Exploring the possibilities of a two-sided telco business model

Why should only the user pay for communication?

The answer to this question might seem obvious:  of course they shouldn’t.  But in many ways, this reflects the historical one-sided business model of the telecom industry, in which only subscribers or enterprises paid service providers for communication.  This model has served telcos well through decades of growth and high profits, but now operators are seeing their communication ARPU decline as communication gets bundled with connectivity. 

This is forcing to look for new revenue opportunities as communication gets bundled with connectivity. So it’s time to look to the other side, so to speak.

Two-sided business models are common in other industries.  Newspapers are perhaps the most obvious case, with a model built on both advertising and subscriptions.  This model is famously under pressure, with ad revenues falling drastically and some publications leaning more heavily on revenue from subscriptions.  But, even with all this, advertising remains a key factor in the media industry, specifically through the development of native advertising and sponsored content.

Or take NutraSweet, the brand name of the artificial sweetener aspartame. It was initially marketed directly to consumers but is also now “invisible” as an ingredient in more than 5,000 products, such as Diet Coke.  Google also makes use of a two-sided model, in which the company attracts users with free services on one side, while advertisers pay for information and exposure on the other.

And there are existing examples within the telecom industry, from toll-free numbers – where the business pays – to emergency service calls – when the cost is often picked up by government. 

Within telco, there has been a discussion of the two-sided business model for telcos for several years, and it has become clear that telcos have a great opportunity to sell services to “upstream customers” such as developers, governments and retailers, while continuing to focus on their traditional “downstream” customers.

Much of the discussion on the topic, however, has centered on OTT players and how to involve third-parties into the business relationship between customer and service provider.  But we feel there is real opportunity in addressing a two-sided market more directly by expanding into new verticals.

And there are many verticals to explore. A good current example is a federal US program in which the government provides mobile phones for certain disadvantaged job seekers, in order to help them stay in contact with potential employers.

Remote education is another area in which governments could pay for linking teachers with students.  There are intriguing efforts in this area – such as the “cloud school” approach being tried in India and the UK, in which students are linked to teachers solely via video. , And with the explosion in more traditional distance learning, this sector has the potential to be big business – and not a business in which only the student pays for the link.

The Telefónica Group has created an entire company – Telefónica Learning Services – to focus on e-learning, including integrated virtual classrooms and multi-format offerings for desktop and mobile devices. Examples of their projects include working with rural farmers in Spain, schools in South Korea and creating a digital platform with the National University of Distance Education in Spain, including support from MIT in the US.     

Then there is health care.  Hospitals could pick up the cost of communicating with some patients, if the alternative of clinic visits or increased illness proves to be more expensive.  An early use case for this is AT&T’s Remote Patient Monitoring program in the US.   

Here is a description from an eWeek article around its launch:

[The] platform could enable better management of chronic diseases, such as congestive heart failure and diabetes, as well as reduce hospital re-admissions, AT&T reported.  In addition, the platform will provide reminders to patients about their medication routines and educate patients about their conditions.

With some imagination and by bringing communication into new contexts, the two-sided business model will allow operators to reach beyond the limits of their existing business.  And that is something worth taking risks for.

By Bodil Josefsson for The Voice on Telecom
 

WebRTC – friend or foe of RCS?

At the Voice of Telecom we’ve taken several different looks at WebRTC and what it means for telcos, including, among other things, the role of IMS in the future of WebRTC and how to spot successful WebRTC partners. 

We’ve also written a lot about Joyn and RCS.  But what about the two together?

It might be easy to see the two technologies as competitors – one open source and the other a developing telecom standard.  But this would be short sighted, for comparing WebRTC and RCS head on is like comparing apples to oranges, not apples to apples.

Instead, the right answer for operators is not to choose between the two technologies – they must be viewed as complements.

To recap, WebRTC is a technology that enables web browsers to use a device’s camera and microphone to allow voice and video calls without the use of plugins. One of its main advantages is that it has lowered the barriers for smaller startups and developers to build real-time voice and video calling solutions, and, according to Disruptive Analysis, the one-billion-WebRTC-devices mark was reached earlier this year.

WebRTC is also currently the only existing soon-to-be standardized technology on the market to create horizontal cross-platform communication services, encompassing smartphones, tablets, PCs, laptops and TVs, which adds value for both consumers and enterprises.

WebRTC gives operators the opportunity to offer telephony services to more devices, such as PCs, tablets and TVs. By combining  existing IMS technologies, operators will be able to provide, for example, one-number services. WebRTC is not going to lead to increased revenues and profits on its own, but taking communications to the web can prevent revenues from plummeting and open up new and intriguing enterprise opportunities, particularly for consumer-facing companies initially but with far reaching implications in the future. There is also a great marketing value in WebRTC, showing that operators can stay relevant and encourage innovation. 

One important characteristic of WebRTC, however, is its lack of a standardized signaling layer, and it’s up to each service provider to decide how this is handled.  We discussed this in a post over the summer, and it remains crucial to locate a person and make a call.

This is where IMS and RCS come in. With RCS, operators can offer a wide range of services, including – on top of voice and video – chat, presence, address book, video share, image share and file transfer. It builds on the standards of the telecom industry with the connected quality and reliability.  

