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Reader Forum: The ROI of RCS

Editor’s Note: Welcome to our weekly Reader Forum section. In an attempt to broaden our interaction with our readers we have created this forum for those with something meaningful to say to the wireless industry. We want to keep this as open as possible, but we maintain some editorial control to keep it free of commercials or attacks. Please send along submissions for this section to our editors at: [email protected]

The rise of over-the-top messaging services has been hugely disruptive for the mobile industry. Free OTT messaging apps with text, VoIP and even video features have made the traditional operator revenue model of paid messaging subscriptions, and even monthly voice minutes, obsolete. With continued smartphone growth and so many free alternatives available, subscriber expectations have changed and users are becoming less likely to pay for basic messaging services, eroding a multi-billion dollar revenue stream for mobile operators. These driving factors have forced operators to rethink their approach and created a push for rich communication suite services as a standard that will help mobile operators compete with OTT services. So far, the standard has seen limited uptake, and the value to operators is still in question.

RCS overview

RCS is a platform created by the GSM Association that allows operators to offer richer communications through an “interoperable extension to voice and messaging today.” RCS transitions all messaging and voice capabilities from the current circuit-switched operator network to an IP multimedia subsystem infrastructure. RCS utilizes various standards defined by 3GPP and the Open Mobile Alliance and combines them with enhanced phone book, messaging and calling services. RCS includes specifications for the user network interface, which defines how a device utilizes RCS network services, and also a network-network interface, which defines how two RCS service providers exchange traffic with each other. The main features of RCS include:
–Enhanced phonebook: enables service capabilities and enhanced contact information such as social presence.
–Enhanced messaging: provides chat, emoticons, location share and file sharing.
–Enriched calling: enables multimedia content sharing during a voice call or video call (e.g. “see what I see”).
The current version of RCS, version 5.1, includes a discovery framework, which is the cornerstone of RCS. It allows users to see what contacts also have RCS services available to communicate. The concept of interoperability between different RCS client apps and the inter-working of RCS services between operators worldwide is a pivotal advantage of RCS messaging versus OTT messaging apps. Anyone with an RCS-capable handset, subscribed to an RCS-based operator service, can communicate.

Mobile operators are playing catch-up

The concept of converged services and unified communications is not new. The RCS Initiative was announced in February 2008, yet few wireless operators have deployed RCS services. MetroPCS released an RCS client in 2012 and Sprint just released its first OTT RCS client in 2013. Why have so few operators deployed RCS services? For one, the roll out is expensive and challenging. To deploy RCS, the operator has to first deploy an IMS infrastructure alongside their existing circuit-switched network. After that, an RCS infrastructure, which includes a presence server, messaging server, video share application server, etc., has to be deployed on top of the IMS infrastructure. Operators also need to integrate with existing platforms in the network, such as billing, provisioning, portal, proxy servers, gateway and voicemail systems.

Once the extensive groundwork is laid, challenges still remain. To truly make an impact, RCS must be pre-loaded by the handset manufacturers, enabling an RCS experience for consumers right out of the box, without worrying about which OTT app to download. And while a number of OEMs have publicly expressed a commitment to RCS, the question remains if the standard will take off without support from Apple.

RCS: Breaking down barriers

Despite the challenges sited above, RCS creates a new opportunity for mobile operators to fill a gap in the fragmented user experience created by the sheer number of messaging applications available. By rolling out RCS-enabled handsets, mobile operators will be able to provide users with VoIP features, video sharing, video calling, instant messaging, image and file transfer, and geo-location sharing all from one application. Operators have the advantage of using one key component that OTT app providers don’t have – your phone number. That means no switching apps and no signing in to multiple services.

Ironically, it’s the “walled garden” experience of OTT that mobile operators are in the best position to set right. By making RCS the industry standard, wireless operators will gain the ability to innovate with cross-platform messaging APIs that enhance the value of their network and bring a richer experience through network presence and integration with contacts. For example, by simply seeing which contacts are available in real-time, users can avoid the hassle of trying to schedule a video call.

Can operators find the riches in RCS?

The basis of any new service offering should be revenue growth, yet RCS alone lacks a clear path to monetization. Operators that are launching RCS services are doing so with free apps and features, but OTT apps have proven that consumers are willing to pay for personalized communications. For example Japanese messaging company Line makes over $10 million per month from selling stickers. Operators need to build in clear revenue generating services like this in order to get the ROI they seek from RCS. They also need to innovate more rapidly and roll out new features within months rather than the typical multi-year deployment plans they are used to. Today’s subscribers are fickle and have short attention spans. Without a content strategy that enables more personalized communication and the ability to roll out fresh content and new features rapidly, the OTT market will simply take advantage of the RCS services themselves and continue to steal consumer mind share from operators.

Summary

The “4G” networks that mobile operators spent billions to create are driving the rise of OTT apps and hurting the mobile industry’s profitability. The same could happen once RCS clients are launched, giving OTT vendors another infrastructure to out-innovate mobile operators on, beating them at their own game once again. Whether these innovations are developed internally or contracted to partners, mobile operators will need to become more agile in service rollout, and focus on finding recurring revenue streams from their RCS investments.

Vinay Chandra is the senior director of product management for Smith Micro where he is responsible for developing the company’s CommSuite product line. In his current role, he has led innovative advancements such as voice-to-text technology. Chandra holds more than 15 years of experience developing key marketing strategies and products for companies ranging from startups to leading global enterprises, specializing in mobile, wireless and telecom product portfolios. Chandra holds a Bachelor of Engineering degree in computer engineering from Bombay University in India. He also holds a Master’s of Business Administration in marketing from the University of Phoenix and a certification of practical product management from Pragmatic Marketing.

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