|Issue:||Europe I 2013|
|Topic:||Rich communications suite is only the start|
|Author:||Jose M. Romero|
|Title:||Director of Marketing & Technology|
Jose M. Romero is the Director of Marketing & Technology at Movius. Mr. Romero has worked and consulted for a wide variety of companies ranging from Fortune 100s like Motorola to successful startups.
Jose M. Romero has an undergraduate degree in Electrical and Computer Engineering from the University of Florida, as well as an MBA from the University of Miami.
Voice and messaging revenues of mobile communications service providers are in serious decline as new technologies and Internet players disrupt legacy business models. Some are attempting to reduce revenue losses by providing consumers with services already obtainable from OTT players. But they may be better off developing mechanisms to seamlessly connect services already offered by successful existing OTT networks.
Many established wireline and wireless communications service providers (CSPs) around the world are currently being forced to re-evaluate their fundamental business strategies in the face of unprecedented changes to the dynamics of their traditional market sectors. Already fierce competition from traditional CSPs is now being intensified with the greater entry into the market of internet service providers (ISPs), web enterprises such as Amazon, Facebook and Google, original equipment manufacturers (OEMs) such as Apple, and media and broadcast companies such as BSkyB. Added to this, a slew of new technologies, including voice over IP (VoIP), mobile broadband and cloud computing, are disrupting legacy business models. For some CSPs, it’s literally ‘make or break’ time.
In practice the assault on the historic way of CSPs doing business and on their customary revenue streams began some years ago with the rise of ISPs, and the growth of increasingly bandwidth-intensive services and digital Internet products that ran over the CSP networks. This phenomenon gave rise to an increasingly acrimonious debate about network neutrality that took place in North America, Europe and more recently Asia-Pacific.
The arguments for maintaining network neutrality, or lack of ‘bit discrimination’ for different types of traffic, are often couched in terms of the socioeconomic benefits that flow to humankind from unfettered access to information and communication services, the critical boost that this hands-off regime gives to innovation, and the extra edge it gives to individual national economies. In reality, though, today network neutrality is just as much about money. Put baldly, the likes of Internet-dependent companies such as Amazon, eBay, Google and Yahoo! have no desire to pay special charges to network owners to conduct their increasingly bandwidth-hungry online businesses. Coming at this from the opposite direction, network operators think it only reasonable that such intensive bandwidth users should make a particular contribution to the very high cost of rolling out the broadband access and trunk facilities on which the conduct of Internet businesses depends. Or risk having their services ‘throttled’, as has happened with AT&T limiting the use of the FaceTime video chat service.
Net neutrality is still an issue with, for example, the EU presently conducting a consultation in Europe and public interest groups filing complaints against AT&T in the USA. But moving on from that debate, a social networking site such as Facebook doesn’t only rely on some form of network neutrality to conduct its day-to-day business. It may be that Facebook drives additional traffic revenues for network owners but, as noted by several industry analysts, the social networking site has ambitions to move into sectors formerly the preserve of network owners. Already offering email services, the social networking enterprise is understood to have ambitions in instant messaging (IM), and mobile and video service provision and aggregation. It could also be considering VoIP.
Facebook (along with Google) is also reported to have plans to enter the smartphone arena. Smartphones have proven to be enormously popular in recent years, with one estimate from IHS iSuppli being that they will constitute more than half of all mobile phones in use by 2013, and another from Ovum that calculates some 1.7 billion smartphone units will ship globally in 2017.
As with social networking services, smartphones are something of a mixed blessing for wireless CSPs. Undeniably, their use greatly stimulates mobile data traffic revenues. However, as has been pointed out by several industry observers, CSPs in a number of geographies have been obliged to heavily subsidize smartphones, in the process inflating their sales and acquisition costs. There is also the very real risk that smartphone owners will subsequently take their business to low cost mobile virtual network operators (MVNOs) or SIM-only service providers once their contract with the subsidizing and higher cost CSP expires. Building sufficient network capacity to accommodate global mobile Internet data volumes – projected by Cisco Systems to increase 18 times from 2011 to 2016 and hit 10.8 exabytes per month (with one exabyte equivalent to one trillion gigabytes) – is additionally a source of considerable concern for mobile CSPs.
Getting the message across
More immediately, the use of smartphones is contributing to a serious decline in mobile CSPs’ SMS revenue stream. Collectively, billions of dollars of SMS revenue is being lost each year to over the top (OTT) messaging services because of smartphones. According to analysis and market research company Strategy Analytics, intense competition between operators themselves, combined with the growing popularity of OTT IM services such as WhatsApp, Kik, Line Messenger and Tencent’s QQ, will drive a 12 per cent fall in global consumer spending on operator messaging revenue over the next five years. Strategy Analytics believes the decline in messaging revenue will be more pronounced in regions such as North America and Western Europe with the greatest penetration of smartphones and data users; in these geographies SMS and MMS expenditure will decline by 18 per cent and almost 25 per cent respectively.
In response, some CSPs have taken the walled garden approach and created their own closed ecosystems like Telefonica Tu Me and T-Mobile Bobsled that, in one way or another, compete directly against OTTs.
Others are pinning their hopes in the war against OTT messaging on the emerging GSMA-led Rich Communications Suite (RCS)/Rich Communications Suite-enhanced (RCS-e) standard.
RCS/RCS-e has been designed to deliver an experience beyond voice and SMS and reduce revenue losses by providing consumers with services already offered by OTT players: this includes IM or chat, live video sharing and file transfer across any device. In some RCS/RCS-e iterations there is inter-working between the mobile and fixed domains. For operators, RCS/RCS-e is being billed as a technology to strengthen relationships with customers and harness further revenue opportunities from advanced personal communications.
RCS is only the start
In helping mobile CSPs to combat their loss of control and their surrender of revenues to OTT players RCS/RCS-e looks to be a step in the right direction. However, in the view of some experts, RCS/RCS-e is too focused on the network and needs to be more about the user. At present mobile CSPs are working to make their data pipes bigger to accommodate rising mobile data volumes. In doing so, mobile CSPs are helping OTT providers, but with relatively limited benefit to their own bottom lines.
To regain control and re-grow messaging revenues, it’s required that the mobile CSP positions itself as a central point connecting all social networks together. The key lies in seamlessly connecting the IP-based advanced personal communications already offered by successful existing OTT networks.
This would allow, for example, someone on Google Talk to video conference with a friend on Facebook, send a file to someone on MSN Messenger, or instant message to Skype. If the CSP is providing a single simple user interface enabling this connection at the hands of the consumer then the potential is huge. It’s a win-win for the customer and the operator. Moreover, by controlling the user experience, operators can then enable other capabilities like multiple phone lines for BYOD, voice micro-twitting, mobile identities and social audio/video conferencing to further differentiate their offers.
While the RCS system is a great step forward, operators would be better served by offering an integrated open solution that allows customers to connect to any network via one portal.