So how could an operator use WebRTC and RCS together?  A good example could be to expand the range of devices – such as PCs and tablets – that RCS could support.  An operator could do this by using the WebRTC media framework, IMS for find and connect, with the RCS services on top to give added value.

To give you a sense of the possibilities, earlier this year, analyst Doug Mohney wrote two posts at 

WebRTC world that discussed how RCS and WebRTC could effectively put most current OTT players out of business.  From his first post:

The bigger picture here is that OTT players are going to find themselves displaced by a combination of carrier supported and promoted services in RCS -- because at the end of the day, carriers want to have a large number of customer relationships  -- and WebRTC providing a one-stop shop for developing third-party apps that can tie into third-party services in ways we can't yet imagine.

This is only one possible scenario and RCS is one example of many, in which WebRTC is a potential complement for telcos and not disruptive.  If operators think creatively and are open to new technology and business models, we see many more ways to make the most of telecom and web technologies - working together, not separately.

By Christer Boberg for The Voice on Telecom
 

Exposing assets for enterprise apps is a key to API success for operators

Could it be time for operators to stop chasing the long tail?

The “long tail” consumer app market is worth billions, providing more than a billion smartphone users services such as Google Maps, Twitter and weather reports.  At the same time, there’s been a lot of talk about how operators can expose their services through APIs to take advantage of this smartphone boom.  And, in fact, operators have been exposing SMS and payment capabilities for several years, with some success though not yet for significant revenue. 

But we believe the revenue is out there, though perhaps not where most people are looking – Google Play or Apple’s App Store.  Instead, for at least the short term, we argue that operators need to shift focus to the “short-tail,” that is, exposing assets for enterprise apps, either B2B or B2B2C. This means working with fewer, yet closer, partners that integrate operator APIs into their complete service offerings.

Enterprises are, of course, being transformed by the same web-based solutions as consumers. New technologies and operator cloud offerings enable more contextual communications on a scale impossible to imagine before. But you can’t just translate consumer business models to enterprise.  Engaging and integrating with enterprise solutions requires a sharp focus on improving productivity, business processes and a company’s reach towards its customers.

With new standards such as WebRTC and HTML5, application development has been made exponentially easier, and some examples of enterprise-apps include video collaboration (including document sharing), voice control of apps even while talking on the phone and a range of medical applications.

However, operators also can’t ignore their current developer networks. They need these in order to scout for developers with the ability to create successful apps, and telecom-enabled long-tail services can also be valuable for an operator aiming to generate new revenue from API sales, gain additional revenue from increased traffic, reduce churn or increase network efficiency.

This diagram sums up nicely our vision for how the service exposure business should look :

We've previously highlighted AT&T’s innovative efforts in exposing assets and encouraging developers and have closely followed on Twitter the OneAPI effort from the GSMA.

And once again, AT&T is at the forefront of thinking about service exposure, this time as they shift towards enterprises.  In a recent interview with FierceMobileContent, Laura Merling, vice president, ecosystem development and platform development at AT&T, said "AT&T has always been focused on the enterprise. But now we are saying that this business is an extension of our business."

This means the American telco giant will make APIs available to select enterprise customers that aren’t available to consumer-facing developers, such as security for a financial services company. Merling also said the central challenge in this new initiative will be developing tools for other companies, rather than finished AT&T products.

That’s a big change in mindset, but it’s an important one, as operators reach towards a more flexible and innovative future.

By Bodil Josefsson for The Voice on Telecom

3 keys to spotting successful WebRTC partners

WebRTC opens up possibilities for millions of developers to create new services that we can’t even imagine today.  New players are rapidly forming new ecosystems and transforming current ones, and we can’t yet say what will drive success.  Will it be new interactions? Or new relationships? Have we learned any lessons so far?  There don’t seem to be any definite answers, so let’s start our discussions here.

With that, we introduce our first guest post from Kelly Fitzsimmons. Kelly is a serial tech entrepreneur and co-founder of the Hypervoice Consortium. The consortium has the mission of articulating and advancing standards, capabilities and potential applications for Hypervoice, or the transformation of voice communications into searchable and shareable native web objects.

You can follow Kelly on Twitter at @schnellerkeller

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 Standards don’t create disruption. Innovators do.  The ultimate value of WebRTC will emerge from how well entrepreneurs and technologists put WebRTC into action.  By dramatically lowering the barriers to entry, what used to be hard will become easy.  The result will be throngs of new startups. So then what?

For telco players looking to partner with hot up-and-coming startups, it is important to focus on the few, not the many.  In essence, a telco partner needs to try and spot the "winners" before they know they are winners.  And in this way, a partner's role is not that much different than a venture capitalist. 

So the real question is, do any of the early WebRTC startups have a discernible advantage? 

1.     Capitalization - Has the startup raised capital during the downturn?   The ability to raise funds in the past – particularly during the Great Recession – indicates that their leadership earned the trust of others and, most importantly, their technology has gone through a modicum (if not a lot) of due diligence. This is proof of some staying power.

2.     Team – Does the startup team have experience and expertise in navigating relationships with large strategic partners in the past?  Do they understand how to navigating licensing, IP issues, channel?  The more seasoned the team, the more likely a successful outcome.  If they don’t understand their partner’s world, they are likely to be impatient, which can be exhausting for all parties.

3.     Revenue - Does the startup already have revenue from real clients?  If so, they have moved past market discovery into market validation. This is a critical step that many startups never make.  This step alone will help you significantly de-risk the partnership. If they don’t have revenue now or likely ever, choose another partner.

