Over on IP Carrier, Gary Kim posted a nice graphic illustrating the growing effects of over-the-top messaging on SMS revenue country-by-country across Europe for the last three years. But I’m struck by how many still phrase this phenomenon as caused by OTT messaging. OTT messaging is the response to the problem, not the cause.
The problem is that SMS as a technology has been charging a lot and delivering less than it should for the price, especially in Europe where cross-border voice and messaging has been badly overpriced. The market has been begging for disruption, feeling entitled to revenues it has not really deserved based on the services provided. The lack of the cross-border silliness in the US has insulated carriers here somewhat, but it won’t last.
If you leave food out at a picnic and come back to find an ant colony taking it away, the ants aren’t the problem – your negligence is. European mobile operators have been negligent in providing value for the money when it comes to SMS and voice, trying to use the profits to subsidize the investments needed for more general (and much, much cheaper) data traffic. The rise of OTT apps is just the ants arriving to take advantage of the mismatch, whether it be SMS, voice, or video.
While carriers complain and announce plans to stomp on the ants, the only truly effective way to stop them is obviously to put the food away.
Mobile carriers need to change the way they price things to reflect the fact that data is everything now, while voice and SMS are just apps. If we make data too cheap and the apps too expensive, OTT disruption will make us look stupid every time.
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Love the ant analogy! Tekelec recently talked about how the telco brand is not directly tied to the devices and apps, but rather indirectly, which makes it important for operators to cultivate that “indirect” link and open it to monetization by nurturing the OTT relationship.
http://www.tekelec.com/tekelec-blog/index.php/2012/06/ott-players-a-new-revenue-rich-customer-segment-for-service-providers/#.UCPKxGiDTww
Great point Robert
We’ve seen this technology evolution happen before with what the Internet and soft switch did to the wireline carriers in the early 2,000s. This 2nd tsunami of mobile voip/messaging is in full motion due to easy access of the internet via mobile/wifi networks, the advent of sexy smartphones that everyone wants and the ease of software distribution via app stores that offer a cadre of better quality voice, messaging and other communication services via OTT players such as textplus, Line2 and textme. The carriers can’t control this. Apple is in control and OTT is benefiting big time.
My belief is the carriers need to protect their bread and butter and provide high quality and ubiquitous access to the internet as the application revenue is going to go to OTT. Don’t get confused here: the carriers will still get their money and margin, but it won’t come from the application layer.
The question isn’t IF this will happen, it really is a matter of when? And when is happening a lot faster than the wireline market did and is still doing due to the ease of distribution of the app store and the alternative access options that are coming to market.
As an example of what’s happening with OTT, have you met any 10 year-old who has asked for a feature phone? Not where I live. They all want iPod touches to play their games, download free voice and messaging apps and post on their social networking sites.
OTT is the new frontier.
“We’re The Pipe That Carries It All” – Level (3)
Check out this video on YouTube:
http://www.youtube.com/watch?v=Uxbw7WgeZPo&feature=youtube_gdata_player
I had no idea that L(3) was the pipe that carried it all.
“All” is such a big visual, hard to grasp it all.