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Joyn is Carrier Response to over the Top Messaging

Smartphone adoption is driving mobile service provider mobile broadband revenue. But smartphones also are cannibalizing service provider voice and messaging revenue.

In 2012, the increase in smartphone penetration will cause voice and messaging revenue erosion of 3.9 percent in Western Europe and 1.6 percent erosion in Eastern Europe, according to Informa Telecoms & Media.

In fact, every increase of 10 percentage points in smart phone penetration in a given market costs Western European operators a 0.5 percent loss of voice and messaging revenue, according to Informa (News - Alert) calculations.

For such reasons, Spain's Telefonica, the UK's Vodafone, France's Orange, Telecom Italia SpA and Germany's Deutsche Telekom AG are set to unveil a new messaging system tentatively called "Joyn" at the Mobile World Congress (News - Alert), according to the Wall Street Journal.

Joyn is a service made possible by the “Rich Communication Suite (News - Alert),” which is essentially a suite of messaging applications built on IP Multimedia Subsystem (IMS) standards.

The Allot MobileTrends Report  shows that WhatsApp, an over the top messaging app,  now accounts for 18 percent of the messaging bandwidth, a dramatic increase in popularity from only three percent in the first half of 2011.

Facebook Messenger also grew from zero to 22 percent of total IM traffic in just four months, the study shows.

As you might expect, Allot (News - Alert) argues that dramatic growth of all sorts of over the top apps represents both a threat to traditional mobile operator revenue streams, as well as a possible opportunity.

Over the top IM displaces use of text messaging and is a revenue negative.  But opportunity might lie in the creation of carrier affiliated applications, which is the whole idea behind Joyn.

To be sure, the IM “displace effect” seems to be mostly a European phenomenon at the moment. But the general pattern holds for most apps, which increasingly can be created and delivered over any mobile or broadband connection, with near-zero revenue implications for access providers.

There would seem to be two approaches to revenue generation. Allot emphasizes value-based pricing that could raise profit margins and gross revenue. At some point, one has to wonder whether some access providers also will become “over the top” application providers themselves, in particular to attack new markets outside the existing network footprints where those firms already operate.

In other words, the over the top business problem is that revenue is earned by the app provider, not the access provider in a direct sense (though the rationale for buying access obviously is stronger as each additional app is added, and as some apps provide incentives for users to buy more-expensive access packages).

Edited by Rich Steeves

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