A new white paper produced by UK-based Juniper Research projects wireless carriers will lose a staggering $14 billion in the next year as consumers give voice and message business to Over The Top (OTT) service providers including Skype, Facebook and WhatsApp.
Compared to paying a cellular carrier for voice calls or text messaging, consumers are increasingly turning to free web-based applications that serve the same function.
Paper author Windsor Holden, in an interview with RCR Wireless News, said the telecom industry is going through “a significant migration of communication formats.”
“If you look at, to begin with, the problem that operators face, it’s that they are all pretty much featuring within saturated markets. On top of that, when you have no subscribers left to get, as it were. You also have the over the top players … coming in and further eroding their revenue stream.”
Some text-messaging plans, for instance, can cost up to 25 cents per message while WhatsApp, a free Web-based application, provides text messaging plus audio and video messaging.
Holden said that usage levels for voice and text “are diminishing quite markedly. The operators understandably are rather aggrieved with net neutrality. They perceive OTTs as getting a free ride on their network. The net result is that the network operators, as a result of these next generation services offered by the OTT, are seeing quite significant erosion of revenue.”
His research into carriers from Italy, Spain and the United Kingdom found voice revenue in those markets has dropped 60 percent since 2009.
Holden’s report references dozens of carriers and is based on interviews with reps from Amdocs, Bango, Gemalto, Ruckus Wireless and Three UK; he also considered case studies of AT&T and China Mobile.
On the bright side, he estimates a potential $66 billion in new revenues over the next five years if carriers can capitalize on growing areas like big data analytics, machine-to-machine (M2M) networking and mobile digital banking.
Mobile money, Holden said, “is particularly pertinent to operators playing in developing/emerging markets. Given the relative ubiquity of mobile there is a significant opportunity there for the operators to offer financial inclusivity to consumers for the first time.”
Holden’s report recommends operators cut operational costs and look for opportunities to increase costs to the user.
Specifically, he suggests more costly shared data plans and bundling content into a monthly subscription.
NFV (Network Functionality Virtualization) could help save on hardware costs and increase how long it takes to offer new products to consumers, according to Holden.
“Certainly there are significant opportunities [with NFV] for operators to reduce the costs of proprietary hardware but also from a time-to-market perspective. If all the functionality is virtualized, then it’s a lot easier to update that over the air and reduce the time of taking your product to market, particularly if a competitor has launched a product.”
Juniper Research is a market analytics firm that provides information on the mobile, telecommunications and applications industries.
