Will IMS Fail? In Other Words, Does OTT Win?

If you have been in the telecom business long enough, you have seen a few different "next generation networks" come and go with somewhat mixed market success. 


ISDN was, for some, the first such network. Then there was B-ISDN, known better as "asynchronous transfer mode." 


Then there is IP Multimedia Subsystem, whose ultimate success seems yet uncertain, if its fundamental architecture and goals certainly will be a foundation of future networks. 


And now there is Rich Communications Suite, which builds on IMS. Observers might further note that picture messaging, essentially a broadband version of text messaging, likewise has failed to garner much success.


Pessimists might point out that, so far, none of the would-be "next generation networks" has been a raging success.

To be sure, the functions often are accomplished, but sometimes in other ways. Who would have guessed that a "legacy" protocol such as IP would become, as much as anything else, the "next generation network," in large part.

Optimists keep trying, as standards, whether created by the market, or by standards bodies, are crucial for the global telecom business.

Tyntec is the company Thorsten Trapp formed to provide products based on the mobile industry’s Signalling Connection Control Part protocol used by GSM networks.

Apparently, Tyntec's software is what allows Pinger to provide over the top text messaging services. And Trapp apparently doesn't have much confidence that some of the newer proposed architectures are going to succeed.

Specifically, he is doubtful that IMS or RCS will succeed. The issue is why he believes that. Without widespread handset support it’s not going to become ubiquitous, and even if it does, users will be hit by roaming costs and interoperability issues.

But OTT players merely need an IP connection for their apps.Will RCS Fail? It's a challenging notion, but not historically unprecedented.

There will be standards. The only issue is which standards, and how they eventually take hold. In recent decades it has been "the market" more than the standards bodies that have succeeded.

Vodafone, Visa Form Mobile Payment Partnership

Vodafone Group is launching a mobile payments venture with Visa, using near field communications and Visa prepaid accounts to let customers pay for goods and services with their mobile phones.


Vodafone, the world's largest telecom company by revenue, said the companies will work together to develop Vodafone-branded services to the U.K. company's base of 398 million customers in more than 30 countries. 


These services will be launched later this year in Germany, the Netherlands, Spain, Turkey and the U.K., with rollouts elsewhere in Vodafone's global portfolio to follow.



NFC-enabled phones currently on the market include Samsung Electronics Co. Ltd.'s (005930.SE) Galaxy S II and Nokia Corp.'s (NOK) 700 model. Vodafone, Visa Form Mobile Payment Partnership

Mobile Banking Grows, Fiserv Finds

As other studies also have shown, consumer use of mobile banking, and willingness to use mobile banking services, continue to grow, a new study sponsored by Fiserv has found.

When asked if they had used a mobile banking service in the past month, one out of four online households stated they had, and those that use other digital services such as online banking, bill pay or e-bills, were even more likely to have used a mobile banking service.

Some 30 percent of both online banking and bill pay users had used mobile banking while 44 percent of e-bill recipients had used the service.

The majority (60 percent) of mobile bankers used the mobile browser on their phone to access their mobile banking service; 41 percent used a downloadable application (app); and 32 percent accessed the service through text messaging.

According to the survey, 40 percent of mobile banking users have paid a bill using their mobile phone as compared to 28 percent in 2010. Some 32 percent used their mobile phone to transfer money versus 25 percent in 2010.

As some other surveys have found, many users trust their financial institutions more than other entities. Some 40 percent of mobile phone users said they would trust their bank or credit union to handle mobile payments, followed by PayPal at 35 percent and Visa at 33 percent.

Nearly one in five consumers currently owns a tablet and this figure is expected to increase rapidly, which means tablets soon will be a bigger factor in mobile banking and transactions,  the study found.

According to the survey, 19 percent of online households currently own a tablet and another 20 percent expect to purchase a tablet, which means almost 40 percent of online households could own a tablet by mid 2012. In addition, multiple tablet households are emerging, with 37 percent of households that already own a tablet stating that they plan to buy another.

