Carrier mVoIP Grows Up Different: From OTT Competitive Response to Segmentation ... · PDF file · 2014-10-29Segmentation Differentiation Consumer Services ... Unlike the generic

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Advisory Report

Carrier mVoIP Grows Up Different:From OTT Competitive Response toSegmentation Differentiation

Consumer Services

October 2, 2012

Issue

Until recently, most carriers viewed third-party mVoIP apps as an unwelcome and damaging product of the app store age; a major threat to their core mobile voice revenues. Although that view still holds, a number of European and US carriers have decided to meet the third-party app providers head-on, with their own-branded applications for IP comms voice and messaging. Unlike the generic positioning of IP comms OTT apps such as Viber or Skype, carrier mVoIP apps tend to demonstrate a more varied, and segmented positioning.

Carrier mVoIP apps have been developed to foster value and diff erentiation across a more granular spectrum of services, to serve diff erent strategic agendas – from national prepaid acquisition aggression, to targeting segments with frequent roaming and international calling requirements. Some carriers have even resorted to launching smartphone apps for voice calls which are, in fact, standard circuit-switched mobile voice. Th is advisory report gives an overview of the variety of approaches in evidence, with carrier mVoIP examples from a number of markets.

Current Perspective

Carrier mVoIP Targeting Frequent TravelersTo date, a handful of European carriers have launched their own-branded mVoIP apps to off er a voice-over-WiFi roaming alternative to OTT apps in this space, notably Viber, Vonage Mobile and Skype Mobile. Importantly, early examples of carrier mVoIP for roaming all attempt to generate revenue, either directly as a premium service, or indirectly by allowing customers to ‘use’ their home package’s national mobile minutes whilst using the application abroad. One of the fi rst such services to launch in Europe was the 3GlobalWiFi app from 3Sweden. 3GlobalWiFi was brought to market in June 2011 as both an iOS and Android free-to-download app, with low-cost bundles of minutes for calling from abroad back to Swedish fi xed or mobile lines, from a self-sourced WiFi access point. Although many in the Swedish media dismissed 3GlobalWiFi as superfl uous (particularly given the user requirement to self-source the free WiFi access), the operator has continued to market it. Earlier this summer, rival Tele2 Sweden launched a similar proposition, a Tele2-branded iOS and Android mVoIP app for cheap mobile roam-ing calls back to Sweden (see Tele2 Sweden Launches +46 WiFi Roaming App). In June 2012, Mobitel (Telekom Slovenija) provided a third such example (see Mobitel (Telekom Slovenije) Launches Mobile VoIP App For Frequent Travellers). In launching this service, Mobitel essentially extended its fi xed Com-municator (VoIP) service to mobile devices, via an iOS and Android app and service.

Although all three apps are similar in that they are exclusive to each carrier’s customers, and promoted al-most entirely via direct marketing, the pricing model diff ers. Whereas 3GlobalWiFi is a prepaid service, in which 3 Sweden customers pay in advance for an incremental bundle of roaming minutes to be used

Emma Mohr-McCluneCurrent AnalysisResearch Director,Consumer Services - Global

Wes HenderekCurrent AnalysisPrincipal Analyst,Consumer Services - U.S.


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Carrier mVoIP Grows Up Different: From OTT Competi-

tive Response to Segmentation DifferentiationConsumer Services

over WiFi, Tele2 +46 allows Tele2 customers to place calls from abroad using minutes from their na-tional voice bundles. Mobitel’s Mobile Communicator service is diff erent again, in that the carrier has essentially extended an existing fi xed VoIP service to the mobile screen for an incremental monthly charge. Mobitel Communicator is priced at EUR 3 per month together with a standard mobile plan, or bundled free with higher-value plans, with all calls and messaging placed over the app charged at standard package rates. Th e Mobitel Communicator app can be used over cellular broadband or WiFi, although the carrier advises the latter to avoid data roaming charges.

