With the rise of free instant messaging apps, can GSM-based Rich Communication Services help telcos compete amid dwindling SMS revenues?
With Telkomsel and Indosat announcing the development of their own messaging apps based on the GSMA-approved Rich Communication Services (RCS) standard, Indonesia is about to join countries like Singapore, South Korea, and Spain in rolling out an industry upgrade to the aging SMS. In the meantime, their customers are being drawn away and their revenues siphoned out by communication services companies.
When Joyn was deployed in South Korea last December through a collaboration between three telcos, it faced an uphill battle against KakaoTalk, which has upwards of 90% membership of the entire South Korean mobile market. It’s still early days, but from the looks of it, Joyn may have decent traction.
In Singapore, SingTel and StarHub efforts to work with Vodafone plan to implement Joyn was met with skepticism from SGE’s Terrence Lee. Lee said back in February, “it is more logical to acquire a mature, profitable chat app that is already occupying a niche in Asia” because it would be far more efficient, less time consuming, and would not require consumers to adopt yet another new app.
“So, if SingTel or StarHub wants to build their own chat app, they’ll have offer something that’s truly different rather than adding to the noise by offering more of the same. One way to do it would be to create an API that links all the disparate apps together, resolving the fragmentation issue that is plaguing the market,” Lee continued.
A mobile industry consultant told us that RCS, implemented as Joyn, will have a difficult time in competing with OTT companies. He said that if these services are to be industry standard, handsets of all kinds and prices will have to have built-in support and in the meantime, smartphone owners will have to download a separate Joyn app in addition to their already long list of messaging apps installed on their devices.
Daniel Horan, chief marketing officer at Axis, is skeptical about Joyn. Horan told DailySocial that with limited deployment of the service and limited compatibility, it’s unlikely that it will gain widespread adoption both globally and in Indonesia. “My sense is that with the number of OTT players and the speed that they are deploying new services it will be hard for an industry body group like this to keep up.”
Findings by Informa released in April showed that messages sent through OTT services have more than doubled the numbers of messages sent over SMS.
“By the end of 2013, Informa estimates that 41 billion OTT messages will be sent every day, compared with an average of 19.5 billion P2P SMS messages. There are far more P2P SMS users than there are OTT messaging users. There were about 3.5 billion P2P SMS users in 2012, according to Informa, compared with about 586.3 million users of OTT messaging. Each OTT user sent an average of 32.6 OTT messages a day, compared with just five SMS messages per day per P2P SMS user, meaning that OTT-messaging users are sending more than six times as many messages as P2P SMS users do”.
The report also says that global SMS traffic and revenue will still increase due to the inherent limitations of messaging services but they will be nowhere near the rate of those of third party apps.
We wrote in December last year that telcos generally have three options when it comes to OTT services. Fight, partner, or imitate. Fighting app companies is downright foolish and carriers will earn the wrath of consumers. Partnering means getting in bed with the “enemy” while imitating them involves more effort and carries a huge risk.
Sumantri Joko Yuwono, Indosat’s group head of product and marketing support said last week that the carrier is currently evaluating potential partners to develop its app, which will not be available at least until the third quarter of this year. He also said that the app will not be exclusive to Indosat, which is interesting considering that Indonesian telcos have a history of not playing well with each other. Perhaps, in the face of this onslaught, they see a reason to unite.
The South Korean rollout of Joyn by three operators in December 2012 seems to show a positive sign, as within two months a million people have downloaded and signed up to the service. However, KakaoTalk has gone beyond merely providing a messaging service, as it has become a platform for games and other services, as well. Recently it managed to get Evernote to run on its platform and it also has rolled out KakaoPages, KakaoHome, and KakaoStory to keep consumers within the Kakao environment.
For a global telco consortium to compete in innovation with individual companies, it may be a futile exercise. Technology companies working for their own interests can develop, test, and roll out updates and features far quicker than the consortium and if members of the consortium operate independently of the group, or form their own groups, it will diverge from the entire point of making a standard product applicable to all telcos and device vendors.
If telcos want to make this Rich Communication Service a full replacement for their SMS business and maybe even their voice call business, which means charging for the service, that train has long departed. Thanks to messaging platforms monetizing their services in alternative ways, it’s very difficult for telcos expecting customers to be willing to pay for built in messaging services.
As the business of communications is being taken away from mobile network operators, it’s up to them to decide in what ways should they be participating in the new ball game, whether they should remain as competitors in the field or as the people who build the field and set the rules of the game.