YOU ARE AT:Opinion2016 Predictions: Messaging, NFV and ‘gray markets’

2016 Predictions: Messaging, NFV and ‘gray markets’

Openmind sees evolving messaging and NFV platforms, and tackling of ‘gray markets’

Editor’s Note: With 2016 now upon us, RCR Wireless News has gathered predictions from leading industry analysts and executives on what they expect to see in the new year.

As a new year begins, we look to the market and customer trends that will emerge over the course of 2016. For Openmind, these are underpinned by the drive for operator cost savings, network virtualization and platform consolidation. With so many new, more agile players entering the telecom market, to stand a chance of survival, operators will have to reduce operating expense and capital expense while also becoming flexible and scalable enough to launch new services, quickly.

Below, we have highlighted four trends that we predict in the coming year – from greater subscriber engagement to the embracing of virtualization and the hosted operator cloud.

Greater role for MNOs in the A2P value chain

Early growth in the application-to-person market was largely based on a direct subscription relationship between the consumer and over-the-top services, with the mobile network operator playing a central role in enabling reliable and timely delivery of those services. OTTs are agile, with low overhead costs that enable them to deliver faster services than operators are capable of. Yet as the market develops, the MNO is now required to take a more active role in protecting their customers’ user experience. In 2016, communication service providers must innovate to provide their A2P market with new channels for greater engagement.

In 2016, global operators will continue to roll out LTE networks as well as accompanying IP voice and messaging services such as A2P. This provides MNOs with a fantastic opportunity to monetize through customer experience. For example, MNOs are able to further performance and growth in the A2P market by complementing the A2P messaging channel with push notifications. Research has shown push improves on the performance of messaging as an A2P channel in terms of read- and click-through rates. If operators can act as an enabler for brands and organizations to send push notifications to their customers – enabled using existing infrastructure – the resulting new business models and revenue streams could be worth up to $5.8 billion next year, rising to $10.9 billion by 2018.

This provides a chance for MNOs to partner with brands to deliver messages and drive new business models in 2016.

Messaging will develop its NVF business case

NFV can deliver on the promise of reduced opex and capex, and fast service launch while providing flexibility and scalability. However, challenges will still remain, and as with all new technologies, there will be variations in vendor implementations. A key factor for 2016 will be interoperability and interworking among different network functions virtualization vendors and deployments.

But the potential for NFV will remain huge, with the benefits of consolidation, service centralization and data center optimization being key drivers. Use cases will gather further momentum in 2016, in particular virtual IP multimedia subsystem core, which is certain to have a major impact on voice-over-LTE and rich communication service rollouts in the coming years.

Fundamentally it will be a clear business case that will drive NFV forward in the coming years, and Openmind’s experience is messaging is a strong candidate domain for virtualization in 2016. Consolidated messaging platforms will continue to be very relevant for operators this year, as they aim to reduce cost of ownership, drive innovation through services and look to deploy a wider range of NFVI products.

Operators will turn gray to pay

This past year we have seen a significant growth in A2P messaging for global mobile operators. As brands and digital service providers roll out mobile-first strategies to reach consumers all over the world, A2P provides them with the perfect opportunity to engage. It is estimated the A2P market is already worth $50 billion per year with a 5% to 6% compound annual growth rate forecast, and given the current interest, we believe this will continue to grow in 2016.

But side-by-side with this new revenue growth has been growth in the “gray market” for A2P messaging. Gray market A2P, for example, is messaging traffic disguised as person-to-person traffic and therefore subject to the free/cheaper rates than where handled as A2P. Internationally originated A2P messaging revenue is specifically at risk from gray routes. In fact, it is estimated such gray route messaging traffic results in a revenue loss of $5 billion per year, with 75% of CSPs not being aware or having strategies for its prevention.

We predict 2016 will be the year operators finally realize the threat of gray routes and begin to monetize them.

Operators will look to the hosted cloud

There are numerous examples where cloud platforms are fundamentally changing whole industry sectors. Cloud is also transforming communications services – for example, WhatsApp, Skype, Snapchat, etc. While these organizations steal a march, in 2016, operators will need to respond and enhance their own communication services using cloud-based platforms. But, they can’t go it alone; many are trying to build their own cloud infrastructure, but that has traditionally required complex and slow network investment rollouts.

This will change in 2016, as operators become frustrated by the limitations on time to market and innovation. The real opportunity here is to embrace cloud for new services. To achieve the scale and velocity to compete, operators must look to hosted cloud offerings in 2016. One carrier, BICS, has already shown a cloud-based communication service is possible with the launch of its hosted RCS service, which allows its operator customers to quickly, easily and efficiently deploy the full range of next-generation rich communication services. The solution is based on RCS and IMS standards and allows operators to select the apps that offer the best rich communication experience for their end users. When fully adopted, these industry standards will support a whole ecosystem of new services and enable operators to increase the speed of innovation in the sector.

Ultimately, as a new year begins, operators will increase the drive to reduce expenditures. This will be enabled by embracing virtualization and the manifold benefits of the hosted cloud, as well as launching new innovative business models using existing infrastructure. We look forward to seeing what lies ahead.

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