With so many new entrants, telco has a rich playing field to work from.  These emerging companies offer less nimble enterprises ways to innovate quickly and get new products to market.  Although acquisition may be one tried and true route, early partnering is what many of these young entrants really want.  They want access to your subscriber base and billing systems.  For these startups, revenue is king.

The advantage for telcos in partnering instead of early acquisition is that it de-risks the deals. Do these startup partners really walk the walk? Are your customers interested in their products? By partnering early with a few startups, acquisition becomes easier on the backend.  First concentrate on being the strategic and essential partner.  The more key you are to their success, the better the ultimate terms.

By Kelly Fitzsimmons of the Hypervoice Consortium

The key role of IMS - and operators - in the future of WebRTC

We started last week to look at WebRTC and both the benefits and limitations of its lack of a “find and connect” solution. Today, let’s look at how IMS could play a key role in the future of WebRTC.

Telcos already have invested in an excellent “find and connect” layer in the form of IMS,  and implementing a WebRTC signaling layer with IMS would allow the telecom industry to find  a niche in this new ecosystem. Operators basically just need to offer simple API’s for IMS call control that can be used in conjunction with the API’s for WebRTC.

Having this in the context of a telecom grade network, you get all of the other good stuff like interoperability, security and telco-grade reliability. It would also allow telcos to embrace the web developer community and offer them additional value to WebRTC-based applications and services, that is, adding new technology while telecom core values are kept.

Until the arrival of WebRTC, it was very hard for smaller startups or developers to build real-time voice and video calling solutions – it simply required too much investment. WebRTC lowers the barriers to entry, but even with WebRTC, it’s not that simple for a small innovative startup to design ubiquitous service access with interoperability with existing services, and telco levels of quality and reliability. Most have the technical expertise but lack the experience, scale and network assets of established operators.

However if start-ups and developers worldwide could stand on the shoulders of the telecommunication industry – still the biggest giant in communications – they would not have to reinvent the wheel again and again. By cooperating with telcos, they could suddenly enjoy the same opportunity and resources, create more competitive offerings with standardized technology that allows for full interworking, as the likes of iMessage, Google + Hangouts and Skype, etc.

In reality, the telecom industry is in a great position to drive WebRTC-related innovation by offering PSTN termination, quality of service assurances, interoperability between services, and use of server-side infrastructure to mention a few examples.

So, to answer the question we asked the other day, WebRTC does have the potential to level the playing field. Just not all by itself.

By Christer Boberg and Thea Sommerdyk for The Voice on Telecom

Playing to strength: interoperability will remain a foundation of telco innovation

Innovation and interoperability go hand in hand, and we shouldn’t forget this point as we listen to the buzz around OTT voice and messaging services, with small startups portrayed as nimble and innovative in contrast with more established mobile operators.

GSMA.com

For while there is no denying the appeal of many OTT innovations, it is still interoperability that provides the base for all other services to grow in conjunction with. This was true as the mobile community expanded to six billion users, and it is true today of RCS-e and Joyn, which are fast making group chat interoperable and standardized.

Interoperable innovation is happening in other arenas as well, driven by established telecom companies, with VoLTE and webRTC as prime examples. Here at the Voice on Telecom, we’ve examined the potential of all these services and more, from browser-based communication to HD Voice to WiFi VoIP and video calling.

It’s good to remember that within enriched services, the OTT players are the incumbents and most of the operators are the new kids on the block. But operators can work at a scale that most startups can’t, such as launching interoperable services in integrated packages across many devices, including fixed access such as WiFi and devices like personal computers. They can simplify a service and package it nicely in affordable bundles – comprised of data, devices, enriched communication services and devices – to make adoption hassle free.

Joyn particularly offers this blend of flexibility and interoperability. Operators can already customize and add different services in addition to the core Joyn offering – and this kind of tailored offering will be appropriate depending on every operator’s different market and position. This is true innovation – deciding when to interoperate and when to differentiate.

Peter Carson, senior director for marketing at Qualcomm, put it nicely in a recent interview with telecoms.com:

Where operators have a real opportunity is in bringing to market truly universal, reliable iterations of such services, he says. And while that seamlessness, across networks and international borders, is where much of the time consuming complexity resides, mobile operators should not be disheartened.

And interoperability is going to be even more important as communication services become embedded in every context that can possibly support them.  From a 2009 piece in the Financial Times by Michael Shrage, a researcher from MIT:

But where interchangeable parts enabled the mass production era more than a century ago, tomorrow’s interoperable systems promise richer, more diverse and more customizable innovation. Economic historians and post-industrial pundits alike observe that high-impact innovations come less from scientific breakthroughs than from clever recombinations of existing inventions.

To give a concrete example, suppose that a business person is late making a flight connection and has to rebook their ticket.  Typically they would have to call the airline or travel agent and give all their info.  The level of service drops to the lowest common denominator – a voice call.  But what if the agent already knew who they were, what flight they had been on, and knew why they were delayed?  This kind of contextual information could save important time, but it also leads to a better user experience, and all this means increased loyalty to the service provider.

To go even further, think of all the ways communication could expand into machine-to-machine communication, other industries such as health and transportation and beyond. It’s exciting stuff, but it’s not a vision that can possibly be built on isolated islands of innovation.  We need interoperability to make it a reality.

