6 Comments

Summary:

Mobile companies faced with rising data use are often choosing to block or limit innovative voice and messaging apps. But that won’t solve anything — and in the long term it’s only causing the industry damage, says Andreas Bernström, CEO of VoIP service Rebtel.

Andreas Bernstrom of Rebtel

As little as 18 months ago, mobile VoIP and IP messaging apps were considered niche by operators. Now we pose the biggest “threat” the industry has even seen. In fact, a Telco 2.0 report suggests that within three years, 40 percent of messaging and 21 percent of voice revenues will vanish due to over the top (OTT) players like Rebtel, Whatsapp and Viber.

For any telecommunication company these are frightening numbers, and they’re reacting to them in the only way they seem to know: by blocking, charging for or throttling competing services that are cannibalizing their revenues.

But this fear is caused by business imbalance that they seem unable (or unwilling) to fix. Look at any European mobile operator, and it’s clear that around 80 percent of their revenues are still attributed to their most traditional — and most eroding — service: voice and data. At the same time, around 80 percent of their investments go into improving the congested infrastructure necessary to support the dramatic growth of third-party data services.

It’s obvious that this situation isn’t going to get any better. According to Håkan Dahlström of TeliaSonera, the current average monthly data spend is roughly 300MB — and it’s expected to reach 3GB by the year 2020. Needless to say, this model is in a state of transition.

So why do operators seem so reluctant to move to a sustainable (and inevitable) data pricing model?

The truth is that even though traditional revenues are eroding, they are still able to produce mind-boggling figures thanks to their staggering margins. And with consumers firmly attached to the notion of unlimited data, there are few — if any — telecoms companies that want to be the first mover. Meanwhile the longer this transition is delayed, the more cashflow operators are bound to generate, which means good news for shareholders and smiles all round.

On the flipside, however, subscribers will have to endure more expensive and more complicated variations of data access packages, with a plethora of potential data cap limits, access add-ons for VoIP and other OTT services. And it is not looking like it will get easier any time soon.

How will operators fight back, then?

Some in the telecom industry are pinning their hopes on RCSE — the Rich Communications Suite. This is, effectively, an industry-wide attempt by major mobile operators to create their own version of Viber and WhatsApp. However, the core feature set of RCSE was defined in February 2008 and the product is still not out the door: anyone who’s followed the development of VoIP in the app stores knows that four years is equivalent to several generations in the mobile world. Can anyone say with certainty that it will ever emerge?

In fact, I’d be surprised if RCSE was able to compete — but as one leading mobile operator VP put it at the recent Open Mobile Summit in London, what else is there?

Operators are being marginalized and put under pressure from all directions. In 2007, they controlled access, address book, billing relationships and services. Today they essentially just control access and billing. The OTT layer now provides services, address book and a digitalized billing relationship that are all far superior to the legacy systems provided by operators.

Adding to all this is the ongoing net neutrality and regulation debate. The EU and its commissioners already have a dim view of operators in light of the endemic blocking and throttling of services: if mobile VoIP is being blocked and discriminated against and the operators roll out their RCS solution, wouldn’t that scenario qualify as seriously anti-competitive behavior.

Regardless of how this issue is twisted and turned, the real solution is that operators need to move faster to a tiered data revenue model; they need to educate customers about data spend; they need to simplify their offerings as much as possible and, last but not least, they need to do their utmost to allow creative developers to build great communications services that add real value to the access they provide.

Andreas Bernstrom is CEO at Rebtel, the world’s largest mobile VoIP company after Skype, and is an industrial advisor at EQT Partners. He started his career at Goldman Sachs, before becoming U.K. managing director and later COO of TradeDoubler.

Speed bump photograph copyright Shutterstock / Stacie Stauff Smith Photography

  1. Tsahi Levent-Levi Monday, June 4, 2012

    This was my view as well, until I read Alan Quayle’s insightful post about the history of instant messaging and the future of OTT players: http://www.alanquayle.com/blog/2012/05/reviewing-the-history-of-insta.html

    The truth will lie somewhere in-between the world view suggested by Andreas Bernström and that of Alan Quayle.

    Share
    1. Wow, Alan Quayle made some really good points. Having multiple IM clients for multiple IM networks really was to the detriment of IM – seems like an OTT OTT network is the best solution.

      Share
  2. Kevin Fitchard Monday, June 4, 2012

    Hi Andreas, Good post!

    Like you, I’m not so convinced RCS is going to be a cure-all — especially if the value proposition is selling what is essentially Viber or WhatApp for $20 a month rather than give it away for free.

    But I do think the operators have a very powerful tool if they can figure out how to use it: the universal ID of the phone number. Essentially everyone in the world is “in network”, which not even Facebook can claim.

    Share
  3. As someone who’s working in the OTT business, I’d like to ask a naive question: why can’t we all (OTT players) get alone?

    It strikes me funny that while we have all these nifty features, our users are siloed-in our own VoIP garden. Why can’t Rebtel users talk to Skype users or WhatsApp users text friends on Viber?

    Are we so afraid of users turning to other players that we won’t consider providing simple inter-connectivity, something the “dumb pipes” (as we enjoy so much calling them) have been doing since day 1?

    Share
  4. Text Message Marketing Allow customers to request real-time information about your business via text message, while putting your contact information in the customer’s phone for future reference as well as allow you to capture customer’s mobile number.

    Share
    1. No, thank you.

      Share

Comments have been disabled for this post