Classroom Companion: Business

17.4 · Network Access Markets

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17
offer mobile services. 
.
Figure 
17.6
 shows an example of how a VNO (ISPB of 
Company B) is commercially related to the network provider (NP) owned by 
Company A. Both companies A and B offer services to the consumer (C) through 
the Internet service providers ISPA and ISPB, respectively. The major difference 
between them is that ISPA is owned by the company that owns the ICT infrastruc-
ture (IP), while ISPB leases access to the same infrastructure from Company A. See 
7
Chap. 
5
 for other aspects concerning VNOs.
Over-the-top services (OTT) are media services offered by the ASP or content 
provider directly over the network of the NP. OTT services require access to the 
Internet delivered by the ISP. However, OTT services compete with the media and 
communication services offered by the ISP itself. This is illustrated in 
.
Fig. 
17.7
, 
ISPA
NP
ISPB
C
Company A
Company B
ISPA
and ISPB
compete to sell
network access to C
NP
is the owner of
ICT
infrastructure
NP
rents access to
ICT
infrastructure to ISPB
ICT
infrastructure
. Fig. 17.6 Virtual network operator. (Authors’ own figure)
OTT 
messaging
Messaging
OTT voice 
Voice
OTT video
Video
Messaging
voice 
video
. Fig. 17.7 Over-the-top services. (Authors’ own figure)
 
Chapter 17 · Digital Markets

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in which the architecture of OTT messaging, OTT voice, and OTT film distribution 
is presented together with the equivalent services offered by the ISP.
A consumer may use a smartphone in combination with Internet access offered 
by the ISP and WeChat (an OTT messaging service) as an alternative to SMS mes-
saging provided by the ISP. A consumer may also use Internet access combined 
with voice-over-IP telephone service offered by an ASP—for example, Skype—as 
an alternative to the telephone service offered by a mobile service provider. 
Similarly, Netflix may provide the same services directly over the Internet as a pro-
vider of cable television services. The key point of OTT is that the same set of 
services that was traditionally offered over a dedicated communication network 
can be offered over the Internet without other involvement of the ISP and the NP 
than transporting bits.
The major challenge for the ISP is smaller revenue because of competition from 
OTT services. This is because the price per bit for the telephone service has tradi-
tionally been orders of magnitude higher than the price per bit for Internet access. 
Hence, the ISP will face reduced revenue as consumers move from, for example, 
telephone service to OTT voice services since the price per bit that the ISP charges 
the OTT provider for network access is much lower than the price per bit that the 
ISP charges the consumer directly. For the consumer, OTT means significantly lower 
prices for digital services such as telephony and messaging. OTT is one step toward 
the convergence of services (see 
7
Chap. 
3
), in which traditional telephone service is 
replaced by VoIP and cable television services are replaced by video streaming.
Network access services are close to becoming digital commodities. This is 
because it is almost impossible to differentiate between the various network access 
services provided by different network access suppliers. In commodity markets, 
price is the most important differentiator between suppliers. This may also be one 
reason for the ongoing price war between suppliers of broadband access and 
mobile telephone services.
.
Figure 
17.8
extends 
.
Fig. 
17.2
to include device providers (DP). Device 
providers are providers of user equipment such as smartphones, laptops, and 
C
ISP
ASP
CP
NP
Devices provided by DP
are interoperable with
services provided by ISP 
Applications provided
by ASP are
interoperable with
devices provided by DP 
DP