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IP Based Messaging: Creating New Revenue Opportunities

The tide is slowly turning. This is how we can simply describe the transition that is happening now on how we communicate and stay in touch. If we can recall having the same feeling and anticipation the first time we sent our first text message some twenty years ago. We knew then that it would change the landscape on how we stay connected with our colleagues, friends and most of all our loved ones. We knew that it would cross geographical boundaries and our message would be delivered in an instant.

Almost twenty years later and about 7 trillion text messages (2010) sent annually, the culture and phenomenon of messaging is slowly turning a new leaf and it is growing along with the advancement of time and technology. Although recent development shows that SMS is flattening out or even declining in terms of operator revenues, messages will not simply be gone instantaneously.

In fact according to Acision, the messaging giant who supplied 90% of operators and vendors the solution for their messaging capabilities, SMS will not be lost and we will not see it steeply declining in the next 3 years. This was supported by the recent report that was released by KPN Netherlands; their 1Q report showed that compared to the previous year there was a gradual decline in terms of the messaging traffic. 1Q11 SMS traffic was in the area of 1.55 billion SMSs, about 1.3% decline from 1.57 billion the same period last year.

Like KPN, operators believe the receding SMS revenue comes into the wake when consumer sales for smartphone devices are on the rise. According to research firm IDC, the global mobile phone market ballooned in the first quarter of this year, growing 19.8% year-over-year, and the growth was attributed to the smartphone shipments, especially in emerging markets. It says that vendors shipped 371.8 million units in Q1 2011 compared to 310.5 million units in the first quarter of 2010 in terms of overall handsets. The move to have smartphone devices enables the next IP environment, next generation technology, including IP based messaging.

In fact, when Steve Jobs announced the iPhone in 2007 and called it a revolutionary product, the statement didn’t have much of an impact. But four years later it is the leading smartphone device shipped across the globe and most device manufacturers have followed suit. But as the market is being equipped with the new devices, for operators it will be a different case. The declining usage of SMS prompts operators to search for alternate revenue streams. SMS has contributed to the operators’ books for the past few years, giving them income with every message being sent. But in the coming years it will not be the same.

The Move to be Free

Nowadays, it is a common consumer notion that once we move to IP we can freely send and receive messages without being charged per message sent through mobile operators, thereby sending messages through IMS or IP means such as Yahoo Messenger and Facebook is very attractive to the market. The concept “free” has been creating riptides for consumers to jump on the bandwagon. But just like all business models, nothing comes free in this world. And just like what Einstein said about energy, it can only transform from one form to another. This holds true when talking about operator revenues.

And as we move to IMS or IP based messaging services, new challenges arise for operators because they need to adapt to new models that will not be based on per message but perhaps come up with a more holistic one. New messaging applications for smartphones are currently moving into the market, thus it is proof that messaging will still be a key revenue generator for mobile operators. But for operators to remain competitive, messaging services must evolve and will be packaged and leveraged as a unique messaging service with different characteristics, and perhaps closely personalizing them as consumers’ choose. And as we move into IP based architecture, the benefits of it should be enhanced and adopted to the next generation network technologies.

According to Acision, for mass communication services like SMS or IP Messaging service, there are three fundamentals for revenue growth:

1. Connectivity – Most messaging services rely on location, device/app, provider, access network or online status. To make sure that everyone will be connected or can connect will assure the operator’s unique added value in messaging. By making them connected it empowers them to have choice on how and where they will be able to communicate.

2. Context – These is where the personalization of messages comes into play. The real value is achieved if the actual services that rely on messaging are tailored to the individual needs of the different user segments in the operator customer base. It will give the user a sense that his/her desired means to transmit message can easily be accessed, secured and will keep him/her up to date.

3. Collaboration - Operators have a long list of assets that offer a unique position in the mobile domain. To illustrate this with a few examples: they have a billing relationship with every customer segment, they have full control over the access network and they offer professional customer care services. Many of these assets are currently not accessible to service providers and developers outside the operator domain. Offering controlled access to some of these assets could offer a huge opportunity for operators.


The Next Wave

While more and more operators focus on network migrations, regulations and cross network interoperability, the Ping application providers are currently focusing on having the best user experience, thus ensuring reach and reliability. Operators must be concerned and give more focus on running a cost effective messaging operation developing advanced messaging services, and in turn will provide the edge over device app based messaging offerings (Ping applications) that will remain reliant on an access network they do not control. In order to realize this scenario, mobile operators should build on their strengths and provide superior messaging services by seizing these IP Messaging opportunities:

1. SMS and MMS must also be made available in LTE and WiMAX networks, providing evolved, cost effective SMS and MMS services over an IP network. SMS services were originally designed for the mobile network architecture and rely on specific transport technology, which is not available in 4G networks based on LTE or WiMAX. The operator must evolve text messaging based on circuit switched network technology towards text messaging based on IP. By not doing so this will eventually threatens the continuity of SMS revenues. SMS should be enabled as well in IP.

2. Offering new messaging services using IMS, leveraging operator assets by delivering integrated voice and messaging communication services through the unique IMS architecture. New network technologies also enable the introduction of new messaging services. There is clear consensus about the long-term direction of communication services on mobile broadband networks. Ultimately mobile voice over IP (mVoIP) will be delivered on the next generation network, supported by a SIP based signaling system referred to as IP Multimedia Subsystem, or in short, IMS. The IMS standards also cater for new types of messaging capabilities.

3. Introducing IP Messaging services without IMS, and collaborating in the cloud by providing access to unique network assets that enable a superior quality of experience.

Finally, IP Messaging is still on its infancy stages and across the globe majority of the population are still within the 2.5 – 3.5G of communication. But, like always, telecommunication operators has continued to step up the tempo of improving our daily lives through different means of communication. There will come a time when this technology will be a part of our daily lives just like SMS, however, by that time we will have better choices on what modes to choose and how we communicate. Because IP Messaging just like the internet will provide us with more ways to explore, to be in touch and at the same time provide opportunities to operators to be more creative in enhancing user experience, thereby creating a ripple effect in operator’s revenue streams.