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.
Chess – the game of kings. The chess student learns to consider the endgame before making the first move. The student learns to consider the endgame even while executing tactical middle-game combinations. The student learns that incremental positional advantages gained over many moves result in winning endgame positions.
How is chess relevant to the wireless industry? And towards what endgame?
The mobile industry is very dynamic, has experienced major growth in subscriber counts over the last decade, and has witnessed fundamental changes in the very nature of mobile communications over the past five years. The introduction of iPhone and Android in 2007 and 2008, respectively, coupled with mobile broadband access – LTE, HSPA/HSPA+ and Wi-Fi – have changed the mobile value proposition and value-creation chain. Without a doubt there were good business reasons for the introduction of each new technology. Consumer demand for smartphones is a clear indication of the value created. Mobile network operators have created value in high-speed mobile access networks over the last five years, but not the most interesting value-added services.
Wireless networks were built initially for mobile network operators to offer mobile voice services. There was an inseparable link between network access and voice service. This is no longer the case – there is no longer a necessary linkage between the wireless access and the services consumed with the deployment of IP-centric LTE and HSPA networks. Indeed, mobile network operators introduced LTE with no new value-added services; LTE access was the service and enabled many companies to introduce network neutral services. Mobile network operators are adding mobile data capacity that enable the delivery of network and domain neutral over-the-top services that consumers want while, in some quarters, bemoaning these selfsame services as a threat.
The reality is that IP-centric mobile broadband networks have changed forever the ways in which users will expect to receive services – the ability to receive all services on multiple devices over the best available network. While the primary but declining source of revenues for MNOs remains voice communications, voice calling is not the primary usage on smartphones any longer. A mid-2012 report by O2 indicated that less than 10% of the time spent using a smartphone was for telephone calls; in this study, the top two uses were Web browsing and social networking and they accounted for more than 40% of time spent. Consider the applications used on smartphones. A recent review of the top 10 free and paid applications on Google Play is an indication of the state of wireless today. Of the top 10 paid apps, three were games and seven were utilities. Of the top 10 free apps: four were games, three were media (including Pandora and Netflix) and two were communications (Skype, Facebook Messenger).
Are OTT services a threat to MNOs? A more appropriate question might be: without the demand created by Web services, including OTT communication services, what would the demand for LTE and HSPA be? The view of OTT as a primary threat misses the larger picture of the virtuous cycle created by the symbiosis between MBB, smartphones and Web services in general, with challenges from OTT communication services being a side effect.
MNOs are generally good at the services they have traditionally provided – voice and basic messaging. The carrier-grade mobile voice service provided by MNOs is without a doubt more reliable than any network-independent service. Not sure this is the case? Consider this: if you had only an urgent call to make, whose service would you trust – your MNO or an OTT? On the other hand, OTT voice services are good enough for many routine calls, especially when used to avoid expensive roaming charges. Indeed, the rise of OTT services is in part due to the desire of consumers to avoid high roaming charges, or of being able to switch MNO without major disruption to services. Consumers can now choose the appropriate service for the specific context of communications from a spectrum of choices that will no doubt continue to increase.
With IP-centric networks, MNOs have the ability to expand the services offered and compete effectively. For example, T-Mobile USA offers a voice over Wi-Fi service that enables calls to be made and received as local calls on Wi-Fi access points anywhere in the world as long as the Wi-Fi quality is good enough. I have found this service, as part of the spectrum that includes roaming and Skype, to be the most appropriate in many instances while traveling in Europe. But, does anyone want e-mail services from an MNO? Perhaps not. One of the challenges MNOs face is market reach. If there are any questions about the portability of a service across networks, devices and domains, consumers are more likely to seek a service that provides independence from the MNO.
Many question why major operators have not yet introduced rich communication services and whether RCS can generate revenues or increase ARPU for operators. If all operators in a market do not deploy RCS, will a critical mass emerge? If or when all deploy RCS, how can they differentiate? Of the possible courses of action, MNOs could:
–Do nothing – just continue with short messaging. How well has that worked so far? SMS is basically 2G messaging in a “4G” world. If operators continue to do nothing about improving messaging services, they will continue to cede the market to OTT providers, and messaging ARPU will continue its downward trajectory.
–Deploy RCS. Even if RCS cannot be marketed as a separate, paid option, arguably the greater value of RCS will at least slow, if not reverse, average revenue per user decline. The difference would be a net improvement in ARPU with RCS. Additionally, more capable networks will encourage application developers to utilize the capabilities when appropriate application program interfaces are available.
There is, of course, no guarantee that doing something will change this situation – new services have to be good enough.
So, what’s the endgame?
The accompanying diagram provides a view of the mobile services endgame. Beyond basic telecom services, communications-enabled mobile apps that provide enhanced user experiences is really the way of the future – mobile communication services becoming embedded capabilities within a variety of activities.
This recent blog on contextual communications is worth a read. The extent to which MNO services are used within value-added communications-enabled apps will depend to a great extent on how well MNOs implement and expose their services. Who is ready to play?
Madan Jagernauth founded FutureMobile Service in 2013 after more than 20 years in the wireless industry, providing leadership roles for internationally recognized companies like Huawei Technologies and Nortel. During that period, he has provided marketing and product management leadership across all generations of wireless access technologies, including strategic planning, technical marketing and product planning. He has provided the strategic and tactical leadership to launch pioneering wireless broadband products, working both with internal engineering teams and development partners.
With a Master’s degree in Engineering and an MBA in Telecommunications Management, Jagernauth brings an understanding of technology, business acumen and a focus on providing innovative solutions to solve real-world problems. The focus is on the application of technology to create end-user value rather than the definition of technology.
Today, Jagernauth applies this broad experience, focus and understanding of the evolving wireless industry landscape to provide wireless solutions for clients in the United States, including market analysis and forecasts, business analysis and planning, requirements analysis and wireless communication applications.
