Every day more consumers turn to apps as their primary method of communicating in real time. With the evolution of new standards like WebRTC, browser-based communications will start to grow rapidly as well.
The facts and stats are well known. For years, companies like Facebook (News - Alert), fring, Viber, and WhatsApp have been eating away at the SMS and voice revenues of traditional service providers. With the advent of combinations (like Facebook’s now famous acquisition of WhatsApp for $19 billion, a value calculated based on the 800 million users) what has been an increasingly aggravating trend is now becoming an industry bloodbath.
A Growing Threat
In April of this year, Facebook announced it is nearing 1.5 billion users, while at the same time introducing voice and video to WhatsApp and Facebook Messenger. The gloves are off – let the real games begin.
As Facebook and Amazon continue to roll out services on top of services, while providing smartphones, tablets, and laptops at ridiculously low prices, the advantages service providers have long enjoyed (being vertically integrated from the device to the services to customer service) is also being threatened.
Still, when you add up the numbers, communications service providers (carriers, mobile operators, MVNOs, cable MSOs, and more) still own more customer relationships than all the challenger apps combined.
How long this will last is literally up to the actions of the industry, and how open it will be to opening up its walled gardens to more federation than ever.
Alliances are not new to this industry. The only way global telecom ever worked was first through bilateral agreements, then via multilateral agreements as more voice moved to VoIP, then to interconnection agreements, peering, and more. But now, as the networks themselves move into the software domain – with NVF and SDN – how the largest CSPs work collectively to fend off the massive growth of OTT is causing innovation in a few different places.
Let’s look at a few of the early consortiums and alliances under way.
The Bridge Alliance
In 2004, seven companies came together in the Asia Pacific to form the Bridge Alliance. Roaming among carriers was the initial and continues to be the focus of this growing group, which now consists of 36 members with more than 660 million subscribers in Africa and Asia. However, it should be noted that it’s up to the Bridge Alliance members to actually bring end user applications to market.
The GSM Alliance has played an important role in creating interest in and building momentum around rich communications services as the telecom industry’s answer to Google Talk, Skype, and other OTT offerings. Much of GSMA’s work on this front has been through an effort called joyn, the consumer-facing brand for GSMA’s RCS efforts. The group continues its work related to RCS standards and compliant devices as well as its involvement in moving forward the IMS architecture and interconnection models to enable more widespread real-time communications. But while this group has made some progress, it appears to have a long road ahead to achieve its RCS goals.
The RCS Hub
Meanwhile, interconnection is the focus of the RCS Hub, which Jibe Mobile (News - Alert) introduced at last year’s Mobile World Congress. This year at the giant wireless event in Barcelona the company joined forces with Deutsche Telekom, KPN (News - Alert), Sprint, and Vodafone to demonstrate how the Jibe RCS Hub allows customers of the various carriers to seamlessly send RCS messages to one another.
The Wi-Fi Alliance
The 650-member Wi-Fi Alliance, a non-profit that promotes Wi-Fi technology and certifies Wi-Fi products, has also helped move Wi-Fi forward. And, in the process, that has benefitted real-time communications and the communications space as a whole.
A Winning Strategy
But such industry efforts have only gotten us part of the way there, so GENBAND (News - Alert) has put together the ammunition to help CSPs battle the OTT threat and win the game.
After having acquired fring in 2013, GENBAND invested in further development and went to market with a white-label app and cloud-based services that were picked up by a number of service providers, including M2 in Australia, providing the back end to its new Dodo OTT service.
While fring does not require RCS (and IMS in the network) to run, GENBAND has already developed NNI and as part of its launch story at Mobile World Congress in March claimed fring can be implemented within weeks, not years. For CSPs that have heavily invested in slow-moving RCS, the integration makes the decision to roll out powered by fring services a no-brainer.
It’s important to note that the fring-powered apps are also super competitive with the independent OTT apps because they are enhanced with the tremendous assets the CSPs already own. That includes the CSPs’ ability to route calls and messages to any user’s real number on any connect screen; their billing relationships with customers; their brands; and key network-enabled features like geolocation and presence.
An Important New Alliance
While the fring app is very cool – and according to inside sources has served to double the number of new subscribers each week for one very large mobile operator – GENBAND created the fring Alliance to add even more value. In fact, GENBAND’s vision is to make the fring Alliance the largest unified directory in the world.