Looking ahead to VoLTE, WebRTC, HD voice and Joyn - and so much more - in 2013

We are off on our winter holiday here at the Voice on Telecom, which means we are looking back at the past year and forward to 2013.  It’s amazing how far the telecom world has come since we started writing just a little more than a year ago.

FreeDigitalPhotos.net

Back then, we wrote our first post about trillions of text messages and, soon after, wondered if Telefónica was “going too far” into digital.  And even earlier this year, when we wrote about things like WebRTC, it seemed like we were looking far into the future.

Well, the future has arrived.  We’re now talking about WebRTC as a transformational commercial reality, about the cutting edge services introduced fast and furious by Japanese operators, and about smart operators – like Telefónica, among others – that have committed themselves fully to digital services.

One thing that hasn’t changed is our belief that operators remain in an excellent strategic position, whether in billing or M2M or health care or, especially, messaging and voice services. We’ve highlighted these points in our posts looking at Joyn and RCS – which we believe will gain real traction in the market – and VoLTE, which is crucial not just for operators to move to all-IP but can serve as a platform for crucial services like HD voice and video calling.

So we hope to see you in the New Year, when we’ll all have to move faster just to keep up with the changes and innovations that get to the heart of how we all communicate. 

Joyn and RCS 5.0 show off their potential in the US with MetroPCS

We wrote recently about how the timing might be right for Rich Communication Services (RCS) after all. And as if to reinforce the point, one of the leading operators in the US chose the same day as our post to announce the commercial launch of an RCS offering on its network.

Just like the big five operators in Europe, MetroPCS will deliver RCS under the GSMA-licensed joyn brand. It offers more than the basic joyn, though: besides the usual mix of free, integrated instant messaging and chat and simplified content sharing, MetroPCS adds WiFi VoIP and Video calling. The timetable is also familiar from previous RCS unveilings, with the joyn app initially available for one high-end smartphone (in this case, Samsung’s Galaxy Attain) before roll-out of additional RCS-enabled devices next year and native support for joyn services to follow.

But there are more differences  this time – the MetroPCS deployment represents the world's first commercial launch of RCS on an LTE network. The operator will also be using as a baseline the GSMA RCS 5.0 standard, which offers a larger feature set than most existing joyn roll-outs. This makes us wonder whether MetroPCS will be looking to deliver differentiated services along with the base service interoperability that lies at the heart of joyn.

And something else is downright unusual. The industry response so far has been almost universally positive, with the normally sober Fierce Wireless even calling the technology “cutting edge”. Compared with the resigned sighs of “too little, too late” that echo around Europe following an RCS launch anywhere in the continent, the willingness of North America to judge RCS on its own merits – of which there are plenty – is really rather refreshing.

Of course, an RCS announcement just wouldn’t be the same without at least one dissenting voice, and in the case of MetroPCS it comes from an unexpected quarter. T-Mobile USA – who expect to close a merger with MetroPCS sometime in the first half of 2013 – remain distinctly lukewarm on the potential of RCS, to judge by recent comments from company CTO Neville Ray.

While Ray said “there are elements of the RCS offering that make sense,” he instead said he sees the rich application environment in the US already driving many of the services that RCS is aiming to populate.

That may be true.  But there is also little to suggest a lack of space in the market for a fully interoperable communications service that works on any device, on any network, with anyone in a subscriber’s mobile address book. Hopefully a post-merger MetroPCS will get a chance to show just why the industry in North America is right to be excited.

Is VoLTE poised to be a platform for innovation?

Now we’ll see what Voice over LTE can do.

The service known as VoLTE recently went live in South Korea on both the SK Telecom and LG U+ networks, as well as in one market for MetroPCS in the US.

And LTE also continues to spread fast, with the GSA predicting there will be 195 LTE networks in 72 countries by end of 2013 (up from 159 networks in 68 countries at the end of 2012).

And if operators truly want voice to work in this new LTE environment – if they want to give their users a good experience – they will need VoLTE, which gives them the opportunity to provide telecom-grade services to compete against the likes of Skype.

It’s not a surprise that South Korea is the leading VoLTE market.  We examined the country in May and found it on the cutting edge of most telecom trends, from smartphone adoption to the OTT challenge to operators.

We talked to Gabriel Brown, of Heavy Reading, to get some insight into the Korean VoLTE launch. He also said Korea – with its early LTE adoption – was a logical starting point for VoLTE.  VoLTE requires good LTE coverage and ideally would be supported by multiple operators. Korea has that.

But there is also national pride at stake.

“It is also an opportunity for Korea and the Korean telecom industry to demonstrate their prowess globally,” he said. “By being first, they can show their expertise internationally.”

But what about the service itself? In an interview with Telecom Asia, Ian Koh of Ericsson, makes a compelling case for the benefits of fast call connections with VoLTE.

Of course, the most crucial role for VoLTE is as the platform for new services like HD voice and video calling. And FierceWireless says the proposed MetroPCS merger with T-Mobile could spur VoLTE innovation in the US, even though MetroPCS is not yet marketing the service and says it will take four to six months before they have VoLTE up and running in all their markets.

Brown, of Heavy Reading, says that while there hasn’t been huge demand for VoLTE yet, there is “a need for reliable, secure, rich communication services.”