According to the survey, both current and future tablet owners are interested in using their tablet to access financial services. About 44  percent of existing tablet owners have used their tablet to access online banking, already.

In addition, 45 percent of existing tablet owners and future owners are interested in using their tablet for banking.

When Will Mobile Service Providers Get into Mobile Advertising?

By the end of 2011, eMarketer estimated late in 2011, 38 percent of US mobile users would have a smart phone and 41 percent  will use the mobile Internet at least once each month. Both of those trends are a necessary, but not sufficient foundation for mobile advertising, which is a fast-growing but highly fragmented and still small portion of overall ad spending and even of online ad spending.

That fragmentation explains why, even though many tier-one mobile service providers have undertaken internal reviews of growth opportunities, and have identified mobile advertising as among the handful of new businesses that could generate a significant new revenue stream for a tier one carrier, few have made significant moves yet.

The issue is simply that it is hard to "move the revenue needle" for any business already booking annual revenues in the scores of billions. When that is the case, a “small revenue opportunity” of scores of millions does not materially change business results. That necessarily means large tier-one service providers must look for new revenue opportunities that have the ability to produce $1 billion or more each year, for every major contestant.

Mobile advertising, though a logical “line extension” strategy for mobile service providers, does not yet make sense for a tier-one service provider. Even as mobile advertising hits the billion dollar mark, it remains below that threshold, at least for a tier-one mobile service provider.

That will change someday, but not really soon. A potential acquirer will want to see $100 million in current revenue, with a growth pattern suggesting $1 billion can be reached within five years, ideally.

eMarketer, for example, estimates that advertisers will spend nearly $1.23 billion on mobile advertising this year in the United States, up from $743 million last year and set to reach almost $4.4 billion by 2015.

This includes mobile display ad spending  (such as banners, rich media and video), search and messaging-based advertising, and covers ads viewed on both mobile phones and tablets.

This year, messaging-based formats still take the largest piece of the pie, accounting for $442.6 million in spending. But in 2012, banners and rich media will be even with search, each getting 33% of spending, or $594.8 million. That will put them ahead of messaging, which will fall to just 28.2% of all mobile ad spending next year. By 2015, banners and rich media and search will dominate further, and messaging will have shrunk to 14.4 percent of the total—though still growing in terms of dollars.

Video is the fastest-growing mobile ad format, but from the smallest base. Mobile video ad spending, at $57.6 million this year, will grow at a compound annual rate of 69% between 2010 and 2015 to reach $395.6 million.

Mobile advertising is growing really fast, at a 75-percent rate between 2009 and 2010, followed by socal media with a 32-percent growth rate over the same period, but from a very-low base. But television advertising continues to claim the greatest share of advertising spending, and had 11-percent growth between 2009 and 2010.

Who Wins Wallet Wars?

The existence of mobile wallet services operated by Google, PayPal and Isis raises an obvious question: which contestants will “win” the battle to become the dominant or leading wallet services? In principle, one might argue that over-the-top application providers, mobile service providers, clearinghouse networks such as Visa or MasterCard, banks or other payment specialists could emerge as the leading providers of such services.

Researchers at ABI Research say it is the likes of Google and Apple that ultimately will lead the market, though mobile service providers are highly likely to claim the most share initially.

While mobile service providers will havethe majority of NFC-based mobile wallet users early on, their market share will erode between 2012 and 2016 as Google and Apple assume greater share.

“By the end of 2012, Google will prove that Google Wallet is a hit with consumers,” says Mark Beccue, ABI Research senior analyst. “By 2014, we will see Google Wallets supported alongside competing MNO offerings globally.”

Mobile service providers might have 75 percent mobile wallet share in 2012, shrinking to 63 percent in 2016.  Over the top providers will win wallet war

Google Wallet also will succeed in markets where mobile service providers prefer not to spend capital to develop and support mobile wallet infrastructure. In such cases, application providers such as Google, Apple and others will have an advantage.

