Monday, 11 February 2013

Year of The Snake Predictions for The Telecom Market in 2013

We say goodbye to the Year of the Dragon and enter into the Year of the Snake, which is being celebrated all across Asia this week.

This is the only time of the year that Asia takes a break, so I took some time to reflect on the Telecom market and recent trends. Here are my predictions, in no particular order, on the trends that I see emerging and my views on what to expect in this New Year of the Black Snake 2013 for the Telecom market.

For those who haven’t noticed, there is a war currently going on. It is a soft war of course, but it is global and it affects all of us, every single one of the several billions of mobile subscribers and Internet users out there. The various telecom players are fighting, day in and day out to create, innovate, adapt, secure, defend or expand, in order to keep their edge in what is one of the fastest paced industries.
And this war is actually fueled by you and me, the consumers, who have become more savvy, demand more, and have also become more conscious about what we spend and how we spend it.  
2013 will be an interesting battlefield in the areas of Voice, Messaging and Data and the saying “Keep your friends close and your enemies closer” seems very appropriate this year as we start to see some interesting alliances and shifts emerging, which will shape how mobile users will interact and communicate for years to come.

My Voice is gone…

Mobile network operators have been losing billions in revenues on Voice and Messaging. This significant decline in revenues is due to many factors, but let’s be fair…operators have also been cashing in very heavily and for many previous years, so it's time for cash to be changing hands, as both consumers and devices are becoming smarter, and new players join the game.

One of the factors that impacted seriously on the operators’ revenues was the arrival of alternatives ways for mobile subscribers to communicate with their friends and families either for free or for cheap.

The adoption of Social Media and OTT (Over The Top) services such as WhatsApp, weChat, Line, Skype, Rebtel, Yelo, Viber and others is on the rise and is directly linked to the growth of smartphones and tablets, which are shaping a favorable landscape for such new services and mobile VoIP (voice over internet protocol) in general.

"VoIP" used to be a forbidden word in the office of many giant telecom companies for a long time. It was the enemy, stealing money and customers from them. 

Operators have now realized that they had to live alongside VoIP, because VoIP is here to stay. They have been forced to diversify in other areas by finding new sources of revenues in mobile payments, cloud services, location-based services and many more.

Some operators are even launching their own VoIP services now. The latest to jump on the VoIP bandwagon was Etisalat, who launched Five, a VoIP calling card, last month.

I see mobile VoIP services continuing to rise and shine in 2013, as consumers are controlling their spending more, making VoIP an attractive alternative to the standard operator’s offering. 

But also because consumers have become more educated to mobile technology and have globalized their communication habits.

Roaming and international calls

Roaming and international calls are costly and many consumers are being fed up with feeling ripped off every time they make a phone call overseas or just turn on their phone when travelling abroad.

Everyone takes their mobile phone with them on holiday nowadays. In fact, mobile phones have become such an important part of our lives, both personal and professional, that it is just unthinkable to go anywhere without it, and it seems that a week holiday without phone would just be too stressful.

As defined by the GSMA, roaming is the ability of customers to use their mobile phones or other mobile devices outside the geographical coverage area provided by their normal network operator. In other words, when customers travel abroad and use their phones whilst on a foreign (“visited”) network, this is known as international roaming.

In such international roaming situations, consumers are building up charges very quickly every time they make calls, send SMS or connect to the internet from their device.

The list of charges is very long, but to give you a taste of what may end up on your bill when you are roaming, here are some of the charges involved for being on a “visited” network:

- Signalling network fees
- costs of handling and routing the roaming SMS back to the home network
- costs for sending the SMS to the receiver’s network
- Wholesale charge for using your phone on the visited network
- Cost for the international transit of the data
- Cost for connecting to the internet from the home network
- Data clearing house fees
- Commercial costs
- IT costs
- Prepay checks
- Retail costs and taxes on the home network

All of these charges of course are ending up on your phone bill. No wonder that we regularly see some horror stories in the News with phone bills high enough to buy a car or even a house.

No wonder also, that if the operators are unable (or unwilling) to satisfy the consumer’s demand for cheaper international calls and lower roaming charges, that other service providers will enter the market and give consumers what they want.

Consumer now have many alternatives and a wide choices of Apps and services that allow them to call worldwide for just a few cents and even allow them to call whilst roaming, without even touching their phone bill. Some even give free calls, texting or chat between users of the same App.

It seems that the market response to that problem was once again in the form of VoIP, so it makes me wonder if mobile VoIP is not the leading market trend to follow in 2013. Just a thought!

In my view, mobile VoIP has a long and prosperous future for as long as the operators’ charges remain so high. And after all, mobile VoiP will soon become a billion dollar market so it is logical that mobile VoIP players will want to continue playing in 2013 and for many years to come, leveraging on all available technologies to make the international calling experience better and cheaper for the consumers.

