Something old, something new
The range of messaging options available to the end user is growing fast, especially as messaging functionality has become integrated into applications like social networks. But rather than try to compete with the latest online service providers, perhaps operators should return to their roots and rediscover the potential of age-old technologies like SMS.
The problems facing developed market mobile operators in 2010 have been well documented. A powerful new wave of smart devices has stimulated uptake of capacity-hungry non-voice services among subscribers. Operators are running to keep up with the demands on their networks, working to deploy greater headroom and greater throughput while over the top service providers are building relationships with mobile users and generating even more data traffic for the operators to carry.
Arguably the most frustrating element of this scenario for the carriers is that the combination of handset manufacturers, application developers and OTT service providers have succeeded where the carriers were for so long unable to. These issues are reflected in most areas of an operator’s business, and messaging is no exception. Operators—in all but a few cases—have struggled to drive uptake of picture messaging since MMS functionality was put into networks, for example.
Figures from Informa Telecoms and Media show that, of the 95 mobile operators tracked worldwide in 4Q09, 76 reported MMS usage of less than one message per month per user. But with the advent of social networking— shifting the focus from person-to-person to person-to-application—the transmission of photos from mobile phones has, in many markets, become commonplace. Crucially, on high-end smartphones, the posting of images to social networks like Facebook is increasingly being done without using the operator’s messaging infrastructure.
Uploading images through a browser or Facebook application involves a data session rather than an MMS transfer, reflecting the beginnings of a shift to in-application messaging. Any such messaging traffic cannot be measured by carriers, and is effectively beyond their control. On lower tier handsets, MMS and SMS interfaces remain, of course, but handset functionality spreads quicker down the pecking order with the release of every new model.
“If you look at what people are doing with things like Facebook, posting pictures and sharing them with their social group,” says Terry McCabe, CTO at messaging specialist Airwide Solutions, “it’s what we were talking about back in the days of the introduction of MMS. We talked about archiving and the ability to open up your archive to other people. We talked about this infrastructure that would be created for a mobile-centric community. Well, there is a community—it just isn’t mobile-centric.”
“We do see that the trend is for messaging to be embedded within applications which are not dedicated messaging apps,” says Somu Kandukuri, director of product development for Openwave. “At the moment the one advantage that the mobile operators have is reach. But as soon as the reach of Facebook, for example, starts growing, it starts presenting a threat to mobile messaging.” While this is by no means an urgent problem for operators, it does illustrate that one of their core service offerings—non voice messaging—is coming under threat from other players and other models. This isn’t about carriers being outperformed in an area to which they are newcomers, it’s about them losing ground on their home turf.
As messaging evolves to become straight internet traffic, operators are inching ever closer to the unwelcome status of bit pipe provider. Meanwhile, these are straitened times and operators’ investment strategies are tightly constrained. Some within the messaging sector suggest that the kind of investment operators need to make in order to develop compelling new messaging applications that will enable operators to retain a meaningful stake in the messaging space is being withheld as financial teams prioritise other investments, like broadband network deployments.
“It’s becoming more difficult for operators’ messaging departments to get funds to create new messaging services,” says Pamela Clark-Dickson, senior analyst and messaging specialist at Informa Telecoms and Media. The timing couldn’t be worse, says Clark-Dickson, as operators are realising that their core messaging revenue stream—generated by SMS—is now beginning to decline.
“Operators have lived off SMS revenues for a long time in the mobile data space and they haven’t really done that much to develop services around it,” she says. Speaking at Informa’s Global Messaging Congress in June, Wolfgang Seibert, head of proposition implementation, products and innovation at Deutsche Telekom confirmed that CAPEX and OPEX are being channelled to network build-out projects but explained that there yet further constraints on the development of new messaging services. Among these is the absence of additional spend from the consumer base to justify investment, he said. Other familiar problems for operators include their inability to act with pace and flexibility to emerging opportunities and the fact that they are not geared up to fail quickly and cheaply, Seibert said.
