For Carriers Facing an OTT Apps Perfect Storm, There's Hope

By Michelle Maisto  |  Posted 2013-08-26

For Carriers Facing an OTT Apps Perfect Storm, 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.

For Carriers Facing an OTT Apps Perfect Storm, There's Hope

"Operators are in an excellent position to raise the bar with today's social messaging services," said Jim Mains, senior vice president of Global Products and Programs at Smith Micro Software. "They offer a more secure, trusted and reliable service; whereas with OTT apps, do you really know who has access to your messages and personal information?"

The reported added that carriers also stand to benefit from the real estate they occupy.

"One of the biggest challenges of OTT apps is discovery—there are thousands of them and growing every day," wrote Sunil Marolia, vice president of product management. "With the right visual messaging platform, operators can take advantage of prime real estate on the device to offer premium services that generate revenue beyond the one-time app purchase."

The OTT Perfect Storm

Vikas Saxena, CEO of Nimbuzz, expects the OTT market to keep evolving.

"This is what convergence looks like," Saxena told eWEEK. "I've been in this industry the last 12, 13 years. This is what it looks like."

Nimbuzz has more than 150 million users across 200 countries. A majority of those users are in the United States, though Saxena says the app is really "entrenched" in the Middle East, Africa and parts of Asia, particularly in markets where "credit cards really don't work and aren't used for essential-to-life things."

He explained, "We made Nimbuzz free of data charges, and the games [people use] can be monetized through our own air time. It's a real currency in emerging markets—mobile time is like cash. How we do it is, if you want to buy a game or something, we debit it from the airtime of the user. Then, the telecom operators also gain."

Nimbuzz stands out from its competitors, he says, because it has more features—it provides users with the "complete roster" of their friends. Not just their phone book, but their Yahoo contacts, Facebook and Nimbuzz Buddies. Additionally, "we believe there's a whole world of make new friends that's developing really fast," said Saxena.

Nimbuzz makes it possible to message other users using a numeric ID; a user can hide his identity until he chooses to disclose it. It's a popular feature in very traditional cultures where unrelated men and women have minimal options for communicating.

A trend of the recent OTT boom, says Saxena, is that the telecoms are recognizing a need to change their ways.

"They feel like they own users," and not that they're a utility, offering something that users pay for as they use it, Saxena told eWEEK. "Their cost structure is not geared toward being a utility."

The consequence is that users will turn elsewhere.

"Every day I wake up and hear about some new messaging app doing something," he said. The week he spoke to eWEEK, TextNow reintroduced itself as an IP-based mobile carrier and WhatsApp added voice capabilities.

"I feel proud that we were one of the pioneers who saw this coming—we saw that people would be making VOIP calls, messaging each other. I'm proud that this came together and Nimbuzz is a market leader," Saxena said contentedly. "We are living the perfect storm."


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