To be sure, none of these carriers have attempted to hype the success of these apps, and Android app download rates on Google Play indicate unexceptional installation rates. Th e Tele2 +46 and Mobitel Communicator app services, which both allows users to make use of their existing national minutes abroad over free WiFi abroad, attracted between 1,000 to 5,000 downloads on Google Play over the last 30 days, against Tele2 Sweden’s mobile customer base of almost 4 million and Mobitel’s base of just over a million. Comparatively, 3GlobalWiFi attracted just 100-500 app downloads from Google Play over the last 30 days, against the carrier’s mobile customer base of around 1.5 million. As a comparison point, the ‘Viber: Free Calls and Messages’ app attracted between 10 and 50 million installations from Google Play over the same time period, driven entirely through viral marketing.

Carrier mVoIP Targeting Retention in Youth SegmentIn Europe, at least two carriers have launched a messaging and voice application as a retention lever for the youth segment, both using Facebook to aid viral marketing. Th e variance is in the overall pricing proposition.

In Poland, T-Mobile launched the Freeyah iOS and Android app via its Heyah youth brand in the fi rst quarter of the year, followed by the launch of Vodafone Germany’s HeyHo app, specifi cally for its prepaid, youth-targeted Smartphone CallYa Fun customer base, later in June. Th e Freeyah app allows users to make use of WiFi for free calling, messaging and chat, but the app can be used over the cellular network in conjunction with Heyah’s ‘Internet Non Stop L’ or ‘Internet Non Stop XL’, 30-day rolling Mobile Internet plans. Any calls or messages placed using the cellular connection are ‘free’, and do not count against the user’s data plan. Heyah customers are also encouraged to consider using the Freeyah app over free WiFi access abroad, to skirt high roaming call costs. Th e Freeyah app is free to download and is available to both Heyah customers and non-customers, alike. Freeyah app users can also invite friends to use the app via Facebook. According to Google’s own fi gures, the Freeyah app has seen between 50,000-100,000 installations in the last 30 days, a high number for an app promoted almost exclusively through a highly local (Polish) youth secondary brand, and virally via Facebook.

Conversely, Vodafone Germany launched the HeyHo app to encourage its youth prepaid CallYa Smartphone Fun customer base to keep topping up credit. Once the app is downloaded, customers can invite and then call friends for free with a minimum top-up of EUR 15 per month. Calls are po-sitioned as ‘free’, but also high-quality. Interestingly, calls are placed over the circuit-switched network. Th ese are ‘standard’ mobile voice minutes, placed over an app interface: ‘Standard voice’ dressed up as mVoIP. To be sure, this is not the fi rst time a European carrier has disguised standard voice as mVoIP, see 3UK Shakes Up Industry with Free Mobile Skype: No Data Charges (Ha Ha) April 24, 2009, but the youth targeting, and retention-based incentives behind Vodafone Germany’s HeyHo is implicit confi rmation of how far the European carrier community concede the superior usability of app-based interfaces for standard mobile communications. Th e HeyHo app further allows friends to form gam-ing communities and compete for prizes. According to Google Play, HeyHo has seen between 10,000 – 50,000 installations over the last 30 days, despite it being limited to Android smartphones right now. Vodafone Germany is planning to make HeyHo accessible on iOS, but also from Facebook, in much the same way as T-Mobile USA’s Bobsled service.


Advisory Report

Carrier mVoIP for Prepaid Acquisition AggressionIn Germany, prepaid brand Blau.de has deployed an mVoIP app, explicitly positioned as a cost-saving app for long-term contract customers of rival carriers, tied on a fl atrate mobile data packages with ex-pensive out-of-bundle mobile calling rates. Th e Blau.de brand, one of KPN’s several secondary brands in Germany, fi rst fl agged the launch of the Blau.de mVoIP app this February. At launch, Blau.de was fashioned as a free-to-download Android-only app for mVoIP calling over cellular data networks or WiFi. On download, new users were required to register for the service providing a mobile phone number and other details, to receive a BlauApp registration code. On registering the code, each new user received EUR 1.00 of credit, to place national calls/texts at standard Blau.de rates of EUR 0.09/national minute or SMS. Registered users must then top-up to continue service on the expiration of the starter credit. Th is basic proposition has been unchanged since launch, although Blau.de has chan-neled a number of promotions to encourage installation and top-ups. Currently, the carrier is off ering three free months of fl at-rate calling to national fi xed lines for a minimum top-up of EUR10. Th e app has also been made available to iOS devices. According to Android Google Play’s statistics, the BlauApp has registered between 10,000 – 50,000 Android device installations over the last 30 days.

