Tough times are ahead for (mobile) telecom operators. Yes, they knew it was coming, but the speed at which customers are embracing mobile VoIP and chat still surprised them. The measures Dutch telco KPN is forced to take should be a shot across the bow for operators across the globe. The METISfiles predicts a painful transition for many from telco to connecto. Why? Simple: the business model and internal costs of many operators reflect a telco business model, yet they need to more closely match the connectco model. (See our analysis on the six-sided telco model here).
The uptake of mobile VoIP and chat is not coming out of the blue. The main drivers are the fast growing smartphone and mobile internet adoption, the widespread availability of 3G infrastructure, the availability of all-you-can eat mobile broadband bundles, and the high price of mobile voice and SMS. The impact of an increased uptake is potentially devastating. Operators run a very real risk that voice and SMS revenues will dwindle.
So what are the options available for an effective response? Doing nothing is out of the question, as mobile VoIP and chat usage will continue to grow and erode traditional voice and SMS revenue. Blocking VoIP traffic will cause customers to churn to challengers that offer VoIP and chat and will be an issue with EU net neutrality laws. There are a couple of short term solutions, however, that might help operators smooth the transition from telco to connectco.
Operators could lower voice and SMS pricing. However, customers might still churn – albeit at a lower churn rate – to competitors that proactively offer mobile VoIP and chat.
Operators could price VoIP traffic. However, net neutrality will still be an issue here. One of the more effective measures could be bundling voice, SMS, and Internet in one bundle, increasing the possibility that customers will need to buy out-of-bundle usage (similar to the T-Mobile Relax Sim Only bundles).
Operators could create their own VoIP and chat versions for their own customers (like T-Mobile and bobsled). This is a more involved solution and a risky one. The success rate of operators in the world of chat and social networking is limited to say the least (see our analysis of how social networking and communications are merging into social communications here).
But those three options are interim solutions at best. Ultimately, when 4G comes around (within 3-4 years), operators will have to have finished their transition from telco to connectcos. The more innovative operators might even have become webcos and servcos, offering unbundled services to customers and the channel. In the mean time, the transition period is bound to be disruptive and painful.