OTT IP-based messaging:
Outlook for mobile operators and OTT providers
KEY POINTS
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Mobile operators are finding that their revenues from traditional voice and SMS are under pressure from over-the-top (OTT) providers of voice and messaging services.
Operators are also concerned about the potential erosion of their subscriber bases by OTT providers, not only among smartphone users but also their wider customer base.
Data from KPN Mobile and SK Telecom reveals the extent of the challenge that operators face from OTT providers, in terms of declining SMS traffic and revenues.
Some operators are restructuring their tariffs in order to ward off the threat of OTT IP-based messaging providers, introducing integrated price plans that include voice minutes, SMS and data, and that encourage their subscribers to stay “in-bundle”.
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The five operators in the G5 group (Orange, Telefonica, Vodafone, Deutsche Telekom and Telecom Italia) believe that instant- messaging services based on the GSMA’s RCSe specification will help them to retain customers on their networks. However, a number of questions remain over whether RCSe-based services will actually launch, and how relevant they will be to subscribers.
OTT IP-based messaging providers also face several challenges; in addition to the mobile operators’ defense strategies, these providers may also have to contend with subscriber “silo fatigue” and trying to figure out how to generate revenues from their “free” service.
Pamela Clark-Dickson Senior Analyst
Informa Telecoms & Media
OPERATORS SEARCH FOR A LEGITIMATE ROLE IN IP-BASED COMMUNICATIONS
At Informa Telecoms & Media’s Rich Communications event in Munich at the end of October, representatives of each of the operators in the Group of Five (G5) – Orange, Telefonica, Vodafone, Deutsche Telekom and Telecom Italia – acknowledged the multiple pressures on their businesses from OTT messaging services. The most significant concern for operators is not, surprisingly, the immediate downward pressure they are experiencing on their voice and messaging traffic and revenues, as subscribers churn to OTT-provided voice- over-IP and IP-messaging services, but the potential erosion of their customer base by OTT providers (see fig. 1).
G5 members say that, if they do not take steps to slow or halt OTT-driven churn as soon as possible, they are faced with the prospect of losing – and perhaps never regaining – not only the high-value customers who are the early
Fig. 1: IP communications: the respective positions of over-the-top providers vs. mobile/fixed operators New competitive environment
Internet (OTT) communication world
Operator communication world
ARPU
• Innovative communication services • Community-based
• Best-effort service principle • Indirect/no/evolving monetization
Source: GSMA
adopters and avid users of OTT services but, eventually, a significant proportion of their subscribers. That erosion of their subscriber base will inevitably drive down their revenues even further in the long term.
Some mobile operators are extremely candid about the threat that OTT providers of IP- communications represent to mobile operators’
businesses. They believe that if they do not act, they risk being marginalized; members of the G5 believe that they currently do not have a legitimate role to play with regards to providing IP- based messaging.
At present, there is a good chance that mobile users still recognize that the operator provides their voice and messaging services, but if operators
Core communication services • Highly interoperable •
Reliable customer relationships • Direct service monetization •
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