Carrier mVoIP for International Calling Some weeks ago, T-Mobile UK announced a trial of a new mobile application explicitly targeted at people who wish to stay in contact with friends and family abroad: the low-cost international calling segment.

T-Mobile UK’s Clever Connect app, still in trial today, off ers free in-app calling (free calls between Clever Connect friends over the app platform), over WiFi or 3G, together with low-cost international calling rates to phones abroad. Clever Connect is a customised version of the popular Vopium IP Comms app, and from T-Mobile UK’s description, the app automatically chooses the lowest-cost route from the available access options. Th e app is certainly anticipated to end its trial period in the coming weeks, although no fi rm launch target date has been set.

Carrier mVoIP Targeting the Bring Your Own Device (BYOD) SegmentIn the US, T-Mobile has struggled as the number four carrier in the market, with several quarters-worth of postpaid customer defections. As a result, the carrier has been trying several new strategies in order to appeal to a wider number of customers. Two new strategies are a new focus on VoIP/mVoIP services (via its T-Mobile Bobsled application), and targeting BYOD customers, and notably Apple iPhone customers – a cornerstone mobile device, which is still noticeably absent from T-Mobile USA’s device portfolio.

Th e Bobsled service was originally launched back in April 2011 as a PC-based Facebook voice ap-plication in partnership with Virox. Th e service, which is still open to anyone, was initially targeted at Facebook users as a way to provide free voice calling and voice messaging capabilities, straight from the Facebook interface. Customers could initiate VoIP calls directly from the application, or send voice messages to someone’s Facebook wall, along with private voice messaging capabilities. On the mobile side, Bobsled was initially only used to power T-Mobile USA’s ‘group’ and ‘cloud’ text messag-ing features on the youth oriented Sidekick 4G messaging device. In January, 2012, T-Mobile USA then expanded Bobsled beyond Facebook with the launch of iOS and Android apps for full mVoIP capabilities. Reports on the growth of Bobsled users overall have been mixed, but the carrier indicated in May 2012, it had crossed the 1 million subscriber mark, while reaching the 2 million subscribers in July 2012. In terms of released statistics, T-Mobile has indicated that 90 percent of Bobsled messaging is being used domestically, while 80 percent of its voice calls originate outside of the US. According to Google Play statistics, the ‘Bobsled Calling’ app has attracted between 500,000 – 1,000,000 instal-lations in the last 30 days. Notably, T-Mobile USA’s positioning of Bobsled Calling is heavily cross-platform. Th e app is described as providing ‘free unlimited calling’ between Web, Android, iPhone, iPad, iPod and other phones.

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Carrier mVoIP for OTT OffsetTo be sure, all of the apps described above have OTT off set as a common incentive. Th e carrier com-munity now well understands the cannibalization threat of smartphone apps to core mobile voice and messaging revenues, and there is a clear imperative for carriers, as communications providers, to keep in step with changed customer behavior. As described above, carriers can deploy mVoIP apps to serve a number of various service strategy goals, from nurturing retention among the youth community and boosting prepaid customer numbers, to targeting users with friends and family abroad, and more. However, one carrier mVoIP app in particular has taken the lead in competing head-on with the IP comms app community, both as an OTT itself, and in the same generic, non-specifi ed, global and viral marketing terms. For more information on Telefonica Digital’s TU Me app, please see Telefonica Digital Unveils ‘TU’ Brand, with Free IP Comms for Starters May 9, 2012.

Tu Me was launched in May this year, originally as an iOS-only app and positioned as a ‘free all-in-one global communication app’ which allows users to ‘text, talk and share for free’. In the eight weeks after launch, Tu Me was introduced in over 100 markets, extended to Android, and acquired 250,000 active users, with the highest number of active users coming from Spain, the UK, the US and Mexico, according to Telefonica Digital. At June 2012, engagement levels indicated an average of seven communications sessions per app active user, per day. Around 65% of all sessions are chat, with voice representing 25% and photo sharing the third most popular function. Th e app also reached number one in the Apple App Store in Spain and Brazil, and number two in France over the same time period. Within Google Play, the Tu Me Android app is described as having attracted between 500,000 – 1,000,000 installations over the last 30 days.

