Celcos beware: Voice-over-data players gunning for you
By Edwin Yapp March 10, 2014
- Voice over data an inevitable evolution of mobility that's becoming mainstream
- Operators have to defend their turf by being more innovative, offering new services
NEWS ANALYSIS AS the dusk settles on the recently concluded Mobile World Congress (MWC) held in Barcelona from Feb 24-28, one particular announcement caught my eye.
No, it was not the latest smartphones or tablets on offer, nor was it the plethora of mobile wearable technology that went on display, but rather WhatsApp’s announcement on how it plans to offer voice services over its platform by the second quarter of this year.
According to The Wall Street Journal, Jan Koum, cofounder and chief executive of WhatsApp, said its voice product would "focus on simplicity" as it has with its text-based messaging service.
The company plans to introduce the voice service as early as April and would first release a version for Apple Inc’s iPhone and smartphones using Google Inc's Android operating system, followed by services for Microsoft's Windows Phone, as well as some phones by BlackBerry Ltd, noted the article.
WhatsApp stunned the world the week before MWC when it announced that it is now part of the Facebook empire, with the latter paying a whopping US$19 billion for it.
Industry watchers were sceptical of the deal and suggested that the social media giant had overpaid for the tiny messaging company, which reported a revenue of about merely US$20 million last year.
In the years observing the mobile industry, both as a practitioner and a journalist, one thing has become clear to me: That while mobile operators have been searching for that elusive ‘killer application,’ and haven't quite been able to identify it.
Instead, what I find is that the killer application that has and continues to reap an obscene amount of revenue for them is right under their noses: Good ol’ fashioned plain communication.
Perhaps this is why Facebook bought WhatsApp for 19 billion bucks. And perhaps the two CEOs knew something we all didn’t, and the announcement that it would get into voice services could be one trump card up their sleeves.
Of course, this is nothing new per se as companies like Viber and LINE are already offering such services. But it’s significant to note that WhatsApp is joining the fray as it arguably has the fastest growing subscriber base of all the messaging platforms.
In a recent research note by Dan Bieler, the Forrester Research analyst suggested that WhatsApp is about much more than instant messaging; it’s about content sharing – which is an emotional activity.
“Such emotional activities are critical to closer customer engagement,” he explains. “As the online giants use ever more granular user analytics to cement their position as marketing powerhouses, telcos’ hopes of developing new revenue streams from analysing user behaviour are slipping away faster and faster. This is what makes the deal so dangerous.”
I can’t agree more with Bieler’s observation. The WhatsApp announcement is very significant. Over the years, we have read of how traditional mobile operators’ revenue has been slipping.
Voice and SMS revenues have seen a drastic decline very much because these very players – collectively known as over-the-top (OTT) because their traffic traverses over mobile networks – are innovating much faster than the mobile operator industry.
Mobile operators have in the past have complained about such OTT services. They claim that Internet-based companies such as Skype, WhatsApp, Viber and other messaging services merely ride on top of the expensive networks that the mobile guys have built, without having to pay any kind of premium for doing so, while the mobile operators themselves have had to spend billions to build these networks.
Also, they have to operate in a very tightly regulated space and are constantly under government scrutiny.
Just to put things in perspective of how much operators could stand to lose: SMS growth rates fell from 14% in 2011 to 8% in 2013, and the main driver for this was the emergence of social messaging, according to Ovum.
The research firm further forecasts that social messaging cannibalisation of SMS revenues will grow from US$32.6 billion in 2013 to over US$86 billion in 2020.
So what can mobile operators do?
As I’ve argued before, competition often breeds innovation and forces the hand of those who are in control to make concessions. While operators may have some legitimate concerns over the way OTT players operate, the fact is that there is no denying their existence or their presence in today’s world.
Analysys Mason noted that mobile operators must be cognisant of the fact that the deployment of LTE (Long-Term Evolution) is likely to improve the user experience of OTT VoIP (Voice over Internet Protocol) services in the cellular environment and make further development of the services more viable.
“VoIP services are currently restricted to a limited set of use cases and substitution of traditional services has been modest in most countries,” argues Satvik Singhania, an analyst with the research firm.
His fellow analyst Nipun Jaiswal says that rather than complain, operators should partner with OTT players and those who have done so – such as DiGi in Malaysia, 3 in Hong Kong and RCom in India – are reaping some benefits.
“These players have partnered with WhatsApp and the rationale for operators is to appeal to attractive market segments and support their core data business with [a] move to bundles."
Besides this, Nipun says other strategies could include launching proprietary OTT-like services such as China Mobile’s Fetion service or Orange’s Libon, or launching standards-based alternatives such as Rich Communication Services (RCS) and Voice over LTE (VoLTE), something pursued by Korea’s SK Telecom and LG UPlus.
SingTel has gone one better by acquiring OTT player Amobee, he adds.
Whatever the case, it’s not too late for operators to act, as Analysys Mason's Satvik believes that voice will not get ‘WhatsApped’ or in plain parlance, commoditised to the same degree that messaging has.
“We expect, though cannot guarantee, that operators will have learned some lessons from their experiences in the messaging market," he says.
“Operators’ unique selling points such as quality, security, interoperability and trust are more relevant when it comes to voice than messaging. Thus, they have a stronger role in the value chain and control many of the potential differentiators for voice services,” he adds.
For me, these players would just have to spend and innovate. If not, they might just end up going the way of the dodo.
After all, the time for resting on their laurels and reaping their billions in profit, is over.
DiGi subs enjoy extended Whats App messaging