The Cash Cow is Dying: Mobile Networks Face Bleak Future

May 7, 2013 by  
Filed under Features & Editorials

4G will revolutionise tech, but rip apart mobile networks’ businesses…

I say I say I say, what’s the difference between a telecoms company and an ISP…? Nothing!

Technology jokes may not be the best, but in five to ten years everyone will understand this punchline. How we use our mobile phones is rapidly changing and in order to keep up mobile networks are being forced to spend billions shooting themselves in the foot.

The latest evidence for this comes from research company Informa, which revealed this week that use of instant messaging apps has overtaken SMS for the first time. According to its data nearly 19 billion messages were sent per day on chat apps in 2012, compared with 17.6bn SMS.

Interestingly this research is also half baked. Informa only took WhatsApp, BlackBerry Messenger, Viber, Nimbuzz, Apple iMessage and KakaoTalk into account leaving out arguably the two biggest: Facebook Messenger and China’s dominant TenCent service.

So SMS is losing, but at over 20 years old it should be losing. What’s more interesting is the bigger picture. People don’t prefer apps over SMS, they prefer data over everything else.


Megabytes not mega minutes
Data is the revolution mobile networks are forced to inflict upon themselves. Their heyday was the 2G era when the number of cross network minutes and SMS was the defining element of your contract. What they didn’t see was the danger in 3G.

In spending an astonishing £22bn on 3G licenses in 2000 UK telcos, like telcos around the world, thought they were opening themselves up to a lucrative new world of restricted content portals, MMS messaging and video calls. In reality 3G bred the smartphone, which opened up the web and bred the “app store”.

Mobile networks tried to fight back. Network-specific app stores were pre-installed on handsets to try and grab a slice of their revenue and Orange and O2 famously vetoed the Nokia N97 because it dared to integrate Skype into the main dialler.

Even now truly unlimited data contracts are resisted by most networks for fear the higher quality, geography-free nature of VoIP will take off like messaging apps. Whatever their self serving attempts, it seems inevitable.

Pandora’s Box is open and it cannot be closed. Understanding their fate, mobile networks bid just £2.34bn for 4G licences this year knowing it will slash their last major revenue stream and premiums for 4G contracts will evaporate as competition increases. They fight to chop off their own heads.

Take up and roaming
All of which has led to something of a celebration. Mobile networks are about as popular as estate agents, and even Neelie Kroes, vice president of the European Commission, couldn’t resist a dig on hearing Informa’s research: “The cash cow is dying. Time for telcos to wake up & smell the data coffee.”

The trouble is mobile networks know they are dying, just as we all know we are theoretically dying with each breath… This is a sample, to read about remaining the barriers to full data conversion and the potential diversification options for telcos click here to read my full editorial @ TrustedReviews

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