Recommended Actions

Recommended Vendor Actions• If there is one important partner within the emerging breed of carrier mVoIP apps, it is Facebook. Th e ability to call and message from Facebook, as well as invite new friends from Facebook, is a common feature of many of the apps described above. In the case of T-Mobile USA’s Bobsled, the initiative fi rst found root as a Facebook-only tool, and the ability to call and message straight from the Facebook interface has been an important part in the viral marketing of this service.

• Insofar as the positioning of all these apps diff ers, so does the monetization path. For some apps, the monetization is obvious. For example, T-Mobile UK’s ‘CleverConnect’ will charge premium bundles of international calling minutes for out-of-app usage to international numbers, Blau.de’s BlauApp in Germany is primarily concerned with attracting an entirely new pool of customers and generating new business and revenue, from a segment it was previously unable to touch – i.e., German smart-phone users bound by a long-term postpaid contract with a rival MNO. Other carriers will be able to justify monetization in terms of customer retention; the two apps targeting the youth segment in this report – Heyah’s Freeyah app and Vodafone Germany’s HeyHo – both apply here. In other cases, the monetization path is less obvious, and yet to be fully tested, let alone proven. Telefonica Digital’s Tu Me app falls into this category, as does T-Mobile USA’s Bobsled. In creating an mVoIP app, carriers need to think clearly about both the target segment and the near-term monetization path from the outset.

• In Europe, a growing number of carriers are now including roaming and international minutes, and even data, as part of their integrated and bundled service plan for smartphone users. In increase in this trend could encourage more carriers to look to international calling apps (such as T-Mobile UK’s Clever Connect, currently in trial) and even roaming apps (such as 3GlobalWiFi from 3Sweden) to diff erentiate themselves from the bundled approach. Certainly, an app interface off ering ‘unlimited

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free calling between friends’, but additional messaging and sharing features, will seem more appealing to the smartphone generation than a bundle of minutes, with out-of-bundle charges associated.

• All carriers should note that the rise of IP comms apps for free calling over cellular networks will en-courage users to scrutinize the fair usage policies of their current mobile data provider, with reference to bans on mVoIP usage. Certain carrier mVoIP apps available today – BlauApp is a good example – already warn users against such limitations. To avoid customer confl ict (and negative regulatory interest) it is likely that many European carriers will follow TeliaSonera’s lead. Th e Swedish incumbent recently decided to shelve plans to try the same model in its home market. Instead, TeliaSonera started including mVoIP usage in all its subscription plans (with one new voice-centric plan exception), raised prices and plan data allocations.

• T-Mobile USA should consider how to monetize its Bobsled service, while at the same time better integrating the Bobsled value proposition to support the carrier’s marketing eff orts within its core business. From a monetization point of view, the carrier should look be one of the fi rst mainstream VoIP providers to off er true quality of service guarantees at diff erent price tiers. In addition, given T-Mobile’s current focus on trying to get iPhone customers to bring their device to the T-Mobile network, the carrier should consider including information about Bobsled as a core value added service for iPhone customers to tie together connectivity between all their devices, across diff erent OS platforms, rather than just their Apple devices with FaceTime and iMessage.

• Th e idea of dressing up ‘real’ (circuit-switched) mobile voice as mVoIP may seem an unusual, and even anti-intuitive approach at fi rst glance, although this is precisely how apps such as Vodafone Ger-many’s HeyHo works. Customers get app-like features (messaging, sharing, even gaming community features), and even the usability benefi t of one-click call to friends from an attractive and diff erenti-ated interface, together with a ‘quality’ voice experience. Carriers should consider whether this quality lever might just become a new monetization route for Carrier ‘faux mVoIP’ in the mid-term. One could even argue that the recent launch of Joyn apps in Spain and Germany do, essentially, the same thing – provide free quality voice services from an app-based interface, in lieu of the long-awaited Joyn-native devices.

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Carrier mVoIP Grows Up Different: From OTT Competitive Response to Segmentation ... · PDF file · 2014-10-29Segmentation Differentiation Consumer Services ... Unlike the generic