With progress of communication technologies, it enables rapid development of all kinds of services over the Internet, and we call these services with a name as over the top (OTT). The penetration rate of 4G has increased rapidly and also increased mobile operator’s revenue. With the increase of digital convergence demand and other video platforms appear, it can be predicted the level of complex and competition will rise in whole market. The business expansion from scale of economies and the popularity of flat rates all have provided some convenience for people to surf and enjoy OTT services with no worry. However, the mobile Internet service providers (ISPs) have increase the number of market penetration rate quickly and have to deal with huge mobile traffic generated from OTT services. Video streaming accounts for 58 percentages in all mobile data traffic from a recent survey and it indicates that OTT videos streaming services convert mobile operators to be dumb pipes. If mobile operators have to maintain quality of service, they need to invest more money to upgrade their communication infrastructure. Although voice of IP (VoIP) services provided by Facebook, line and Skype do not consume huge amount of mobile bandwidth, it decreases mobile operator’s’ voice revenues and average revenue per user (APRU) significantly. Moreover, the revenue of SMS from mobile operators decline dramatically, too. Therefore, the paper addresses whether mobile operators are capable facing the impact of OTT videos and VOIP, to cope with emerging challenges from OTT services. In Taiwan, all mobile operators have developed their OTT platforms, and some mobile operators bundle their OTT services and mobile Internet service together to make more attractive for reducing churn rates and increase ARPU. In addition, cooperation with content providers and mobile operators are necessities and large scale of merger and acquisition (M&A) between AT&T and Time Warner to enrich their OTT capacities also emerged. This paper discusses different options of mobile operators to cope with OTT challenges. 1. Mobile operators choose to be dumb pipes and upgrade their infrastructures aggressively, and adopt strategic alliance with OTT service providers. 2. Mobile operators aggregate contents to develop OTT platforms by themselves to compete with other OTT services providers. In addition, the paper also how do asymmetric regulations between BISPs and OTT service operators affect the competition between mobile operators and OTT service providers. One is network neutrality and the other is data protection of personal privacy. Network neutrality has been discussed and debated for many years with different kinds of interpretation, but restrictions of selling personal data for mobile operators can produce more notable effect. OTT service provides can sell customer data to make profits whether mobile operators can sell customer data with precise location data. In order to study the competition between mobile operators and OTT service providers clearly, we propose, basing on mobile operator’s perspective, six options from pure wholesale dumb pipe to fully bundle service provider. 1. Wholesale only. It means mobile operators won’t contact consumers directly, and provides their spectrum and infrastructure to mobile virtual network operators(MVNO). 2. Retail only. It means mobile operators focus on their mobile business (e.g. voice business and mobile data business) and don’t get involving in developing their OTT services. 3. Wholesale and retail together. But mobile operators do provide OTT services. 4. Wholesale, retail and strategic alliance with OTT service providers. Mobile operator do develop their own OTT services but take strategic alliance with other OTT service providers and bundle those services together. 5. Wholesale, retail, and develop their owned OTT platforms. Mobile operators can produce contents by themselves or purchase copyright from channel operators and other content providers. 6. The last option is to combine all of above five options. This study adopts cost-benefit analysis to compare total cost and benefit and assess profitability of each option, because cost-benefit analysis can provide quantitative number to aid for analyzing each option and obtaining a clear picture for input and output. The research outcome not only can depict the competition between mobile operators and OTT service providers clearly but also offers a valuable reference for NRAs, mobile operators and OTT service providers about how to regulate and how to compete with difference scenarios and options.
