Why Telecom is losing revenue from Messenger Applications with Voice Calling

It is widely known that telecoms companies are losing revenue to messenger applications, and have been for years. Understanding why this is the case is easy – it is cost. After all, for a consumer, the choice is simple:

  • Pay the telecoms company to send a message or make a voice call; or,
  • Pay nothing and do it over Wi-Fi

Consumers are able to do this because of OTT services (over the top services). These are applications and platforms that allow users to communicate over the internet, without needing a subscription with a telecoms provider. Messenger applications are among the most widely used.

OTT services are also a factor in other industries, such as the entertainment industry.

Long-Predicted Downfall

It is not surprising that so many have made the switch to OTT services like messenger apps, and continue to do so. In fact, this loss of revenue has long been predicted. Back in 2012 when OTT services were still gaining traction, industry analysts anticipated that telecoms providers would be counting losses in the hundreds of billions. They were right.

Even further back in 2006, officials in California deregulated telephone landline prices because they believed there was enough competition in the market from emerging technologies, including voice calling over the internet.

Telecoms providers are still strong, and they continue to develop their networks. An example is the introduction of 5G, the next generation of mobile phone technology. Many experts now believe, however, that Wi-Fi is 5G’s main competitor, i.e. not landlines or other mobile options such as 4G.

It Isn’t Just Voice

It isn’t just voice calling either. Telecoms companies are also losing revenue on messaging services and have been for some time. For example, Americans sent 1.9 trillion texts in 2015 compared to 2.3 trillion in 2011.

Does that mean they aren’t sending messages? Just look at the rise of messaging services for your answer to that question. Users still send messages – they just use free over Wi-Fi services to do it instead of the paid-for services offered by telecoms companies

What’s Next for Telecoms Companies

Telecoms companies have dealt with this changing landscape in different ways. Some have tried to compete by creating their own messaging platforms, while others have heavily discounted their text messaging services.

Experts, however, say fewer than 10 percent of people use telecom company’s apps for messaging, and the numbers of users and texts sent are predicted to fall further. Telecoms companies that continue with these strategies are swimming against the tide and risk becoming increasingly irrelevant to users.

There are signs that attitudes are changing, though. Instead of being dismissive, hostile, or ambivalent to OTT services, telecoms companies are now looking to partner with them. This represents a realization that their business model can no longer compete with the free-to-use services, and that consumer expectations have changed permanently.

Telecoms companies will not get the revenue back that they have lost to messenger applications, and they are unlikely to recover market share. If they embrace the trend and seek to innovate they can evolve. When they do, the biggest beneficiaries will be consumers.