That is exactly what telecom does well, he says:

Even if consumers are not aware, in the industry there has been enough development for us to come to the conclusion that more operators will launch services in 2013, and it will become more mainstream from 2015 and onward.

So what do you think?  Should operators make VoLTE a priority as they roll out LTE?

Welcome to the speedup: VoLTE, Joyn and Tu Me push back against rising OTT players

We’re back from our summer break here at the Voice on Telecom.  And though we were gone for only two months, it seems that all the trends we’ve been examining since last October are now on fast forward.

On one hand, voice and SMS are under ever-increasing price pressure, at least in places like the US and Europe. (Though let’s not forget that huge swathes of the developing world are just getting connected now, and most operators in all markets will see huge voice and SMS revenues for decades to come).  The clearest example is in the US, where AT&T has just come out with its shared data plans (Verizon did the same earlier in the year). This sparked a net neutrality debate, as AT&T will only allow FaceTime cellular access on the new iPhone to “share plan” customers.

What caused no fuss at all in the media was the fact that both the Verizon and AT&T plans include unlimited voice and SMS.  At the same time, WhatsApp, the OTT messaging company, now sends or receives more than 10 billion messages a day, just months after it hit 1 billion messages. According to a report from mobileSquared, OTT services are affecting traffic for almost three-quarters of operators, link to the whitepaper a big jump from 2011.

But there is lots of good news too.  MetroPCS in the US has launched Voice over LTE, as have two operators in South Korea, SK Telecom and LGU+. This has real potential to kick start video calling and allow developers to expand voice offerings as the VoLTE community expands, and perhaps in the long runs as possible frustration over FaceTime and other OTT video services grows. In Korea, the two operators are branding VoLTE differently but also offering a wider range of VoLTE services, like HD Voice. Both companies also promised to unveil more VoLTE-capable smartphones as the year goes on.

The GSMA-led Joyn initiative also gained momentum with its recent launch by Vodafone in Germany. With Joyn – a suite of features such as instant messaging and video calling based on IMS – up and running in Spain and Germany, there is now a real opportunity for operators to prove its value in competition against the OTT competition.

In its report, mobileSquared says that RCS has real potential as a long-term answer. But it will take time to get enough people in the Joyn community – both through operator interoperability and the widespread rollout of Joyn-enabled handsets.

So what can help bridge the gap? Maybe Telco-OTT efforts like Telefónica’s Tu Me. When we wrote about this pure OTT play, it quickly became our most-read post ever. And as of August, the service had 600,000 users, with growing bases in India and the US, where Telefónica is not present.

Plus, Telefónica only recently started marketing Tu Me with this slick 60-second ad and a revamped Facebook page with more than 131,000 “likes.”

Telefónica Digital head Matthew Key said in July that TuMe served several purposes, from retaining customers leaving for OTT services to attracting users in places like the US. The group has also signed deals with Facebook, Google, Microsoft and Research in Motion to enable direct-to-bill payments, something we said last December that operators should consider.

In short, we are seeing disruption in real time. And while this is often scary to incumbents, we want to keep repeating our core message: there is real opportunity here for operators. But they need to act now before the window closes.

How mobile gaming is key to killer content and more revenue in a commoditized telecom world

A few months ago, we said that better latency and quality of service could be the keys to making mobile gaming a better – and more lucrative – experience for gamers, developers and operators.

Those are important technical steps. But let’s also look at the business models for selling new and improved mobile gaming.  How will gaming set an operator’s or other company’s content offering apart from the competition?

FreeDigitalPhotos.net

If many telecom services are becoming commoditized, content – in the form of things like apps, games and music – will become even more important to both reaching new customers and keeping old ones. Within gaming, the transition to mobile will be based on continuous revenue streams that can be easily developed by either telco, device maker or game developer.

In-game revenue can be either subscription or single purchase, and the business model is also flexible in that any of the three major players can offer the game or upgraded services within the game.

But to make this work, you need great content. Over the long run, people are not going to pay for small games. A game like Order of Chaos is nice on mobile, but if it’s played on a network with built-in voice, it can be a great game that draws in users. Same goes for the highly anticipated new multiplayer version of ShadowGun by MadFinger.  

This goes for more than just first-person shooter games too.  Check out Coventry University in the UK and its Serious Games Institute, with up to 25,000 online students.

It’s also important to realize that there is space in the market outside of Apple and Google. The Japanese game portal Gree is immensely popular worldwide and just launched in beta a tool for iOS and Android. Sony has a series of content offerings, from games to books, and Cricket in the US has its Muve Music plan. Also in Japan, NTT DoCoMo increased its stake in Tower Records Japan in order to provide better music content.

Perhaps most prominently, Samsung just unveiled its own iTunes rival with MusicHub.  Killer content is obviously central to Samsung’s drive to take market share in tablet (and phablets) away from Apple.

Customer loyalty is crucial to build a continuous revenue stream. This can be incredibly hard to build, but, if it happens, there is the potential for years of loyalty and a foothold in a disruptive future.

The future of voice does not have to be dark - We'll be back in the fall to keep the discussion going

We’re taking a summer break here at the Voice on Telecom. We’ll be offline for July and August but will return in September. Things are moving so fast in the area we focus on – the future of voice, SMS and person-to-person communications – that we’re already excited to take in what happens this summer and look ahead to the fall and winter.

