Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
Text messaging has long been a cash cow for mobile operators, currently generating about 20% of their revenue. But over-the-top services such as Facebook, Skype, WhatsApp, Twitter and Apple’s iMessage are rapidly siphoning off SMS revenue.
Case in point: In its 2011 annual report, KPN said that “more and more consumers are making use of online social media and mobile apps to communicate, thereby replacing the traditional voice and SMS usage.” In Q1 2011 alone, KPN’s year-on-year SMS traffic declined 10%.
KPN isn’t alone, either. In fall 2011, the research firm MobileSquared interviewed 31 mobile operators worldwide to assess how OTT services are affecting their voice and SMS revenue:
–One-third of respondents said they’re already seeing a decline due to OTT, while 75% are worried about losing revenue to these new rivals.
–The largest group – 32.3% of respondents – expect operators’ messaging, voice and video calling traffic to decline between 11% and 20% over the next five to 10 years.
–The second-largest group of respondents expects a decline of 31% to 40%.
The good news is that mobile operators have several options for protecting and growing their SMS revenues and market shares. In the MobileSquared survey, 42% or respondents plan to implement an IP Multimedia Subsystem so they can offer Rich Communications Suite and Voice over mobile broadband services. Another 45% believe that other, similar technologies offer better options because they enable faster time to market. A cloud-based solution is one option available to mobile operators to quickly offer new revenue-bearing services that leverages the mobile operators’ key network assets and customer relationships, providing a seamless user experience based on a single phone number. Operators are becoming proactive in launching their own OTT service to compete against some of the popular apps including Whatsapp, Viber, Kik, Skype, etc.
Bridging RCS-e and traditional services
Backed by the GSM Association, RCS-e supports messaging and sophisticated, media-rich services such as live video sharing, all with any other mobile user, regardless of network. In the process, RCS-e puts operators in a better position than they are today when it comes to accommodating the myriad of ways that consumers and business people want to communicate.
For example, operators can use RCS-e to create social networking communities to appeal to certain demographics. Each of the community’s members can interact with voice, video and messaging, but unlike similar OTT services, RCS-e wouldn’t restrict their interaction. Today’s OTT services often aren’t interoperable, so users have to hope that their friends, family or customers use the same OTT provider’s messaging or video calling service. With RCS-e, users don’t have to worry about interoperability because the service uses the phone number as a user’s identity; they can just communicate because identities based on phone numbers are universal. That’s one example of how RCS-e creates a powerful market differentiator for mobile operators.
Operators can enhance the value of RCS-e by selecting a solution that combines RCS-e-enabled services with traditional services such as SMS and MMS, as well as with Web-based applications. This broad interoperability ensures that RCS-e services can tap the widest possible market, instead of just those customers with RCS-e-enabled handsets.
A hybrid solution, for example combining RCS-e with a pre-IMS cloud-based solution, also enables operators to offer messaging and multimedia services that are all anchored to the customer’s mobile number while delivering the service to a large set of users. As a result, customers don’t have to remember their login name and password for each service, and the people they communicate with don’t need to remember a unique handle for each type of service. Instead, everyone simply pulls up their contacts from their phone’s or tablet’s address book, selects the way that they want to communicate and initiates it. By making the mobile number the foundation for authentication and other identity-related processes, the hybrid solution shifts the balance of power away from OTT providers and toward mobile operators.
A hybrid solution hides all of the seams between RCS-e and legacy services and platforms, as well as those between networks. The easier it is for customers to use a service, the more they’ll use it. While may seem obvious, it bears repeating because it highlights how a hybrid RCS-e solution enables mobile operators to differentiate themselves versus the walled gardens and siloed services of their OTT rivals.
OTT services are attractive to users largely because they’re free.
Operators can overcome that challenge by using a hybrid RCS-e solution to provide value-added services that customers are willing to pay for. There are also upsell opportunities. For example, mobile operators could associate the RCS-e services with higher priced service plans while continuing to offer basic MMS and SMS on lower priced plans. One key element for the successful uptake of these services is predictable pricing to users, one of the lessons learned from SMS and MMS.
Pardeep Kohli, President and CEO, Mavenir Systems, is a wireless industry Veteran with 18 years of experience. Pardeep, as co-founder, President and CEO, led Spatial Wireless, the mobile next generation networking market leader, to broad success across the US market. Following the acquisition by Alcatel, as SVP of the Mobile NGN business, Pardeep led the continued expansion and success of the Spatial Wireless product across the global market place. Pardeep has worked in multiple roles at NEC America, DSC, Alcatel and PacBell. While at PacBell, Pardeep participated in the technology selection and network implementation of the first large U.S. GSM network.