The future of Telcos and Mobile in a Digital Future

Referencing my past posts on how I’ve slowly switched from a mobile line to whatsapp to Telegram, I thought that Telcos should be afraid of how consumers are switching en masse to calling and messaging via data. Turns out that the carriers in Singapore are concerned about (and this is a new term to me) Over The Top (OTT) services like Whatsapp and Skype which are eating into their profits.

SingTel chief executive Chua Sock Koong has this to say:

“The main problem we have as an industry is we have been unable to monetise this increased demand … and [average revenue per user] has fallen over time,” she said. “I think the pace of change in our industry is relentless so clearly we can’t afford to stand still.(…)

(…)She called on regulators to allow carriers to detect and charge OTT players when their services were being provided over the network. While Telstra has experimented with such moves, the Australian Competition and Consumer Commission considers it to be anti-competitive.

But Ms Chua ssaid the solution was not to simply levy companies like WhatsApp but to become their partners.

“Our ambition must be to become the preferred network partners of customers and OTT players,” she said. “We must create sustainable revenue models.”

In reaction to the above, most consumers believe that when Telcos are already charging to use these services via data plans, so why are they complaining? For these carriers to searching for ways to monetise services like Whatsapp smells like an opportunity to introduce additional charges which nobody likes.

Singtel and other telcos are in a tough position here. They can clearly see that their profits are being eroded by consumers using VOIP and data messaging to replace their own services. Maybe it’s not a big problem now but in another 5 years, who will be willing to pay for a voice call and to send a message anymore?

Yet on the other hand, data calls and messaging are clearly on the rise with Whatsapp reporting that there were 18 billion messages sent in 2013. This is a number that is only set to increase further taxing the capabilities of the networks. According to separate reports this is a problem all over the world with places like China and India noticing great drops in sms usage. Singtel has seen the canary in the coalmine and is reacting. If they aren’t able to generate new revenue streams what is the incentive of upgrading their networks? To be fair free services that ride on the networks should find a mutually beneficial way to rectify the situation otherwise we’ll only ever be messaging via wifi.  

I believe that Singtel’s ideal solution would be to partner with Whatsapp, create a Whatsapp/Singtel app that is installed on all smartphones sold at their stores with Singtel charging a license fee to Facebook Whatsapp for each phone sold. Leveraging on the popularity of Whatsapp it should seem logical that everyone would happily go with that plan, or would that? Sounds a bit anti-competitive to me. 

Eileen Yu at ZDnet has another interesting suggestion regarding deals between OTT apps and carriers:

Any “partnerships” they hope to ink with OTT players shouldn’t be about paying for status quo, especially one that is currently free for these players. Instead, these deals could focus on QoS (quality-of-service) and assuring there’s no data loss or network latency for their services.

For OTT players that choose not to pay telcos for better network performance, their apps can be identified and re-routed to a smaller pipe when the telco’s network resources are stretched, for instance, during peak hours. As a result, users of these OTT services are more likely to experience a lag or data loss and the OTT players risk the wrath of their users.

This won’t make consumers like me happy, but it may at least push OTT players like WhatsApp and Skype to sign QoS deals with telcos to guarantee better experience for their users before the disgruntled masses move to another OTT service that can offer more robust performance.

Count me in as one of those unhappy consumers but I can imagine how tempting an option this would be to the carriers as a way of strong-arming OTT services to sign ‘exclusive’ deals with them. How they’d make money out of it is still beyond me.

OTT services are causing disruption to the traditional mobile carrier model of sales and I think that’s a good thing. I’m really interested to see how they react because the fact that they’re being so vocal about it means that they are hurting badly. I don’t think the mobile phone is ever going to disappear, but what I think will happen in the end is that carriers are just going to create more and more restrictive plans with lower and lower data quotas until they strike a balance.

But what I would really like to see is how mobile as we know it becomes obsolete, is abandoned for mobile wifi stations that are small, powerful and placed everywhere. In such a case no mobile phone would function traditionally with a telephone line but would literally become small computers that connect users via nicknames or email addresses (not unlike what google chat and Skype do now with any computer). We would still make phone calls and message one another but in an entirely digital way.

That’s what I think will happen… and I think the Telcos know it’s coming. It’s just a matter of can they react fast enough?

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