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We’ve been writing this blog and been on Twitter since October.  In that time we’ve tried to reach across the whole spectrum, from four posts on gaming to analysis of Telefonica as a leader in innovation to our takes on new business models, the viability of OTT players financially, innovation in Africa, the Chinese New Year and South Korea, among many other subjects.

What’s had the most buzz?  VoLTE, Joyn/RCS and Telefonica’s Tu ME app. It’s fun that all three of those subjects are about looking forward, rather than dwelling on a gloomy financial outlook.

It’s remarkable how much has changed too in our short time online. We’ve seen the launch of Joyn, Rogers One Number and Tu Me as operators go “Telco-OTT”.  And there is a real sense of innovation and urgency among operators, including openness to finding new ways to make money off of voice and texting channels.  On this level, we’ve examined HTML5, WebRTC and in-web and in-game voice solutions.

It’s a broad, kind of vague, but fascinating topic we’re examining together.  So we hope you’ll come back in the fall and continue the discussion with us.

Apple, Microsoft and how operators can tap into the creative potential of WebRTC

Attempting to guess Apple’s next move has practically become an industry in itself – all you need is a patent filing or a loose-lipped Taiwanese factory mole. In fact, a simple firmware reference will do. But even the tech bloggers probably don’t need to rummage through much trash in Cupertino to figure out that Apple – faced by the constant need to keep their consumer communication devices up to date with network trends – is working on a voice strategy for all-IP LTE mobile broadband networks.

A job ad earlier this spring removed any doubt – the company that already brought us FaceTime is looking for telephony software engineers with “experience in SIP, real-time transport protocol and VoIP related protocols," as well as "familiarity with telecommunication network architectures".

And Apple is only part of the story. Microsoft, in turn, has recently been advertising for HTML5-savvy developers to bring Skype to browsers. So what does it all mean?

It’s probably too early to say for sure. But for the rest of us it’s clear that we’re going to be hearing a lot more about real-time communication on the web (WebRTC) in the coming years. Microsoft and Apple are just some of the players – albeit two of the potentially most high-profile – in a still-nascent sector that could have a huge impact on the way we use the internet.

When services such as Skype become part of the browser experience, the possibility of integrating communication with web pages suddenly opens up. I can read my favorite Apple rumor blog on my tablet, see which of my friends are doing the same thing at precisely the same time, and start up a proper voice conversation there and then.

I don’t need to download a native application, and I certainly don’t need to know anything about web development. But do I need an operator?

That depends on the kind of communication I’m looking for. WebRTC has the potential to enrich communication in areas as diverse as social networks, e-health or education. The chances are that at least one of these offerings will be valuable enough for me to pay an operator for it. This gives operators the chance to develop their own applications and – at long last – force their way into the app store revenue party.

On the other hand, perhaps I’ll just be happy to surf the wave of creativity that WebRTC will inevitably unleash, as I glide from one voice-enabled page to another without paying a cent to anybody. And operators shouldn’t expect any favors from the competition, which will probably do everything possible to cut them out of the picture.

So it’s up to the operators to show they mean business. If they get it right, WebRTC can be the basis for a range of offerings that people won’t be able to do without. And it might reduce the chances of either Apple or Microsoft doing an end-run around the whole industry and succeeding with their own communications services ecosystem. How many bloggers see that one coming?

Facebook and the (lack of) mobile imagination

The world is awash in Facebook news, and almost all of it centers on one theme – Facebook’s lack of mobile success. 

Facebook’s rocky IPO?  All the financial worries revolve around the fact that Facebook is not making money from its exploding mobile user base (the Facebook mobile app is ad-free) and was seemingly not prepared for this huge shift to mobile.

Speculation that Facebook might buy independent browser company Opera?  This is largely about leveraging Opera’s huge mobile browser presence, and gets to the same message as our last post on Mozilla’s Boot to Gecko.  From Rethink Wireless:

The new wave of mobile platforms will increasingly rely on slimline operating systems, with most of the work being done in the HTML5 browser, and content streamed rather than downloaded. This opens the opportunity for web players to seize the reins of the mobile experience and weaken Android and iOS - and also puts browser makers on center stage. Firefox developer Mozilla has already unveiled its cloud OS system, Boot2Gecko, and it would be logical for Facebook to follow suit with a browser partner.

Rumors of a third try at a Facebook phone, including hiring away Apple engineers?  Obvious. Facebook does not want to be just an app on an Apple phone. It wants its own platform. This means building a phone, which is going to be very hard for a company with no hardware experience.

The Facebook phone rumors in particular have generated much skepticism and speculation, with news reports suggesting Facebook could or should buy both Nokia and RIM, among others. GigaOm gave the most lucid summary of all this action:

In many ways, the battle to control the mobile experience is a logical extension of the walled-garden building that both Facebook and more recently Google have been engaged in—that is, an attempt to control almost every interaction with users and thereby convince (or force) them to spend more time within the company’s ecosystem, where more data about them can be harvested. That was the rationale behind the launch of Google+, and it has been Facebook’s primary motivation for virtually everything.

There are a couple questions here.  Is Facebook well positioned to be this kind of company?  And can any company – including Apple – accomplish this in a mobile world of 6 billion phones?

The real question here, however, is … why?  Why didn’t Facebook see their mobile revenue problem coming? Why weren’t they better prepared?

