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June 25, 2013

Why do Swisscom and Telefonica Support Their Own OTT Apps?

By Gary Kim, Contributing Editor

Swisscom (News - Alert) iO has launched a free messaging app that allows users to make calls, chat and share images with other iO users over the Internet for free. 



Some might wonder why Swisscom would do so, since iO obviously allows Swisscom customers to make international calls and send international messages without paying the carrier.

In part, the answer is that iO uses a “freemium” revenue model that requires an additional fee for calling people who are not using iO. That’s the “Skype (News - Alert) Out” model.

The logic probably is similar to that used by Telefónica at some level, where the assumption is that Swisscom can generate some incremental revenue by users located outside of Switzerland, especially by people who are not Swisscom customers.

In other words, iO will represent a chance to sell minutes of use to “non-customers.”

Telefónica, though, also has made a bigger strategic bet on creating branded mobile apps.  For example, CaixaBank, Santander and Telefónica have a joint venture to develop new business opportunities based on the latest mobile and communication technologies.

The firms will create an online community providing merchant offers, discounts and promotions. Additionally, the joint venture will create a digital wallet in which customers can keep all their cards, which will serve as identification in stores and for making purchases within the digital community, as well as being a person-to-person (P2P) mobile payment service for community members.

In fact, Telefónica Digital, a global business division of Telefónica, seeks to deliver new growth for Telefónica through cloud computing, security services, mobile advertising, M2M and eHealth.

Telefónica Digital already has launched a branded over-the-top communications app Tu Go and big data services through Telefónica Dynamic Insights.

Telefónica Digital will deliver these new products and services to Telefónica's 316 million customers as well as entering new markets. Other carriers also have launched similar services, including Orange Libon, T-Mobile USA Bobsled and Telefonica’s Tu Me.

The Tu Go app, available to O2 (News - Alert) UK contract customers, allows subscribers to make and receive calls and texts over Wi-Fi using their normal mobile number. But the calls and texts come out of their standard usage allowances.

So in a way, Tu Go is a “paid” service, to the extent that usage counts against the customer’s purchased bucket of usage.

The point is that iO and similar apps assume users are going “over the top” anyway, and that some service providers see at least some incremental revenue from making such services available on a branded basis, hoping to earn some extra revenue from people who live outside the core service territory, and who are not “customers” in the traditional sense.




Edited by Alisen Downey
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