Operators need to adapt to this threat to their revenues, but they now have to play along nicely, as their early-days old-school tactics of retaining packets of data to "sabotage" the quality of calls and make the VoIP providers look bad are no longer acceptable. Many operators begin to offer special deals for international callers and launch special Apps specifically designed for travelers. So I wouldn't be surprised if 2013 saw some alliances emerge between operators and mobile VoIP providers.

Data…thou shalt be King

Data is quickly becoming king as devices become more capable, and mobile subscribers use their phones more in order to stay informed, entertain themselves, work, communicate and create. 

We are now all heavy consumers of data and whoever will be able to control the data, will rule and bear a chance to win, if not the war, a very important battle.

As the faster successor to 3G, 4G makes its debut though, I have mixed feelings. I fear that 4G networks may actually not benefit the consumer as much as they could because many countries are rolling out monetization strategies that phase out unlimited data plans.

So if the operators use 4G as an opportunity to monetize their data plans and impose too many restrictions and limitations to the data usage, I predict that they will drive consumers away to cheaper or even free alternatives such as WiFi or other data services.

WiFi is booming and free WiFi, in particular, is fast growing, giving hungry consumers easy access to the Internet on the go and satisfy they need for heavy data consumption, from emails to photos, videos, and so on.

There are some barriers to using WiFi of course, from security holes to tedious registration processes to simply check an email, but overall WiFi seems to have more Pros than Cons and consumers are welcoming it.

Devices also adopted WiFi in more or less successful ways, so that anyone with a smartphone can nowadays connect via WiFi in a growing network of hotspots, either free or paying, that mushrooms across every city in the world.

I think that we are still early in the adoption of alternative data sources, but once it matures, and this may be sooner than we think, these alternative data services will put another very serious dent into the operator’s revenues.

Blackberry understood that if you can’t beat them, join them

The smartphone battle has been played in recent years between Google's Android and Apple's iOS. each of them battling it out aggressively to take the lead.

Samsung is continuing its growth, and begins to make Apple wonder whether it is still the coolest kid on the block.

Apple is looking at numbers and starts to understand that China, with its large scale, may be the key ally needed to win the war against Samsung and stay on top of the game.

So there is a lot of movement on the smartphone battlefield, but where is Blackberry in all that?
Did Blackberry become a mere spectator?

It seems that the desire to develop Apps for Blackberry is fading out, as the focus is clearly on Android and iOS. But the demand for Apps by consumers is far from fading out. So how can RIM get out of this situation? 

Well, as I said earlier, 2013 is the year of “keeping your enemies closer” so Blackberry chose a smart way out by adopting third party software allowing Android Apps to be repackaged for the new BlackBerry 10, and leveraging on the consumers and developers’ growing appetite for Apps and content.

This is a smart move for RIM to remain a serious player in the smartphone game.

While Blackberry 10 is not adopting the Android OS as such, it still allows Android apps to work on the BB devices and therefore gives the BB users the Android apps that they've always wanted, but without letting them leave Blackberry for another Android device.

RIM made a bold but smart move which I think will allow them to keep their traditionally faithful BB users, who were beginning to desperately need a good reason to stay. It will be interesting to see how BlackBerry performs in 2013. Early figures show that the didn't make a false start at all, far from it, so let's see if they manage to keep up for the whole race.

Year of The Snake…Fire under Water!

Making long-term forecast in the telecom industry is a lost battle and everyone who has ever tried to guess volumes or numbers too far ahead, was wrong. For this reason, I kept my predictions very short term, as the industry is simply too fast-paced, dynamic and full of surprises.

Consumers are more unpredictable than before. Anybody, who says that he foresaw a Korean pop song breaking the billion views barrier on YouTube, is a liar.

Consumers love and hate much quicker than before, and many people, me included, are still trying to figure out what makes them tick.

Steve Job’s best legacy to us was not only the iPhone or the iPad, but the concept of Apps and App Stores, which have completely revolutionized the way we do everything on our mobile. And that revolution means that it is now possible to build a viable business with just a simple App.

Developers have become more adventurous and creative too, which makes the market highly unpredictable and a simple game such as Temple Run can come out of the blue and drive tens of millions of users crazy and addicted in a matter of weeks.

So in my prediction, the new Year of the Snake is a year of fire under water, a year of unpredictability. I think that 2013 will have more surprises coming out of both established players and new startups and developers, who have now all the tools available to shake the telecom market, which is in fact asking for it too.

Will the war end in 2013. No! App-solutely not! (see what I did there? :) )

Kung Hei Fat Choi!