Could it be that Mark Zuckerberg, who is all of 28, is too old?

Yes, that seems a silly question (and people are starting to argue that Facebook will do fine), but it also recognizes how disruptive the shift to mobile is, even for “digital” companies that are experts on the internet. Analyst Eric Jackson says Facebook could fade into irrelevance by 2020 exactly because it is a “second generation” internet company as we enter the “third generation” of mobile.

Maybe we need to wait for kids born after 2007, who grew up swiping at smartphones from the beginning, to solve the mobile revenue puzzle.  Kids like this one that we featured in a post on France Telecom and its OTT efforts:

Or maybe it just means that there is still a window for the people who know mobile best – you know, telecom companies – to make their mark and not concede the playing field to Google, Facebook and all the other OTT challengers.

Are latency and quality of service the keys to crowning the next mobile game master?

We’ve touched on the possibilities of developing the mobile and social aspects of gaming through better voice integration. But let’s get down to the details.  The mobile gaming market is now dominated by either simple games like Angry Birds or Doodle Jump, or mobile versions of the old games included for free on PCs, such as FreeCell and Minesweeper. 

Both these categories are incredibly successful, as mobile gaming companies have leveraged the huge installed mobile user base and the emotional attachment players develop to games that occupy their commutes and spare moments. The gaming demographic is also skewing older, with wealthier players who are more willing to pay for content but also with less time to sit in front of their TV playing at home.

But what about the next step, as in making money? How can operators and gaming companies create experiences to attract both serious gamers to the mobile sphere and casual gamers to more involved – and more lucrative – games?

How about quality of service?

Today most teams in popular multiplayer PC-games like World of Warcraft communicate on services like Skype or Ventrilio, running in parallel to their game, while also using text chat within the game. This ad hoc system could run into trouble if used on mobile networks, especially if the network neutrality debate ends in a way that encourages more operators to follow the lead of TeliaSonera and start charging for mobile VoIP use.

Also, just practically, simultaneous texting and playing, on either a tablet or smartphone is a challenge considering the size of the keyboard on either device.

Latency is also a huge issue in games. Just the slightest pause could mean that your avatar gets shot and killed, especially when facing a player from a high-speed broadband connection.

Fixing this is not as hard as it might appear. Only a small portion of gaming data needs to be prioritized to increase the user experience – perhaps voice communication and certain immediate game functions (like bullets flying).

The gaming industry is in flux right now. The distribution system for the dominant consoles like Wii, Xbox and PlayStation has been oddly unaffected by the digital distribution, with millions of games still sold at stores and then taken home to be inserted into the console.

That is changing, just like in music, movies and journalism. And that means there are openings for new players, whether they be EASports alumni, Czech gaming studios, Japanese social networks … or a telecom incumbent.

Device manufacturers and operators need content that separates itself in terms of quality and functionality. But what if their app stores featured real-time on-line games with integrated voice?  Or prioritization through quality of service? What if the players were billed in the game instead of on their phone bill?

Could this help them compete against the likes of Apple (AppStore) and Google (Google Play, formerly Android Market)?

And will they hit the play button in time?

A new game in town?

There’s no doubt that the success of mobile devices and the app format is helping to fuel games on the go, from Angry Birds to Doom RPG. Analyst firm IHS Screen Digest predicts that the global mobile games business will be worth around €9 billion by 2015.

But are the social and networking aspects of gaming as developed as they could be? After all, many games require teamwork and offer a ready-made community of like-minded people. There would seem to be a host of opportunities for operators and game developers to cooperate and make money and build their business.

Voice is just one example. With many mobile games – especially those based on teamwork – reliable and effective in-game communication would be a great asset. We wrote about this back in January.

Imagine playing a game on a mobile device that required working with others to achieve an objective. World of Warcraft and many ‘first person shooters’ fit into this category. Offering reliable, high quality voice communication “in game” could be one way for an operator to differentiate its offering.

So why are operators and game developers not getting together?

The answer is they are. Or at least they are starting to. Telefónica Digital recently announced that it had entered into a strategic relationship with games developer Electronic Arts. The deal will allow Telefónica, via its O2 brand in the UK, the possibility to run gaming promotions for EA titles. Subscribers get the chance to play games for free during the first three months after they are downloaded.  

Matthew Key, chairman and CEO of Telefónica Digital summed up the cooperation: “By making a differentiated play in this most emotive and immersive entertainment medium we are fostering a much deeper connection with our customers – another significant step in becoming a true aggregator of experiences.”

So, is the game on? Watch this space.

Do Yoigo customers in Spain really care about net neutrality?

TeliaSonera was very upfront at the recent Mobile World Congress about its intentions to throttle over-the-top (OTT) VoIP services like Skype and Viber unless customers paid for an additional package.

In Spain, through its wholly owned subsidiary , Yoigo, TeliaSonera has already begun to implement the first part of this strategy. Yoigo offers a plan, Bono VoIP, which is included in some of what they call their “Mega Plans.” In, for example, Mega Plan 40, you get 600 minutes of talk time plus 600MB data allowance, and in addition to that you get a 100Mb for VoIP calls.

Does this mean that Yoigo is throttling “unpaid” VoIP traffic? It would be in line with statements from TeliaSonera. It would also be in line with what many other European operators are doing, according to a recent report from BEREC, the Body of European Regulators for Electronic Communications.

