OTT apps launch new attack on telecom sector

Wednesday 29 April 2015 | 16:35 CET | Market Commentary
The communications market is changing. The days of just calls and SMS are over, and new forms of communication are emerging, such as social networking (Facebook), micro-blogging (Twitter) and photo/video sharing (Instagram, Vine, Snapchat). The new platforms are also adding VoIP and chat functions, as the big players expand their presence and stage a new attack on the telecom sector. 
  • Google launched a MVNO, Google Fi. What's new is its simple tariffs (USD 20 per month for unlimited voice and SMS, USD 10 per GB, no roaming costs) and seamless switching between Wi-Fi and mobile (Sprint and T-Mobile US). Only Google's own Nexus 6 phone supports this for the moment, but it can connect all the user's other devices running Hangouts (VoIP).
  • Facebook added a new app to its ecosystem: Hello. This is a call management app. It also added video calls to Facebook Messenger.
  • WhatsApp has added VoIP for free calls between users of its app. In the first week, voice already accounted for 5 percent of the data traffic over WhatsApp. It will not be integrated with Facebook Messenger, but there will be interoperability between the VoIP functions.
  • Microsoft is rolling out Skype to the business market (Skype for Business), replacing Lync. It will also be integrated in Windows 10.
  • Twilio started a trial of Twilio Video (video calls), based on WebRTC technology. No app is needed, only a browser. The technology can be incorporated in apps and web services. 

The big question is how all this will impact traditional communication services, namely voice (fixed and mobile) and SMS. SMS is already in decline, while voice is still holding ground. Skype has already taken a good share of the international calls market in recent years. FaceTime (Apple) is doing its best to break open the market for video calling. In addition, there are literally hundreds of other VoIP and chat apps. Operators try to compete with free calls or unlimited calls for a flat (low) fee. But will traditional voice and SMS be able to withstand this new attack from the OTT sector?

The traditional services have a few advantages:

  • They're 'always on', even if no data connection is available. No app is needed. 
  • The quality is more reliable and better than VoIP. LTE deployment in low spectrum bands should help improve indoor coverage.
  • Costs are minimal. VoIP leads to data costs, unless Wi-Fi is available. WhatsApp Voice is estimated to use around 0.5 MB per minute. 

Nevertheless, the OTT apps have built a considerable user base, especially the apps controlled by Facebook. And this despite the inherent advantages of traditional calls and SMS. We conclude that users like the expanded functionality and the low-to-no costs of apps such as WhatsApp. The traditional service providers will need to come up with a new response to face the latest round of competing OTT services. 

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