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Preparing CSPs for the SMS Decline

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Timo AhomakiBy Timo Ahomäki

Time Magazine recently reported that SMS messaging in the U.S. is on the decline, with the average American sending 678 texts per month in the third quarter of 2012, down from a peak of 696 texts per month over the summer. For the past several years, text messaging has been growing at a steady pace in the U.S. And now, just as the technology turns 20 years old, people are changing the way they communicate through their mobile devices which has meant that operators have had to look at not only how, when, where and which services that they are using their smartphone for, but also look at ways to collaborate with the companies offering these services and developing packages to fit into their customer’s lifestyle.

This decline in text messaging has been partially attributed to the rise of other social services; Facebook, for instance, lets users send messages to each other in both email and live chat formats, all via its cohesive Web, smartphone and tablet applications, thus finally creating a viable alternative to one of the stickiest modes of communication available via mobile. At the same time, operator-driven alternatives such as rich communication systems seem to lack traction in the marketplace, potentially leaving CSPs with a losing bet in the messaging space.

Coming at a time when regulators in the U.K., Sweden and Finland have been talking about enforcing measures that allow customers to exit contracts early, the need for CSPs to create compelling service offerings has never been clearer. And while partnering might seem like an obvious route to success, in a marketplace which is increasingly dominated by rapidly innovating internet companies, collaboration between external third parties and operators has had a tumultuous history in the past with success and failure abundant in equal measure.

Where this collaboration has worked particularly well to date is in areas requiring a degree of vertical integration such as mobile payments. For example, following on from the success of mobile payments in many developing economies, last year saw the collaboration of Everything Everywhere in the U.K. with MasterCard to offer its mobile wallet services exclusively to Orange and T-Mobile customers. Similarly, the traditionally vertically integrated movie industry seems to have found a perfect distribution partner in the CSPs which crave compelling content to complete their broadband offerings.

In the area of messaging, however, such success stories seem to be few and far between. The current lack of vertical integration across these ecosystems means there is no natural role for the CSP to play as it stands. To defend their share of the messaging revenue, the CSPs therefore need to bring something genuinely new to the table. This could come in the form of the customer intimacy that has traditionally been a cornerstone of CSP operation. Not only do CSPs sit on a wealth of customer data, but they also have actual humans responding to customer service calls – something few Internet players can claim.

Leveraging this customer insight into a competitive advantage for both themselves and their partners could well prove to be one of the key competitive advantages of the future CSP. This has been true for the vertically integrated ecosystems of content and banking services, but not so much for the less obvious areas of messaging and person-to-person communication. After all, customer insight is ultimately what Facebook is all about as evidenced by the recently launched search functionality. 

The surge in the number of smartphones across the world offers a wealth of opportunities for CSPs in a number of developing markets where mobile Internet access may well be the first online experience purchased by customers. This means that operators need to fully leverage the opportunity to enhance mobile messaging and deliver a service not only for traditional text but for emerging applications, and social networks to maintain relevancy in an increasingly complex marketplace. Though voice calls and SMS will remain firmly in the consumer’s hand for some time, it has never been more pressing for the operator to cast the net wider at new models that let CSPs evolve into a "lifestyle provider."

Timo Ahomäki is CTO, Tecnotree Corporation.

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