Living with Apps

Can apps become potential sources for new VAS streams for telecos?

The walled gardens of VAS have been facing severe drought in the wake of climactic changes of a mobile broadband era. What are the factors that have hit the traditional VAS revenues and what can the players do to stay in the game?

Apps have become a double-edged sword for telcos, thanks to the flourishing over-the-top (OTT) ecosystems. While apps like Facebook, YouTube and WhatsApp are unarguably a major driver of 3G traffic, these are also forcing operators to accept commoditization of their mobile broadband assets.

Indeed, apps have been disruptive to VAS and telcos have been slow to respond to the winds of climactic change that happen to characteristically favour the internet players in an ongoing era of convergence.

To their credit, telcos have not been washed away and have instead worked to readjust their business models even if that has required some trade-offs to be made.

Redefining VAS

VAS landscape is already getting redefined, and innovation has to be the name of the game ahead. While telcos have done well in departments such as mobile wallets and payments, they could potentially do better in areas such as smart metering, health tracking and monitoring, various education and citizen services as well as M2M services in future.

There is clearly a major shift underway from services such as caller-ring-back-tones (CRBT), IVR, astrology, Bollywood and cricket, which are losing steam as apps that provide much more rich functionalities and user experiences are charging ahead.

The rapidly growing adoption of smartphones means that there is an app for almost every VAS that ever was. Will apps coexist with VAS, or have they decisively signalled the end of VAS? How will that affect telcos in the long run, given that apps leave little for telcos’ control over customers? What are going to be the new rules of the App Economy game?

Regulation and Compliance

Regulation is arguably acknowledged a key reason why the VAS industry suffered a sudden collapse. Many VAS revenue streams were severely impacted after Telecom Regulatory Authority of India (TRAI) issued guidelines that barred activations of VAS services without explicit consent of the users. However, it has also been counter-argued that VAS industry had grown complacent and was not innovating enough to rise to the needs of a new generation of smartphone users. Worse, there was a lack of transparency in how the VAS services could be activated, which led to the TRAI guidelines and caused a disruption for which the VAS players were unprepared.

Interestingly, as the mobile phone becomes a primary device that more and more customers use for making payments and financial transactions, security and compliance requirements are kicking in. Three-layer authentication processes are being adopted to mitigate risks of identity thefts and asset loss, and SMS is gaining ground as one of the preferred layers. Indeed, even before the goals of financial inclusion are achieved and mobile phone become the central piece of the no-frills banking in future, there already is a real potential for SMS-based VAS to gain some fresh lease of life.