Applications like Skype have been viewed with a certain amount of trepidation by the wireless industry.
After all, over-the-top (OTT) services run for free on networks which cost billions to construct and undermine operators’ business model. Ovum recently estimated that social messaging would cost operators more than $23 billion in mobile messaging revenue this year.
Why pay for calls and text messages when you can get them for free with a free app?
Blocking the services isn’t much of an option, since it could land operators in hot water with consumers and regulators and leave them vulnerable to competitors with less restrictive policies.
The solution, says Verizon LTE development director Brian Higgins, is to come up with compelling products that will keep customers paying for services.
“The right thing to think about from a product standpoint is that all consumers, myself included, are going to be finicky. They’re going to want to change their options when and where they’re available,” Higgins says.
“The carrier’s primary responsibility in addition to driving new technologies and building new technologies is also in enabling options that are out there for people to utilize. From our standpoint, it’s always a smart thing to make those different services available.”
Verizon’s approach: innovate its way out of the over-the-top dilemma.
For instance, Verizon began allowing its customers to download Skype in 2010 and began offering the free calling service on its LTE network last year.
But at the same time Verizon is supporting Skype, it also aims to compete with it. It is working on a voice-over-LTE service and plans to eventually migrate to broader rich communications suite offerings.
“There are certainly plenty of offerings that are coming in over the top that may compete directly with things that we’re building internally and we think that’s fine,” Higgins says. “It really helps sharpen everyone’s pencil – the over-the-top players and also the carriers – to try to build a superior service offering. Our hope is the best offering wins with consumers.”Pointing out that messaging revenue grew 4 percent year-over-year during the first quarter, Higgins says he doesn’t yet view over-the-top providers as a serious problem even as Verizon works to make its services more competitive.
The threat posed by free apps has yet to materialize – so far.
Part of Verizon’s strategy to set itself apart from the competition – whether in the form of OTT providers or other operators – is to come up with new products that highlight the capabilities of its network. The company has dedicated research and development facilities in Waltham, Mass., and San Francisco that are open to outside companies and developers who want to make products using its network.
Products developed at the centers serve to highlight the abilities of Verizon’s LTE network, currently available in about 230 markets covering two-thirds of the country.
“It’s the raw capabilities first and foremost,” Higgins says of Verizon’s LTE network. “The primary disruption gets down to the technology itself.”
Some of the creations from the facilities will be on display at Verizon’s booth, including LTE-enabled sensors and technology for healthcare and public safety.
Verizon’s LTE rollout hasn’t been completely seamless – it experienced sporadic outages since the network first launched in December 2010 – but Higgins says the problems have been resolved.
“We’re confident that the issues we ran into are not going to reoccur,” he says.
Hiccups aside, customers are signing up in growing numbers for the service. By the end of March, Verizon had 8 million LTE customers, nearly one-tenth of its overall postpaid base.