App stores spark an evolution
The current, operator-driven businessmodel is based on a tightly integrated messaging system in which the operator controls everything - billing, transport, service management, reliability and security. But the advent of the Apple Store is making that model obsolete. Apple passed the two-billion download mark in September 2009, and more than 100,000 applications are now available in the App Store. Traditional operators are having a difficult time keeping pace with that speed of development. And Apple isn’t the only threat; instant messaging (IM) providers like Google, Microsoft and Yahoo currently have a majority stake in the mobile IM market.
This trend is significant because it not only increases data usage in operators’ networks but also jeopardizes the MNO’s business model. Subscribers can now bypass operators and download messaging applications from third parties – in many cases for free. Operators face the real threat of having their mobile networks reduced to bit pipes for off-deck applications, diminishing their role and seriously impacting revenues.
As a result, traditional providers are being forced to explore new business models to shore up their market position and protect revenues. Many operators are leveraging their access to subscriber data to create advertisement-driven messaging. Other operators are evaluating a revenue-sharing model in which they “piggyback” on popular services by opening their networks to third parties and helping them deliver and bill for their services. Another alternative is next-generation closed messaging, which like its SMS and MMS counterparts, is controlled by the MNO. Even when competing against free, third-party messaging services, operators have qualities that play in their favor like security and carrier-grade, five 9’s reliability and availability.
Given the competitive nature of the industry and the likelihood that competition will continue to increase, all three models likely will have a part to play in the new world of messaging. Some operators may focus on one model; others may opt for a combination of several models.
Meanwhile, as data traffic surges, MNOs are starting to deploy all IP networks such as LTE or Wimax. This shift to IP is more than a measure to accommodate increasing traffic loads; it’s also an economic necessity. Operators have to reduce data transport costs to remain competitive. Traditional providers also view IP as hedge against becoming a transport pipe for third-party apps since new, IP-based protocols open the door to advanced IP-based messaging services.