The situation is not unremittingly bleak, though, and growth remains a feature of carrier messaging, both in terms of traffic and revenue. Global SMS revenues are forecast by Informa to grow from US$99.86bn in 2010 to US$118.32bn in 2014. Over the same period the share of global mobile messaging revenue accounted for by SMS is set to fall from 85 per cent to 79 per cent as more advanced services like MMS, mobile IM and mobile email gradually begin to generate more revenue. MMS is forecast to grow in revenue from US$6.4bn to US$9.66bn, mobile IM from US$2.65bn to US$6.5bn and mobile email from US$8.52bn to US$15.3bn over the same period. And, even in developed markets where SMS revenues are falling, growth is still forecast.
Almost two thirds of the 257 mobile operators tracked by Informa in 4Q09 reported a minimum ten per cent year-on-year growth in SMS traffic. “The fact that these operators included those in the developed world as well as in emerging markets is significant,” says Clark-Dickson, “since it indicates continuing demand for SMS among subscribers in markets where alternative messaging services are available on both mobile and PC.” And there is anecdotal evidence that inapplication messaging is not necessarily cannibalising carrier messaging. Wolfgang Seibert said at the Global Messaging Congress that iPhone-owning users of social networks on the German T-Mobile network are sending 2.2 times the number of SMS messages and 2.1 times the number of MMS message as iPhone owners who do not frequent social networks.
Nonetheless, carriers need to act decisively to retain their stake in the messaging sector; a challenge that is reflected across much of their business. In the view of Arjan Lasschuit, director of product management in Mobile Messaging for Tekelec, they are doing just this, in a number of ways. Operators are “taking control of the situation by setting out a next generation messaging roadmap,” says Lasschuit.
Central to this, he says, is the GSMA – sponsored Rich Communications Suite (RCS) initiative; an IMS-based solution that puts the network at the centre of a stable of evolved messaging and communication services like enhanced address books, rich call services enabling the transfer of different content formats during calls and rich messaging, which aims to integrate instant messaging functionality into the mobile messaging experience. He describes it having “an end goal which is what almost every user wants today. Chat and IM over the mobile network infrastructure.”
Carriers are also deploying social network gateways, he says, again bringing control over the distribution of end user messaging into the network. Adding MMS and SMS functionality then enables them to offer the same functionality to the majority of users that don’t have the highest end smartphones, he says. But operators have struggled in the recent past with strategies designed to control user behaviour; the walled garden content model being perhaps the best and most frequently cited example. And they have reaped the unwelcome rewards of trying to come late to various application-based parties. RCS could be too little too late. “RCS mandates IMS as the basis for bringing a lot of services together,” says Openwave’s Somu Kandukuri.
“The key thing here is the timing. If you look at the functionality that is mandated by RCS, there are a lot of free applications that already do that. If we get to a stage where everything is all-IP, the chances are a lot of these services will be offered not over IMS and SIP but purely over http,” he says. Arjan Lasschuit argues that subscribers will find appeal in the fact that operators will manage the entire process behind the scenes in an RCS environment, negating the need for the end user to engage in complicated set-up procedures but, as Kandukuri says, time is rattling on. Airwide’s Terry McCabe raises a more fundamental objection to RCS; namely that it might not make commercial sense.
“It’s easy from a technological perspective to talk about converging the messaging technologies, creating a single unified client that brings together all of these things,” says McCabe, “but is it really addressing a user experience, need or desire? And does it have any commercial value for the operator?” he asks.
“Where is the business case that enables the operator to make the investment that is required to support this?” The alternative to trying to design an environment that puts the operator at the centre of the messaging ecosystem as RCS does is, as Albrecht von der Recke, chief operating of- ficer at Spanish MVNO fonYou suggests, is to expose their assets to third party developers.
This is something with which operators are now beginning to grow more comfortable. FonYou offers its users an enhanced level of services—a rich suite of its own—but based purely on voice and SMS. Users are able to manage voicemails, for example, as they might do emails; forwarding them, archiving them, even posting them online. It does not plan to replicate its MVNO model in other markets, preferring instead to white label its service for operators to launch as a retention tool under their own brand.
The firm’s host in Spain, Telefónica, offers users a maximum capacity of 15 voicemails, says von der Recke, and those messages are “trapped” and unusable. “If you want to participate in this social media phenomenon, you have to expose these assets and give them to the users so something can be done with them,” he says.
“The paradox is that the operators are selling internet access but they haven’t worked out how to transform their business models to take advantage of the internet in the way that the banking industry has, or the book publishing industry.” The exposure of existing assets as an alternative to building new ones in an attempt to play catch-up to online service providers is a strategy recommended by others as well as von der Recke. MMS, the perennial disappointment, could be successfully exploited if operators were interested, says Airwide’s Terry McCabe.
