Short Message Service (SMS) was created in the late 1980’s and has been the dominant messaging channel for mobile phone users until the recent rise of instant message applications on smartphones. The use of instant message applications such as LINE, WhatsApp and Viber have exploded globally with users benefitting from the ability to send free messages on the data plans offered by telcos. The same telcos are now seeing their revenues from SMS being lowered by the increasing use of instant message applications and are looking for new ways to recoup that revenue.

Michael Frausing and David Khoo from mobile messaging solutions provider Acision shared more with e27 about how they see the future of SMS will be and how telcos are embracing the future of messaging. Acision is the market leader in SMS with around 35 percent market share. Michael is the senior vice president for Asia Pacific and David leads the technology department as vice president.

According to Michael, opportunities in the SMS space for telcos lie in the undelivered or uncharged text messages. These messages are not monetized by telcos usually because the prepaid subscribers are not able to send these messages because they are out of credit. Michael estimates that this may range from four percent to 12 percent of the total volume of messages, putting it anywhere from 800 million to a billion messages per month. Acision, with their Collect SMS service, enables telcos to monetize this opportunity by allowing users who are out of credit to still send messages where the recipients bear the charges instead.

But is SMS here to stay? Or will it be taken over by the adoption of smartphones and the numerous instant message applications available on these devices?

According to Michael and David, mobile service subscribers are looking for three main items – Price, rich messaging experience and quality of service and reach. Telcos are able to remain competitive in the third demand, but is being heavily challenged in the first two. David sees SMS evolving into what a GSMA initiative calls Rich Communication Services (RCS). RCS is essentially a “messaging hubbing service” that will allow telcos to connect their SMS and MMS services with Over The Top (OTT) services like instant message applications and social media sites such as Facebook, which has their own messaging services.

According to Michael and David, The GSMA initiative will require the joint effort of regulators, telcos and social media networks for it to succeed. With nine to 10 handphone manufacturers already on board for RCS, the movement is progressing at a fast rate with the requirements looking to be finalised with telcos within the month.

David also mentioned that representatives for RCS are already talking to regulators. This is because when a communication network hits a large number of connections, regulators will step in to make sure that it adheres to certain restrictions like privacy and security. David mentioned that smartphone instant message applications have not been heavily regulated as they have not reached that extend yet and expects regulator interference soon as the number of users grow.

According to David, Over The Top service is the first wave in the change of mobile messaging. The second will involve Voice-Over-Internet Protocol (VOIP) and the third will see these services being virtualised on the cloud. Virtualisation of MMS has already been done in certain countries and both Michael and David sees cloud as the key, especially in the future of RCS, as a mash up of multiple services is the way forward.

For RCS to work with OTT services, David talked about getting the instant message applications to open their APIs to the platform. This will allow inter-operability by allowing messages from SMS, OTT and social media sites to cross. Where telcos are interested, RCS will open channels for current SMS users to reach out to users on other platforms, while still bearing the same messaging charges that they are used to. The telcos’ concerns would be the influx of messages from OTT and social media sites into the SMS platform that does not allow them to monetize from but taxes their system.

It seems that Singaporean telcos SingTel and Starhub are already taking matters into their own hands by looking to launch their own instant messaging application. Michael believes that this OTT application venture will be an alternative IP-based messaging service approach similar to Telefonica’s TuMe service. He mentioned that “while these types of messaging applications will provide a better quality of service and user experience, it’s really only half way to providing seamless messaging between any users on any network.” Michael also commented that, “Operators in the region are taking small steps in the right direction with their own OTT apps. When RCS will be fully adopted and deployed, it will bring back control to operators and provide seamless connection between networks while offering rich messaging experience to users.”

In Michael’s opinions, OTT services created by operators will address the following:

  • Provide IP Messaging alternatives to OTT players incorporating SMS/Social Networking interoperability in the near term. This could be extended to Off-Net users in order to drive mobile messaging, terminating traffic as being planned by other regional mobile operators
  • With operator specific OTT applications, the subscribers’ address book and usage profile (e.g. Telephony, Messaging and Data consumption patterns) can be mined for either internal or external promotions and marketing efforts.
  • The operator specific OTT applications is an avenue for them to drive mobile VAS as part of their digital life program, which include services like; mWallet, TV, advertising and gaming or commerce ecosystems
  • As part of an operator’s quadruple play strategy – TV, broadband, fixed and mobile services, they can converge into an OTT application which is device agnostic
  • Create an IP Messaging subscriber base early with relevant subscriber profile information, which can be monetisable when RCS is ready to be deployed in the region