Though Apple is not yet in the market, ABI Research believes Apple will enter the market. “Apple will launch a mobile wallet product in 2012,” Beccue argues.

ABI Research also predicts that near field communications will support 594 million users in 2016.

That is not to say banks, payment providers or merchants will fail to attempt their own offerings. Starbucks, for example, operates one of the most-successful mobile wallet and payment programs in 2011.

In most cases, such efforts will have suffered in the face of successful programs offered by the likes of Google, Apple and the mobile service providers, ABI Research believes. Who wins wallet war?

Apple has yet to launch a mobile payment service, though it is widely believed from patents and whispers in the corners of the industry that the company will equip its iPhones with payment-enabling NFC sensors and software in 2012.

As with Google and its carrier partners, AT&T and Verizon will allow Apple to offer its mobile wallet to consumers who have iPhones, regardless of whether or not the carrier has a competing mobile wallet, Beccue noted.

Still, most observers believe PayPal says 2016 will be the year when some industry executives believe U.K. shoppers will be able to use their mobile phones to shop, instead of using cash, checks or credit and debit cards.

PayPal’s conclusions are based on a Forrester Consulting survey of 10 senior executives from major U.K. retailers and other businesses.

Some 49 percent of mobile buyers surveyed by Forrester Consulting use their mobile phones to purchase products at least once every three months.

“By 2016, you’ll be able to leave your wallet at home and use your mobile as the 21st century digital wallet,” says Carl Scheible, Managing Director of PayPal UK.

“We’re not saying cash will disappear entirely, but we’ll increasingly use our phones and other devices rather than our wallets to pay in-store as well as online,” argues Scheible. 2016 key for U.K. mobile payments

Some might even argue  that mobile wallet functions will have more substantial impact on the retail shopping experience, however. “Payment” using a mobile device might be the least-important new reason people use new mobile commerce applications.

In fact, some might argue, consumers will be using mobile payment apps because the value of the mobile wallet offers clear value.

“PayPal’s vision is a one-stop shop for retailers to engage their customers directly during every part of the shopping lifecycle, generating demand from consumers through location-based offers, making payments accessible from any device, not just from the mobile phone, and offering more flexibility to customers even after they’ve checked out,” Scheible says.

“As well as paying for goods without having to queue, the report reveals shoppers can look forward to being able to carry digital loyalty cards, promotional offers and receipts on their phones – keeping everything in one place creating a virtual shopping hub,” PayPal says.

Isis Signs JPMorgan Chase, Capital One, Barclaycard

Isis, the mobile wallet venture owned by AT&T, Verizon Wireless and T-Mobile USA, says it has gotten deals with JPMorgan Chase, Capital One and Barclaycard that would allow the bank customers to purchase goods by making payments using Isis-capable mobile phones. Isis Signs Three Banks


The deal means that Chase, Capital One and Barclaycard credit, debit and prepaid cards can be placed into the Isis Mobile Wallet. Starting in mid-2012, consumers then will be able to shop at participating merchants in Salt Lake City and Austin, Texas, where Isis is running trials. Isis deal

Device Subsidies Do Matter

A recurrent complaint in some quarters is that mobile phone subsidies, tied to service contracts that recoup the cost of the subsidies, inhibits consumer freedom to change service providers, and there is some logic to the thinking.


But it also is true that without such device subsidies, consumer adoption of the latest devices, and therefore the pace of innovation in the mobile apps space, would be less. 


One clear example are buy rates for Android and Apple iPhone devices in countries where users generally buy subsidized devices, compared to markets where users generally pay the full retail price of handsets. 


As this chart from the Wall Street Journal illustrates, subsidies have a big and positive impact on consumer willingness to buy and use either Android smart phones or Apple iPhone devices.