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1. Introduction
The rise and boom of Internet-based industries represents significant challenges to some traditional sectors of the economy, such as publishing, music industry, advertising and media[1]. Traditional telecom operators are also vulnerable to the new markets and services that appear as a consequence of accessibility to the Internet and, in particular, in the face of over-the-top (OTT) services, applications and content, as Skype, WhatsApp, Netflix, etc.
Many articles report the impact of OTTs on telecommunications markets. For instance, Shin (2012) documents how mobile operators in Korea have faced a reduction in voice calls due to Internet calling services or applications based on text messaging for smartphones. Similarly, Nikou et al. (2012) point out that European operators' income dropped as a result of OTT services such as WhatsApp and social networks like Facebook and Twitter. In this paper, we concentrate on the challenges and implications posed by OTT content (i.e. online video). OTT TV-Video may be a substitute of traditional TV. Furthermore, access to OTT content enables disintermediation, i.e. content owners - which up until now had to negotiate with telecom operators (or television operators) to reach consumers - have the option of no longer doing so and are able to interact with the consumer directly through a Web page[2]. As a result, many households are disconnecting their TV content provider and dropping pay-TV services altogether (see Banerjee et al. (2013) for evidence of this phenomena in USA).
We build a conceptual framework to analyze the response strategies by telecom operators in the context of an evolving TV technology. We argue that the technology that enabled bundling of services was the entry door of telecom operators to the content market and that, nowadays, online TV may be their exit door if they do not display innovative strategies to remain in the content market.
We focus on countries from Latin America (LATAM), which is interesting given that the region is showing an increasing global economic weight. We make an effort to articulate the empirical evidence about telecom operators' strategies in LATAM with the conceptual framework that we develop. The lack of data in the region is an issue that implies some limitation for our analysis. However, we work with a liable database that has been constructed...