RCS and the battle for the mobile inbox

When OTT providers first started offering calls and messaging for a fraction of the cost of mobile network operators, many telcos feared that one-day they might simply become dumb data pipes.

For many MNOs today that scenario has become a reality.

Robert Gerstmann chief evangelist and co-founder of CLX explains why application to person (A2P) messaging could be just the right tonic.

In countries like Brazil and China, OTT applications are now the primary channels for P2P (person-to-person) communication. WhatsApp penetration continues to grow at a significant rate, for example in Saudi Arabia (73%), Malaysia (68%) and Indonesia (40%).

For some telcos this is good news. The surge in the use of WhatsApp, Facebook Messenger and WeChat means there’s more money to be made from servicing our insatiable appetites for data. However, selling bits and bytes is ultimately a low margin, low growth business, and being a data pipe doesn’t really put a telco in a strong position.

Telcos could really be at the center of the mobile ecosystem, the masters of all they survey. 

Telcos could really be at the center of the mobile ecosystem, the masters of all they survey. This means generating revenue off data from increased OTT use, from consumer messaging, and from A2P (application-to-person) messaging and its myriad of potential use cases.

However, in reality telcos are losing the grip they once had in the marketplace. Many are simply sleep-walking into a dumb-pipe future and need to wake-up if they want to take a meaningful part of the market.

A2P SMS is on the rise

Voice revenues are near extinction. P2P SMS traffic is heading off a cliff’s edge, and the long-term future of the basic text message format looks uncertain at best. Right now, A2P SMS revenues are buoyant and even set to increase significantly, but enterprises will one day start to question the efficacy of SMS compared to feature-rich OTT messaging services.

Therefore, I believe the only thing standing in the way of telcos becoming dumb pipes is RCS (Rich Communication Services), otherwise known as the next generation of SMS. Telcos must choose to either support RCS and make it work, or accept their fate.

Spearheaded by Google, RCS has the potential to completely replace SMS and help MNOs to possibly regain lost ground in P2P messaging, but even more importantly for their bottom lines, continue to be part of the A2P messaging eco-system. The question is – are they ready to take this opportunity?

The battle for the mobile inbox

To control the mobile ecosystem you must have traffic. But with Facebook Messenger for Business gaining traction with brands and enterprises, and WhatsApp recently entering the A2P market, the battle for control of the mobile inbox has never been more fiercely contested.

With A2P SMS only growing in popularity among businesses, the mobile inbox is still an important destination for everything from appointment reminders, to delivery notifications and fraud alerts, but that status is under threat.

If OTT messaging services were to gain significant share of the A2P messaging market, the world consumers know today where most A2P messages end up in the same mobile inbox would be a thing of the past.

In many ways RCS represents a chance for telcos to control the mobile inbox and ensure A2P messaging continues to mainly be sent via an open ecosystem…

In many ways RCS represents a chance for telcos to control the mobile inbox and ensure A2P messaging continues to mainly be sent via an open ecosystem as opposed to the OTTs proprietary approach, and there are encouraging signs that suggest RCS will deliver.

According to Juniper Research, 90% of all RCS traffic is expected to be driven by brands and businesses by 2022, netting operators an estimated $9 billion. However, the key to telcos unlocking that revenue lies in the appeal of RCS to both businesses and consumers – which is why the pricing model will be critical.

The price must be right

Right now nobody in the mobile industry has a clear idea of how the pricing for RCS is going to look. As a basis, it looks likely that there will be a per transaction model supplemented with a per session model to support more interactive use cases. These costs will be charged by the telcos and carried by the business wanting to communicate with consumers.

With OTT services like WhatsApp, MNOs typically make money on the data from when the message is sent, and when that message is received.

However, it doesn’t seem fair that consumers should have to pay if a brand decides to send you a rich media message like a video advert. Ideally, the businesses should also pay for the recipient’s data so that the recipient only pays when they respond.

If operators follow the WhatsApp pricing model for rich-media for RCS, it could lead to problems. Because RCS has the capacity to deliver a whole payload of information in one message (think SMS plus images, audio, videos and more), consumers could resent having to cover the data costs just to hear from their bank or retailer.

For now, RCS only works on Android, whereas services like WhatsApp already work seamlessly across iOS and Android devices. Until Apple gets onboard with RCS, which is not guaranteed, installations of Android Messages hit a level where RCS offers brands and businesses enough consumer reach, and telco interoperability is in place so that businesses can run the same RCS service across multiple telcos, telcos will have to get creative with pricing.

We know that brands and businesses are more than ready for an SMS upgrade, while consumers already prefer richer, more interactive forms of personalized messaging.

The long-term future of MNOs in the A2P messaging market depends on ensuring that RCS takes the baton from SMS, winning the battle of the mobile inbox and continuing to deliver rich messaging for many years to come.


Robert Gerstmann Chief Evangelist and Co-Founder of CLX

 

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