Introduced earlier this year, the fring Alliance is actually a new company, supported by GENBAND. The new company will be collectively owned by the CSP alliance members. GENBAND Chairman and CEO David Walsh and Roy Timor-Rousso, who was fring’s co-founder and is now general manager of the fring Alliance, explain that the fring Alliance was established as a new company to support a broad coalition among many of the more than 700 customers GENBAND already serves with its traditional equipment and software offerings.
“People come together quickly when there is a common enemy,” said Walsh.
So, in addition to offering a proven app consumers love, the fring Alliance is also providing a business model and opportunity for CSPs to align their interests, shares costs, share ideas, build a massive directory, and scale so rapidly the OTT challengers “won’t know what hit them,” Walsh added.
“I won’t use OTT for a business call,” Walsh said. “The service providers own the signaling and the call quality. They can have incoming fring Alliance calls go to voicemail or really any number of options which benefit the user experience – this is the real killer app in this space.”
An Affordable & Available Solution
Walsh went on to talk about the advantages – including lower cost and faster time to market – associated with the fring Alliance OTT vs. RCS over IMS.
“It’s enormously expensive to put RCS on IMS,” Walsh notes. “It requires heavy infrastructure and even when it is completed, this combination will have to compete with the flexibility, scalability, and low cost of virtualized clouds.”
GENBAND and the fring Alliance, meanwhile, can offer everything RCS promises 3 to 5 years from now right now.
As Timor-Rousso noted, CSPs basically have four options to respond to the growing OTT threat. That includes becoming a dumb pipe supplier and leaving a lot of money on the table; developing a walled-garden social network and hoping for success with a model that has generally failed; working with a partner like Orange Libon and giving customers away; or joining an alliance that allows for customer retention, new revenue generation, and other benefits. The fring Alliance has now arrived to make the fourth option an actual possibility, he said.
“It really comes down to a great user experience,” said Timor-Rousso, who added video console members are also interested in the alliance. “And we have delivered that to the subscribers of the service providers with which we’ve already rolled out the services. Consumers love having the ability to communicate over the top with their own phone numbers, and with an easy to use social mobile and global app that enables them to message friends, family, and colleagues – and without racking up SMS and voice fees.”
In the process, he added, service providers get to keep their customer relationships, and even though they may give up a little on SMS and voice, the CSPs make money on off-net sessions with termination fees they control, while also driving up data usage.
What It Takes to Join
What does it cost to join the fring Alliance?
Charter members will pay a nominal set up fee based on their total number of users in exchange for the first tranche of equity. They subsequently pay an active user fee, which goes toward operating/administrative costs and product development. Alliance members receive a second tranche of equity based on the number of active subscribers based over a 12 month timeframe.
Twenty-five percent of the equity in the new company will be given to the charter members on a pro rata basis. So if five charter members join with an equal number of subscribers, each gets 5 percent. There will be maintenance fees of 10 percent of the initial amount paid. These fees will subsequently be reduced based on the number of active users a company has.
“Having active users is an important aspect, as they create greater liquidity, making the market more valuable to other participants,” explained GENBAND Chairman and CEO David Walsh. “In the world of telecom, more active users means the value of the network increases, as such users are likely to bring other users on the service as well. Charter members with more active users also get the benefit of more equity.”
GENBAND is taking risks. The fring Alliance is highly innovative and an idea one would usually expect from a startup.
Lucent Technologies CEO Rich McGinn told me in an analyst briefing in 1999 that the real innovative software in the carrier market will be developed by companies with small teams drinking beer and eating pizza. I may be paraphrasing a bit since it’s been 15 years; regardless, I marvel at how GENBAND has – for the moment – become the company blending the pizza and beer startup world with the reliability of carrier-class telco products and services.
Add to this an innovative business model, including financial participation and an upside opportunity tied to the growth of the alliance, and you have something very special. Maybe it is not too late for the telecom industry to fight back – and even win.
Power to the People
Real-time communications today is social, it’s mobile, it’s global – and it’s personal. Millions of people around the world are continuing to turn away from SMS and voice, and move rapidly toward apps that help them manage their lives while staying connected with friends, family, and colleagues inside their experience of choice.
A recent Statista report with data from March 2015 shows the popularity of the 10 most popular social, mobile, global apps, and two of the top 10 (WhatsApp and Facebook) combined forces and now serve more than 1.3 billion subscribers with free voice and video features, taking this phenomenon beyond texting.
