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Summary

Video is the engine for revenue growth. So claimed Huawei's rotating CEO, Eric Xu, at the 2017 Huawei Analyst Summit in April in Shenzhen, China. But first you have to convince consumers to pay for it on a standalone basis, and well, we all know how that story goes – that's incredibly challenging. Therefore, video needs to be offered as part of all bundles if it hopes to become as pervasive as voice services.

Video to become a more intrinsic part of the bundle

Entertainment video (including IPTV) is a $650bn long-term opportunity, Huawei believes. Last year, Huawei said it hoped video would become a "basic" service of telcos, similar to voice (apparently SMS is no longer considered a basic service). But the real consumer issue hasn't changed in the last year or even two years – how do telcos monetize video? There are a few successful examples, that's true. For example, LG U+ has launched five 4K channels, and this year its video content revenue is expected to surpass its fixed broadband revenue. But let's face it, LG U+ would be hailed as an industry shining light that not everyone can emulate by virtue of its coming from a high-ARPU developed market where the operator can invest heavily in content as a differentiator.

Content is a differentiator, and that's why some people (e.g., football or basketball fans) might be willing to pay for video, but the majority will not. On the other hand, consumers will be more welcoming of video when it is bundled alongside their existing paid offerings. In short, video as a basic service means ensuring that there is a video component in all bundles (not just the expensive ones) that are offered by an operator.

Huawei takes on industry "content aggregator" role

Huawei has stepped into the debate, taking on a content aggregator role, but it doesn't expect to make a profit from its video aggregation role. Xu said that no telco was willing to do content aggregation, so Huawei stepped up to do that. As a content aggregator, Huawei will mainly serve telcos in very small markets that are unable to invest in content to differentiate. Huawei has 1,000 content partners and more content aggregators. Its aggregation initiative was short on detail, but this is a very difficult task it has set for itself.If it is aggregating for multiple operators, will they all have the same content (i.e., no differentiation)?

Huawei also believes that once the industry steps into the content aggregator role, it can step back from the role. That might be an unattainable pipe dream. Moreover, the biggest bottleneck to monetizing video is still prevalent – OSS/BSS integration.

Appendix

Further reading

"Consumers who don't yet bundle in China and Australia value the bundle proposition quite differently," TE0009-001624 (April 2017)

Author

Nicole McCormick, Practice Leader, Broadband and Multiplay

nicole.mccormick@ovum.com

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