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Megafon thinks OTT will save video offering

By PETER WHITE

Published: 14 December, 2012

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For the full version of this story, request this week's copy of our paid weekly service, Faultline, at www.rethinkresearch.biz/faultline or email sales@rethinkresearch.biz

Megafon Russia's second largest cellular operator is making final preparations to launch an OTT service by the end of 2012. This looks like a switch to OTT after the operator announced November 2012 that it was abandoning plans to launch IPTV after two years of testing, at a time when its two main rivals including MTS and the country's number three VimpelCom have both established IPTV offerings. The decision by Megafon to go OTT so quickly appears to be a panic response to the collapse of its IPTV offering.

This was a blow to the prospective platform supplier, Russian middleware provider Netris, which is struggling for air in the Russian market and would have gained much needed buoyancy from the Megafon contract.

Megafon needs to catch up fast and therefore is going for OTT both over its own fixed broadband infrastructure, and also the services of other operators. Megafon is now looking at 4G/LTE as the platform for future growth in IPTV/OTT. This will take time, as much of the infrastructure has still to be built and there are only 100,000 LTE customers now. The OTT plan therefore appears to be a stop gap while 4G/LTE rolls out, and Megafon is considering subsidizing the cost of set top boxes to get a kick start.

This is against the backdrop of a massive pay TV landgrab right now in Russia. All conquering pay TV leader, DTH operator Tricom, which has 8.9 million subs has been accused by its rivals of anti-competitive pricing below cost, which must be true for the free basic package it offers. Rivals contend that the $29 per year it charges for the premium service cannot cover its rights and distribution costs, and that the break even figure would be at least double that. It is cheap even by Russian standards.

Tricom has no OTT or interactive capability so cable and telcos TV operators feel this is the only way to hold onto customers.

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