As massive as these numbers are, and as fast as they are growing, in aggregate, the world’s top communications service providers serve many more people. The International Telecommunication Union estimates there are 7 billion mobile subscriptions worldwide, with slightly fewer actual users given multiple subscriptions for some. The numbers are growing, driven in large part by the developing world, and by the end of 2016 most experts believe 8 billion subscriptions will be active.
The good news for CSPs is that they are part of a high growth market.
The challenge for them is that even as the number of subscribers grows, SMS and voice revenues continue to decline as independent OTTs like those companies in the top 10 siphon people away by simply giving them a better, more personalized, and more intuitive way to interact. Many of these social, mobile, global messenger apps offer group chats, the exchange of graphics, video and audio messages, as well as the convenience of personal directories that make it easy to find and invite friends to chat for free.
If we add up the number of people using these RTC apps based on the Statista report, and take into consideration some people use multiple apps, approximately 3 billion out of 7 billion possible subscribers today have chosen the new world – less than half, but with growth trends, it is fair to say that by the end of 2016, 4 billion out of 8 billion will be communicating using OTT solutions.
Time to Take Back OTT
There is only one way to win back consumers or keep them from jumping ship. Give them what they want and make the experience and economics better than the alternative.
To protect the other half of subscribers and to lure back those who have abandoned legacy services already, some of the largest CSPs in the world are launching their own messaging apps and super-powering those apps with features only they can provide given the investments they’ve made in their networks and systems. And while these brands may also continue to invest in longer-term responses to the independent OTT messaging challengers with rich communications services (RCS on compliant devices delivered over IMS networks), they are winning by offering better and even more personalized apps to their embedded base today – not years from today. But it’s not just the app itself – it’s the community and the very size and nature of massive communities like Facebook and QQ which CSPs must focus on immediately before any more market share is lost.
The new world of real-time communications is a paradox.
On the one hand, consumers have choices and the ability to customize the way they communicate using social, mobile, and global messaging apps by creating their own directories and managing their own preferences. They are in effect creating their own walled gardens leveraging the walled garden approach of social communities like Facebook.
On the other hand, consumers still crave the convenience of being able to see beyond their own walled garden to an open universe where they can find other people, or services, content, and more. They resist being too controlled by closed communities, and are willing to try new things, explore new communities. Constant changes in consumer attitudes and behavior continue to create openings for CSPs. These are all opportunities to move quickly and strategically – and offer something bigger and better.
CSPs can go to market with at least as beautiful and intuitive apps as the challengers. But what’s in the background makes the apps even more compelling for users – that includes the ability to associate these apps with their existing subscriptions and services, tied to their current phone numbers, automatically available as icons on deck when new devices are purchased, and apps that are easily made available as downloads for existing devices from app stores, and are continually enhanced with new features.
A better, personalized experience for the subscriber can create a deeper relationship with a brand that added a cool new app to the offering for free or for a minimal monthly recurring fee. That’s a foundation upon which the CSP can build, by marketing new services that further drive loyalty.
Leaving behind the not invented here mentality and partnering with experts in user experience design to create the experience layer that is fueled by their own existing systems and massive data inside those systems creates a go-to-market approach that has already been proven to work.
By pooling their assets and working together as they always have, giving interconnection a new meaning in the software network world, CSPs have the ability to counter and surpass independent OTTs with a white-label, fully federated real-time communications over-the-top platform. That could create the critical mass that will be required to address the challengers and take full advantage of a high growth market. Simply put, the CSP community is bigger and better together.
Enter the fring Alliance
That aggregate size and those CSP assets are what the fring Alliance aims to leverage.
The fring Alliance offers CSPs the means to not only compete, but also retake market share, maintain consumer loyalty, and reduce customer churn. By federating its subscribers, the fring Alliance enables its members’ subscribers to reach friends and family on a shared, global directory. The fring Alliance immediately and cost effectively makes it possible for CSPs to extend their network reach with a proven social, multimedia application, and gain distinct advantages compared to standalone OTT offerings.
Consumers can enjoy the convenience of a single phone number, even when roaming. They can get access to the most intuitive and advanced user experience, such as multi-party video, one-touch photo sharing, co-browsing, collaboration, across any network via any device on any screen.
Meanwhile, CSPs can provide their subscribers with a single billing plan. CSPs can develop customized marketing business plans and bundled services to create the most business value and brand value since fring is fully white-label ready. And CSPs can further enrich revenues with future innovations, for example embedding ad-sponsored content, leveraging the ease of integration through APIs and the growing software ecosystem.
Edited by Stefania Viscusi