The ease and convenience of messaging services have made Short Message Service (SMS) and Multimedia Message Service (MMS) an indispensable part of mobile users' lives today.
In Caribbean wireless markets, operators can benefit from growing messaging opportunities by introducing new, aggressive pricing models that make messaging more affordable to the masses.
By deviating from traditional pricing strategies in this region, operators can attract new subscribers, reduce churn, and increase average revenue per user (ARPU). Operators moving toward all–IP networks can also leverage beneficial infrastructure changes to reduce messaging costs and gain market share by introducing new, more advanced messaging services.
The mobile market represents one of the Caribbean's chief growth industries as the region works to recover from the recent global economic downturn. With a penetration rate of more than 62 percent overall, Caribbean mobile penetration rates are among the highest in the world, according to Paul Budde Communication. However, penetration varies widely throughout the region, ranging from single digits in some nations to over 300 percent in others, Budde says.
In 2010, total SMS traffic in the Latin American region—which includes all South and Central American countries and the Caribbean—totaled over 286 billion messages, according to Portio Research. From 2010 to 2015, this traffic is expected to grow at a compound annual rate of 10.9 percent to reach 479.8 billion by the end of 2015. MMS growth has been even more dramatic. In 2010, total MMS traffic in the Latin American region was 2.2 billion messages and is expected to grow at a compound annual rate of 25 percent during 2010–2015 to reach 6.6 billion messages by the end of 2015, according to Portio.
Aggressive Pricing Strategies
When pricing messaging services for subscribers, Caribbean operators have traditionally charged subscribers a per–message fee. As a result, subscribers have limited their use of SMS to avoid high monthly charges. This has led to a very low average number of messages per subscriber per month, which increases operators' overall cost of sending SMS messages.
In contrast, in areas where subscribers are charged a very low price for text messages, the average number of messages per subscriber per month is significantly higher, as is the case, for example, in Costa Rica (690 messages) and the Philippines (565 messages). In the United States—a market where an unlimited messaging model is the norm—the average number of messages per subscriber per month is 620, according to CTIA–The Wireless Association®. The typical teenager in the United States sends over 3,300 messages per month, according to The Nielsen Company, driving this high average. In fact, in the United States, the average number of voice minutes per user has fallen over time, while the amount of data and text has surpassed voice minutes. As messaging use has grown, operators have benefited from higher ARPU and reduced churn.
Introducing new pricing plans with unlimited messaging options can provide Caribbean operators with the same opportunity to encourage messaging growth. By making messaging more affordable, an unlimited strategy can lead to new subscribers, increased subscriber loyalty, greater per–subscriber messaging volumes, and higher ARPU.
The traditional Caribbean pricing model also results in an assumption of significant risk by the operator as it projects its capacity demands. The Short Message Service Center (SMSC) is typically sold based on capacity, usually measured by the number of Message Delivery Attempts (MDAs) per second supported by the platform. When purchasing or expanding SMSCs, the operator estimates its required capacity and negotiates the price for each processing unit or MDA with the service provider. The result is a restriction on the expected utilization of messaging services in an operator's network, a “ceiling” that places all risk on the operator in terms of forecasts and estimates. By working with a vendor who can offer innovative business models that are not MDA restrictive, operators can support the capacity needed to offer unlimited pricing models.
Convergent Networks
Another trend in Caribbean markets—as in the rest of the world—is an evolution toward all–IP convergent networks. Operators such as Digicel, Scarlet, and Telecommunications Services of Trinidad and Tobago (TSTT) have deployed WiMAX in this region. Others are considering an investment in LTE, which has been called the most rapidly developing mobile system technology ever. In fact, according to the Global mobile Suppliers Association (GSA), at least 91 LTE networks will be deployed worldwide by the end of 2012.
While mobile data growth has fueled interest in these next–generation technologies, the throughput enhancements and low latency offered by WiMAX and LTE create opportunities for new advanced convergent services. Operators can seamlessly migrate existing services such as voice and messaging onto the all–IP–network, realizing significant cost savings while offering an enhanced converged user experience. Launching feature–rich IP messaging services represents an important way for operators to capitalize on their initial investment as they move toward all–IP.
The demand for next–generation messaging services is clear, with mobile subscribers currently using next–gen services such as Skype, Facetime, and iMessage. Operators such as Deutsche Telekom, Orange FT, Telecom Italia, Telefonica, and Vodafone have already announced plans to launch next–generation messaging such as Rich Communications Suite (RCS) in late 2011 and early 2012. RCS includes such capabilities as enhanced address books, instant messaging and chat features, group messaging, image and video sharing, and presence features.
In addition, third parties are now developing services previously “owned” by network operators. Services such as Skype, Facebook, iMessage, Google, MSN, and Yahoo provide messaging services “over–the–top” (OTT), with little or no revenue potential for the operator. As interoperability improves, operators face a substantial threat of revenue loss as subscribers choose these OTT messaging methods over traditional SMS and MMS. By offering subscribers a rich user experience, operators can maintain this important revenue stream while attracting new and maintaining existing subscribers, who will be less likely to migrate to alternative services.
Rather than replacing their existing messaging infrastructure, operators should seek solutions that enable their networks to evolve as messaging services grow. Operators' technology investment should support Wi–Fi, LTE, CDMA, and GSM delivery simultaneously and support interworking of next–gen and legacy messaging methodologies. Operators are best served by flexible, proven solutions that can bridge the gap between SS7–based and IP messaging platforms.
Conclusion
Operators who introduce new, aggressive pricing strategies will be best positioned to take advantage of the potential for messaging growth in Caribbean markets. By being the first to offer an unlimited model, operators can encourage higher per–subscriber messaging volumes, gain market share, and increase ARPU.
Likewise, launching new messaging services as networks evolve toward all–IP can increase subscriber growth, reduce churn, and minimize the threat of OTT services. By implementing solutions that bridge legacy and next–generation technologies, operators can leverage their infrastructure investment to protect messaging revenue as they move toward a fully converged platform.
This article originally appeared in Cancion from CANTO