The technology is particularly useful in the delivery of interactive mobile advertising campaigns, he says, and can be very effective at drawing the subscriber into a dialogue. McCabe cites examples of campaigns run by experimental MVNO Blyk, which attempted to build a business by subsidising usage costs among its user niche of 16 – 24 year olds with multimedia advertising. Blyk foundered due to a lack of reach—a key advertising metric—but a number of its campaigns were deemed extremely successful in terms of the level of interaction that was stimulated among the users.
“That’s a technology that exists today and is in just about every network out there,” says McCabe. “But it’s not opened up to aggregators, or to advertising agencies or to any of the various organisations and entities that might wish to exploit it. It’s frustrating because there are concrete cases where operators have lowered the tariffing [for MMS] and opened up that access to a degree and generated a significant amount of traffic.” One benefit of focusing on the facilitation of innovation around existing assets is that the platform is available to all users in the case of a technology like SMS, and a very large proportion in terms of MMS.
As Openwave’s Somu Kandukuri has it, “the one advantage that the mobile operators still have from a messaging perspective is the reach and the simplicity of those services.” SMS has gone largely unchanged since its debut but, in recent years, threaded messaging has been the key innovation. Nokia had it some years ago, says Informa’s Pamela Clark-Dickson but it was really the SMS interface on Apple’s iPhone that demonstrated just how much room for improvement remains with the service. The kind of personalised services that fonYou is trying to popularise can be applied to SMS as well; treating the messages as subscribers are more used to treating emails. The enhanced capabilities of new handsets mean that SMS can be brought out of its greyscale legacy environment and evolved into a more attractive, more flexible and more interactive messaging service. And it stays on the carrier infrastructure, where it can be measured and billed for.
And for those users who don’t have the latest handsets, SMS represents an opportunity for them to access more sophisticated services despite the limitations of their device. So says Jeremy George, chief operating officer at ForgetMeNot Africa. The most limited handsets tend to be in emerging markets and this is where ForgetMeNot is targeting its solution, which enables users to interact with email and instant messages through simple SMS. In Africa 97 per cent of people do not have a data connection, George says, and yet there is huge enthusiasm for internet-based services like social networking. The firm is allocated up to 1,000 numbers by the network operator, which it uses to establish a dedicated connection between the mobile user and the user’s contacts’ email or IM addresses.
So whenever the user sends a message to this new number, it appears as the relevant type of message at the other end. Because the number is used to create a permanent connection with the contact’s account, says George, that 1,000 numbers can be reallocated to customers as often as is desirable. Very few people have more than 1,000 contacts in their address book, he points out.
The firm’s first launch was with Econet Wireless in Lesotho, in September last year. In May this year it launched with Safaricom in Kenya, which will evolve into a much larger deployment, says George.
ForgetMeNot enables email and all the branded instant messaging services. It has a Facebook release in beta testing. “Your $20 handset becomes a unified messaging device,” says George. While the service is aimed squarely at the emerging markets, it is conceivably something that would have appeal in developed markets. After all, high speed connectivity is patchy in even the most advanced mobile networks and the low cost of SMS might enable carriers to drive uptake of new services. SMS and MMS, the old workhorse and the also-ran, are likely to be operational for many years to come, says Pamela Clark-Dickson, and they represent significant opportunities for operators.
The penetration of SMS in particular makes is a essential target for development, she says. “Operators have other messaging services, some of which have worked well and some of which haven’t,” she says. But the one that has worked consistently well, generating revenue and traffic, is SMS. “It has been in the market for a long time but I think perhaps this year mobile operators are realising that it’s going to be important for them to focus more on SMS at the same time as they look at future messaging technologies.”
The message to operators is a familiar one: play to your strengths. Over the top service providers are innovating at a rate that, in most spheres, is beyond the mobile operator’s reach. But the carriers retain certain core skills and abilities, like the delivery of mobile messaging technologies, that could keep them in the game for as long as possible. Nobody expects SMS to be the long term future of messaging, and the shift of all messaging to IP traffic is seen as all but inevitable. For now, though, there are still opportunities to be taken.