But what will the reaction be? When Dutch operator KPN last year announced plans to charge subscribers extra for the use of OTT services, with a focus on WhatsApp, which is huge in the country, it sparked an uproar, which ended with Dutch legislators quickly introducing – and passing – a net neutrality law.

The situation in Spain seems to be very different. Apart from a few disgruntled voices, Spanish subscribers seem to accept Yoigo’s add-on offering.

Why is this? Is it because Yoigo is the fourth operator in what is essentially a three-operator market? Are OTT services and their availability not an important factor in Spain? Or is it because consumers – outside the Netherlands – aren’t paying attention yet?

Or are we seeing the start of a new attitude from consumers, a willingness to pay for OTT VoIP services if the rest of an operator’s offering is attractive?  

What do you think?

AT&T making strategic - and smart - bets on HTML5 and the cloud

You want to know who gets the convergence of mobile, social, the internet and voice?

It’s AT&T.

In recent days, the American giant, the heir to the Ma Bell monopoly, came out with two distinct yet strategically related moves into both HTML5 and the cloud.

With HTML5, AT&T has created a new API platform that will allow developers of web-based apps to include SMS and MMS in the app, take in-app payments charged directly to an AT&T bill, as well as integrate with AT&T’s U-Verse TV. The company is also opening an AppCenter app store on Android phones, so users will have a way to discover HTML5 web apps, says GigaOm.

HTML5 is important for operators, both in their consumer and enterprise offerings, and AT&T has long been frustrated by platform fragmentation. A standards-based web technology would solve that problem and put operators in a better competitive position against companies like Apple, Google, RIM and Facebook that look to own the customers on their respective platform.

HTML5 has been the best alternative to native apps for a good while, but its performance still frustrates developers, and it still lacks that breakout hit to trigger “boom time.” Oh yeah, and everyone thinks HTML5 is hard to monetize.

AT&T can help change both that perception and reality.

At the same time, AT&T made two “ambitious” moves into the cloud by launching CloudArchitect, a cloud infrastructure as a service model aimed at developers and small business, and by being the first US telco to sign on to the OpenStack initiative, an open-source cloud project started by NASA, among others, in 2010.

Providers have been courting developers for years. And here we see an operator trying to grow into the internet, and not locked into one strategy. Where the company thinks it can make money more or less itself – in the cloud – it aims to own it. But in web development, it is opening up to others.

Of course AT&T has its own ambitions on the web.  But instead of limiting itself by only pushing its own things, the company is embracing the creative forces of the Internet to maybe help it discover the next big thing.

It is not either or.  It is about doing both. And this multi-pronged strategy ensures AT&T multiple revenue streams from developers, enterprise clients and end users.  It is good business, and it is necessary business, because the market is moving too fast for anyone to stand still.

This is why VoLTE is so important for operators ...

This is a video of Gabriel Brown, of Heavy Reading, giving an excellent five-minute primer on Voice over LTE (VoLTE), both on its short-term rollout and its long-term potential as the core of future connectivity networks.

One quote that sums up why VoLTE is so important:

Voice is a critical application, with a lot of revenue. People pick up the phone and want to make calls and want it to work. That's why then need it.

Will the revolution in France be "Free"? And will it be about business model or technology?

Frenzied crowds.  Wild gimmicks.  Fans with their own nickname.  Outside of an Apple store, you don’t see this kind of flash and glam often in the telecom world.

But that’s what we’ve seen with the launch of Free Mobile, France’s country’s fourth mobile operator.  Led by tough-talking iconoclastic tech entrepreneur (and convicted felon and part-owner of France’s most prestigious newspaper) Xavier Niel, Free Mobile burst onto the market earlier this month with an offer of “unlimited” calls and texts to 40 countries for just EUR 19.99 a month, plus no contract required.

So, yeah, it’s fun (though maybe not for France Telecom, SFR and Bouygues Telecom) to read the articles because of the crowds, the fan nickname (Freenauts) and Niel’s history of successfully disrupting the French broadband world.  But is this really a long-term threat to the established operators?  Or is it all smoke and mirrors.

The consensus in the telecom press seems to be:  smoke and mirrors.

Morningstar has the most concise analysis (though there were good takes from Ovum, Fitch Ratings and Stanimir Minov in Austria, among others).  And here are the reasons why Morningstar says Free Mobile will not shake up the French telecom market: Free’s prices are below cost; high data usage could overwhelm Free’s network; the established operators will fight back; French consumers like to shop in stores, which Free does not have; and France has a high rate of contract customers, meaning people cannot switch operators easily.

That all makes sense. If you focus on the business model, it seems clear that Free can sign up only a certain – and very low – percentage of the market, and its prices will not be sustainable.

But what about technically, with what Free says is an innovative mix of Wi-Fi, HSPA+ 3G, femtocells and its all-fiber backbone?

This is debatable.  Like with Republic Wireless in the US (see our post on that here), a patchwork service can never match a true mobile network in coverage and quality. But I am intrigued by their focus on Wi-Fi, as is GigaOm.  If you put together Free, Republic Wireless, AT&T with its “hotspots,” plus operator True in Thailand investing in USD 48 million in Wi-Fi networks, well, it’s some kind of Wi-Fi trend.

Is it one we need to be paying closer attention to, even in terms of voice and SMS?