giants. In addition, OTTs are free from legacy infrastructures and can adopt state-of-the-art technology with lesser difficulty and introduce new or improved services in far less time than firms that have spent a fortune on building network infrastructure. Therefore, supporting OTT firms can be a good industrial policy action that enables the public to enjoy the benefits of the broadband ecosystem sooner. This may also motivate network giants to speed up their new service introduction and improve service quality, thereby generating greater social welfare.

Policymakers need to introduce a new set of broadband policies that foster the development of OTTs and should be ready to intervene when existing players engage in anti-competitive activities against them. Interventions directed at network operators include the enforcement of an open network policy, unbundling requirements, an arm’s length rule when dealing with their subsidiaries, and functional/structural separation. Alternatively, if the current market condition is not competitive enough, policies can be “targeted” to help OTTs become significant players in the market. Remedies such as direct subsidies or tax relief can be applied, keeping in mind that they must be temporary in nature; otherwise, they may cause more harm than good in the long run. Moreover, it is important to remember that there is no one-size-fits-all solution. For example, the treatment of partnerships between OTTs and network operators has to adjust according to the stage at which broadband development is: the lower the stage, the more lax the governmental oversight should be. Similarly, proactive policies that ensure that these partnerships extend to investment in broadband infrastructure and the Internet economy, leading to optimal resource allocation, should be framed when the market mechanism is inadequate.

Top of page