The changing dynamic between operator services and OTT providers is a fascinating one. It is constantly evolving as the industry presses forward, and while the popularity of OTT – and the threat that this poses to operators – is undeniable, the answers are not quite so obvious.
There are many approaches that operators can take to compete with OTT, and enriching their communications services is the most immediately apparent. The fact that anyone with a mobile phone technically has access to core communication services is a major advantage for operators, and one that they need to capitalise on fully if they are to stay competitive.
In terms of messaging, this could mean transforming text messaging into instant messaging, making it faster and reducing the character limitations as well as augmenting the content that can be sent, such as pictures and animated characters.
Implementing rich communications can generally go two ways – operators either launch their own OTT services or to work with other operators to make interoperable services. OTT and core communication services provided by operators are likely to fit separate needs and may therefore evolve in different directions.
Florent Stroppa of VAS specialist OnMobile notes that as this process unfolds, OTT services are creating new standards of communication. Giving the example of Snapchat, he notes how a channel can become wildly popular with a fairly specific audience – in this case teenagers –and yet function essentially as the opposite of an operator’s core capabilities.
“OTT services are here to stay, but so are core communication services”, says Stroppa. “There are still around 7 billion phone numbers, and those will continue to be useful for a while. OTT services still have to use these numbers provided by the operator to offer their own services over-the-top as another layer.”
Louise O’Sullivan, CEO of Anam Technologies, agrees. “The various different channels available to consumers do not constitute an ‘either-or’ scenario”, she says. “Telecoms is a huge space, and communication is reliant on human behaviour. People adopt and adapt new streams.”
New channels are not necessarily replacing older channels – it’s more that specific services start to serve specific purposes. Communities are evolving around the services that people use to communicate with their friends; however if they are calling someone they don’t know, such as a doctor or customer service channel, they’ll use the application provided by their operator.
“People are not using WhatsApp to the detriment of SMS – they are using both”, says Stroppa. “It’s not simply a case of one app becoming dominant, people are using five different ways of communicating so as a whole, the number of messages sent is increasing.”
Making communication richer will not necessarily allow operators to compete directly against OTT applications, but it will improve the services they currently offer. Under these circumstances, rich communication is less about using the same channel to communicate than it is about adding functionality and therefore value – for example, when calling a doctor, the patient could be able to share part of their calendar in order to find an available appointment. Its power comes from the fact that it is ubiquitous – people aren’t going to download a specific app to connect to their doctor.
“These competing technologies are here to stay, but they are here to stay together”, concludes Stroppa. “Ubiquity is still of value, and the only truly ubiquitous service is the one provided by the operator.”
The data would appear to support this; particularly in Asia-Pacific, but also in Latin America, many operators have already tried to introduce their own OTT applications and found that their attempts have driven up SMS usage. A survey conducted by messaging and charging specialist Acision and covering the US and the UK indicated that while around 76% of mobile users now use some alternative form of messaging app, over 90% of them still use SMS on a daily basis.
“The thinking on the ground is that operators can push an application as much as they like, but if nobody actually downloads and uses it then people still rely on the baseline of communication”, says Acision’s JF Sullivan. “SMS is perceived as having 100% reach and about 99.9% reliability. With OTT apps, you can either talk to people who already have the app, or ping people who don’t have to app to tell them to download it – then, finally, you can use it to talk to them.”
The explosion of OTT apps in recent years has certainly facilitated communication, but due to the more exclusive manner in which they work, the fabric of communications will still rely on the technologies that people perceive as being reliable. While SMS may be one of the more limited ways of sending text-based messages, it is certainly more reliable than most.
OTT traffic may be burning a hole in the profitability of SMS, but traffic across all channels is rising. In markets such as Asia-Pacific, smartphone adoption is tremendously high, and while people are keen to explore the new functions of their devices, they are used to feature phones – hence their continued use of SMS. Even though OTT adoption has been hugely significant in many developed markets, SMS volumes are still increasing every month.
“Carriers have to stop thinking about how to they can generate more SMS and therefore make money off each individual message – they need to think about how to introduce a set of services that simply drive usage”, notes JF Sullivan. “Everything we’ve seen to this point proves that more usage– whatever it is – will drive up SMS traffic.”
Reliability and ubiquity are not the only advantages offered to consumers by SMS – the channel is a heavily regulated bearer, so there is a lot more protection for the subscriber than there is for OTT messaging. SMS has a different level of exposure; there would be far more liability if operators had direct access to read SMS messages than there would be for OTT providers monitoring user exchanges.
In fact, regulation in many markets is strict enough that operators would require a court order to actually look at a user’s SMS messages. Such regulation does not apply to OTT, making it a far less protected environment.
However, this is in no way a disadvantage for the operator. In the current communication environment, it’s more important than ever for operators to understand trends in user habits, so there is a lot more sophistication to the data they’re receiving and how they’re utilising it.
With SMS, it’s possible to identify trends in content without actually having to look at the content itself as operators can track the subscriber end-to-end. This is a real issue from a QoS perspective for providers – if messages are reaching their customers via grey routes, there’s no way of telling where the traffic is coming in from.
“As an operator, it’s crucial to separate unwanted content from subscriber-desired content; unfortunately both are terminated into their networks via grey routes,” notes Louise O’Sullivan.
Tracking the subscriber end-to-end allows operators to achieve this while making sure that they remain part of the value chain - a key issue in light of the revenue loss that they face from the proliferation of OTT. This provides a further example of how operators can take advantage of the core nature of their offering to compete with OTT providers.
“The perception of SMS is different – it is seen as the ‘old reliable’ service”, concludes O’Sullivan. While the relationship between operator services and OTT will continue to shift, this level of consumer trust is unlikely to erode anytime soon.