How Apple got around the worlds telcos: It started with something unpopular that no one wanted, they even called it “Facetime” (so everyone would think it was a dead duck)

The announcement that Messages Beta is replacing iChat doesn’t seem like it’s going to change the world but it’s just laid the foundations for Apple to make the next move and do away with the technical reasons a Apple iPhone customer needs a mobile operator for anything more than a good data connection.

In summary:

> Failure to explore Video Calling ensured telcos missed out on identifying the opportunity in presence

Mobile Video Calls need presence before they make sense as a mass market mobile proposition: it is helpful if a caller knows their recipient is on a 3G Phone, on a 3G network, has enough battery left (especially in the early days), is in a location/time where they can accept it (eg. the lecture has finished), etc, etc. The most obvious use case for a customer to want to have presence is for mobile video calling. In the early days this was abundantly clear.

Note: this hasn’t been a problem for us with 3G Doctor. As an outbound call model where the patient essentially “books” a consultation on their video mobile it’s fair to presume they are ready and reachable. Similarly if the video consulting experience for any reason fails we can always default to an informed voice consultation.

> Operators didn’t reject Apple’s FaceTime move because they’d given up on video calling

Mobile operators have completely failed to understand video calling. As a result it failed to generate much consumer interest and after wasting their marketing budgets promoting “so what” use cases that could have been sufficiently served by video messaging (eg. I can show my friends a dress I’m wearing, look at me on a bungee jump, etc) many of the telcos gave up on it. This resulted in them ceasing to buy devices with forward facing cameras, continuing to price the video calls at exorbitant premium rates (even for contract customers with unlimited data plans that allowed them access to video calling alternatives that were much more bandwidth hungry eg. Fring), ceasing to work on the interoperability and user experience issues that remain a challenge even today (eg. despite Nokia being the first mobile device maker to identify and specifically target the 3G videophone market 7 years earlier, at the end of 2011 when their accountants launched their flagship mobile – the N9 – it featured a forward facing camera but no video call application).

> Apple used Facetime to create presence but stay under the radar of telcos

Realising that telcos wouldn’t pay them to just waltz in and cart customers off with a one stop solution to calls and messaging, Apple acted smart and played to win presence first.

Aware of the operator fear of VOIP (look at the share prices fall when a mobile device maker mentions something like Skype) Apple was smart to realise that the operators had given up on video calling and so wouldn’t mind so much if they toyed about with that even if they were giving it away for free (as long as they left the customers buying text, call and data plans from the operator who was subsidising the customers getting their hardware in the first place).

> 2012 and Mobile operators have given Apple a 5% market share made up of their most affluent and profitable customers PLUS a huge cash surplus that perfectly places them to kill the host

So today we get to see Apple start moving forward with it’s new converged communication offering and no operator is voicing disconnect (publicly at least).

Messages Beta makes it possible for customers to send unlimited messages, contacts, locations, photos, videos and place video calls between one another without even using a mobile network or a mobile phone. All you need is an internet connection and an Apple device (iPod Touch, iPad, iPhone or any Mac). The messaging system also supports a variety of other IM services.

> What next?

Want’s left for telcos when their top 5% of customers move to data plan only tariffs and are happy to buy them off Apple (who will be in a great position to pass on wholesale international-roaming-free rates)?

What happens when Apple launches a cheaper iPhone and creeps this network independent offering beyond the top 5% of subscribers?

Perhaps the pro-competition authorities will help telco’s out?

In light of this move is it any surprise that you won’t see anyone from the world’s most profitable mobile company at the GSMA’s Mobile World Congress in Barcelona later this month?

If they were attending I wonder what they’d think of the GSMA/PWC predictions that the mobile operators will be taking 50% of the global mHealth industry revenues by 2017?

Or perhaps that’ll be okay because as we’ll be seeing increasingly with voice and SMS revenues this 50% may represent the much less profitable segment of the total revenues?

About David Doherty
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1 Response to How Apple got around the worlds telcos: It started with something unpopular that no one wanted, they even called it “Facetime” (so everyone would think it was a dead duck)

  1. Pingback: Are Smartphones still too complicated for Mobile Operators? « mHealth Insight: the blog of 3G Doctor

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