With increasing innovation and rise in new business models, most sectors are in loom of disruption. Mobile Network Operators (MNOs) are among those that are battling against the threats posed by Over-the-Top (OTT) service providers in the voice and messaging services industry.
OTT service providers such as WhatsApp, Skype, LINE, and many more offer voice and messaging services at free of cost through the Internet, thus severely dent the revenue stream for MNOs across the globe. Users across the globe are shifting to the advanced services extended by OTT compared to the voice and SMS services offered by MNOs at a certain cost.
According to Frost & Sullivan’s report titled Developments in Voice and Messaging Services in Asia-Pacific, Forecast to 2023, the proliferation of OTT applications with the increasing Internet penetration rate has resulted in decreasing SMS revenue by 3.7% across Asia-Pacific between 2013 and 2018, which translates to a loss of $7.8 billion for MNOs.
In order to manage the mounting challenges faced by MNOs in Asia-Pacific, the National Broadcasting and Telecommunications Commission (NBTC) partnered with ASEAN Telecommunications Regulators Council (ATRC) to draft an OTT regulatory framework, which results in the proposed tax regime that is expected to govern the OTT service providers and benefit MNOs in the region.
Besides support from various government and agency bodies, MNOs must embrace next-generation communications in order to match their services to OTT as some traditional MNO companies have yet to improve their services since SMS, which is a key turning point behind the success of OTT players.
Adoption of Voice over Long Term Evolution (VoLTE) network and Rich Communication Services (RCS) can be a game changer for MNOs in this matter.
Voice over Long Term Evolution (VoLTE) Network uses Packet-Switched network for voice calls instead of circuit-switched voice network thus offers high quality (HD) voice and video calls for consumers. This service also enhances brand positioning, legacy 2G and 3G network switch-off, and potentially increase demand for MNO core services.
Adoption of VoLTE eliminates the need to have voice on one network and data on another; both voice and data services can be provided via a 4G LTE network and allow MNOs to phase out their legacy voice networks on 2G and 3G. This will reduce the operational cost for MNOs significantly and offer competitive advantages over OTT players.
Rich Communication Services (RCS) architecture is much more extensive compared to SMS due to the services it supports. RCS provides chat, multimedia sharing, voice and video calls, and even supports legacy messaging services. RCS opens up various marketing approaches and allows users to interact with Application-to-Person (A2P) messages. Efforts by Google and GSMA on RCS have resulted in significant progress, thereby accelerating RCS adoption by MNOs.
In sum, the adoption of VoLTE and RCS by MNOs are likely to close the competition gap with OTT players and increase revenue stream. Messaging services are expected to grow at a much faster pace than voice services in APAC, largely due to strong growth in RCS A2P messaging, where industries such as mobile banking, mobile payments, and mobile health services are expected to increase the usage of A2P messaging.
Subarna Poudel is a researcher with Frost & Sullivan. He can be reached at firstname.lastname@example.org