Amidst commoditization, increasing price pressures and the competition from OTT voice and messaging applications, Mobile Operators looking to augment their revenues have started making major inroads into the content business. The transformation of mobile networks to all IP-networks meant that IP-content such as IP-video can be delivered wirelessly onto mobile devices, and Mobile Operators can now provide content services such as OTT streaming music and video, OTT Mobile TV services, digital libraries and a wide range of digital content and mobile applications including those used for the connected car and connected home. To acquire the capabilities that willl enable them to deliver content on top of delivering connectivity, Mobile Operators are investing in technologies such as video optimization, content delivery networks, content and application platforms and are partnering with major video and music brands and providers of application and service management platforms - so that they can start packaging and selling content and kick off the transformation toward becoming a digital service provider.
Operators' investments in the content business is taking place in parallel with their investments in their connectivity business, with expansion of their LTE and LTE-A services, Wi-Fi networks, IoT/M2M networks and research and trials on newer technologies such as small cells and eMBMS as well as 5G, despite the reducing margins and decreasing ARPU. At the same time, the deployment of network virtualization technologies and software-defined networking is expected to reduce network operating costs and boost margins over time.
If 2019 will see IP video traffic making up 80% of all traffic on mobile networks and given that margins in the connectivity business will continue to decrease, will content eventually become a bigger business for Mobile Operators than connectivity?