News / For Carriers Facing an OTT Apps Perfect Storm, There’s Hope
Aug 26, 2013

Messaging apps like Nimbuzz and WhatsApp are expected to cost the carriers $54 billion by 2016. But for those that can evolve, there's hope.

WhatsApp, Nimbuzz, TextNow, and BlackBerry Messenger are among the messaging apps (often referred to as OTT, or over-the-top, apps) that consumers are turning to in lieu of the wireless carriers' more costly messaging solutions. In 2012, an average of 19.1 billion OTT messages were sent every day, says Informa Telecoms and Media, which expects that this year that number is closer to 41 billion messages per day.

The consequence, according to research firm Ovum, is likely to be an SMS revenue loss for the carriers of $54 billion by 2016.

Fears of lost revenue have led Vietnam's government to consider banning free messaging services "because of the harm done to network providers," Reuters reported Aug. 20.

Viettel Telecom, one of Vietnam's largest carriers, would lose "40 to 50 percent" of its revenue were its 40 million customers to use Viber—an app that offers free calling, texting, and file sharing—instead of the carrier's traditional calling and texting services, a representative for the carrier told Reuters.

China Mobile, the world's largest carrier, has said that its messaging service revenue fell from approximately $8.8 billion in 2009 to $7.5 billion in 2011.

"China Mobile cannot block this trend and must adjust its strategies in order to adapt to the new situation," Chairman Xi Guohua told China Daily at the Mobile World Congress show earlier this year.

Anurag Lal, CEO of Infinite Convergence Solutions (ICS), agrees.

"The carriers are challenged," Lal told eWEEK. "They're looking to see how they can continue to deliver value while not being segregated to just delivering connectivity."

ICS offers messaging solutions to mobile operators and in the last 12 months has launched a rich communication suite (RCS). It also offers a cloud-based solution to enterprises.

"RCS is a very compelling platform, with robust features, such as high-definition calling ... and best of all, it's standards-based, so it's available to multiple carriers," said Lal. "We believe the carriers absolutely have to deploy RCS."

The OTT phenomenon, he says, has become popular for three reasons: The apps offer compelling features, they're convenient and they're cost-effective.

"I think the operators need to, one, start innovating and, two, look at what customers want," said Lal. In short, they need to innovate in the ways the app providers have.

To their advantage, the carriers also have the weight of their brands and the security that implies, versus an app from a company a user has never heard of before, he added. But that still takes a backseat to the initial drivers.

"The reasons a user would consider an OTT app is, is it cool, convenient, compelling, cost-effective? These things have to be resolved first, and the trust issue comes next," said Lal. "The feedback we get from people is they don't care who it's from, they just want good stuff and they want it to be cost-effective."

In a May report following a survey of mobile operators, Smith Micro Software gave more weight to the trust issue.

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