Opportunies in IP Messaging

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1 Whitepaper Opportunies in IP Messaging Table of Contents 1 Changing one thing changes everything 2 Competing for the new customer 3 Enabling SMS and MMS in LTE and networks 4 Enabling SMS in IP networks 5 Enabling MMS in IP networks 6 Offering new messaging services using IMS 7 Introducing IP Messaging services without IMS 8 Conclusion: driving the change in messaging Changing one thing changes everything The introduction of the iphone in early 2007 changed the mobile communications industry. Now, looking back, no one could have predicted the impact this single device would have. However many changes in mobile telecoms all trace back to that introduction. This first smartphone fuelled a demand for broadband subscriptions, and empowered application developers in unprecedented ways. New applications consumed bandwidth on the mobile data networks with video streams and high resolution images. This in turn drove the development and introduction of next generation mobile networks, using LTE technology. The proliferation of smartphone apps completely changed consumer behaviour. The benefit to the mobile operator is the solid revenue stream next to voice and messaging services SMS and MMS. On the other hand, many of the apps offering messaging services cannibalise the operator s messaging revenue stream. Competing for the new consumer The competition between over-the-top (OTT) messaging applications and legacy messaging services, such as SMS and MMS, will not end with a single clearly defined winner. Legacy messaging services will continue to be an important component for both consumers and mobile operators for the foreseeable future. However, in this new competitive landscape, mobile operators must leverage their existing messaging assets and align with the choice enabled modern consumer. This is possible with new generation network technologies offering all-ip architecture. Plus, at the same time, all-ip architecture offers a number of cost benefit advantages as well. Operators typically focus on reach and reliability with network quality, subscriber services and cross network interoperability. OTT providers, on the other hand, focus on the user experience. The competition will become interesting when the OTT providers begin to scale up networks leading to forced monetisation and the operators begin offering OTT type services. Mobile network operators have tactical advantages now that can be turned into IP Messaging opportunities. OTT based messaging offerings are reliant on access networks they do not control. The operator can gain advantages over the OTT providers by focusing on cost effective operations and developing new messaging services. In order to realise these opportunities, the mobile operator should focus on: 1. Enabling SMS and MMS in LTE networks, providing evolved, cost effective SMS and MMS services over an IP network. 2. Offering new messaging services using IMS, leveraging operator assets by delivering integrated voice and messaging communication services through the unique IMS architecture. 3. Introducing IP messaging services without IMS, and collaborating in the cloud by providing access to unique network assets that enable a superior quality of experience. 1

2 When all addressed, they ensure a strong portfolio of messaging offerings which will ensure sustainable messaging revenues, at lower operational cost. This paper explores these messaging developments to demonstrate the various options in IP messaging. Enabling SMS and MMS in LTE networks For years SMS was the most successful and popular messaging service available. Due to its ubiquity, simplicity, reach and reliability, over 6 billion users have come to appreciate the service and use it on a daily basis. In fact, it is not just used by consumers; it has become a channel to deliver information, premium content and applications for content owners and enterprises. Analysts estimate that in 2016, over 9.4 trillion SMS messages will be sent, generating over $ 720 billion of operator revenues between 2011 and Clearly, the key differentiator remains the unparalleled reach of SMS and MMS compared to any other messaging service due to the operators networks interworking with each other. With SMS, anyone with a mobile device can be reached instantly from a single messaging client, without giving it a second thought. Even with this incredible reach, SMS messaging is still currently quite limited in functionality when compared to the new over-the-top alternatives. In order to enhance the end user experience, operators are advised to expand the functionality with additional (personalised) features such as archiving, group messaging, blacklisting and out of office notifications. In the longer term, operators will face two major changes that have an impact on SMS as a revenue generator: 1. The move to 4G networks SMS services were originally designed for the mobile network architecture and rely on specific transport technology, which is not available in 4G networks based on LTE. The operator challenge is to evolve text messaging based on circuit switched network technology towards text messaging based on IP. 2. The introduction of a wide range of new devices Consumers now have access to a whole spectrum of new devices such as tablet PCs, netbooks and internet TVs. Also in the enterprise world, new mobile connected devices enable further automation in various branches such as finance, logistics and chemical plants. This provides immense opportunities to extend mobile messaging services such as SMS. Clearly, to address the challenges and opportunities for text and multimedia messaging, an evolution of these services towards all-ip networks is a prerequisite. According to Acision, it should be completely feasible to exchange SMS or MMS between an LTE tablet and a feature phone on the traditional mobile network (e.g. CDMA, GSM) simply by adding functionality to the network. Enabling SMS in IP networks In order to make this service work seamlessly in both the traditional CDMA, GSM and 3G networks, as well as in the new mobile broadband networks, there are multiple alternative architectures available. 2

3 The first method is called SMS over IP using an SMS gateway (known as IPSM-Gateway) between the SMS platform and an IMS subsystem in the broadband network. This gateway translates the SMS into a protocol which can be transported across the broadband network. This gateway is aware if a user is connected to the broadband network and will decide to deliver the message to the broadband device. This first method does not require any additional changes to the CDMA, GSM or the LTE network. The second method is called SMS over SGs, using tight integration between the existing CDMA, GSM and the new LTE network (creating an interface between MSC and the LTE MME, which is called SGs). This requires an upgrade of the large parts of the CDMA, GSM signaling network (MSCs), but once this integration is in place, no changes are required to the SMS architecture specifically. In addition, this architecture for broadband SMS does not rely on an IMS system. So for operators who do not plan for IMS based services in the short term, SMS over SGs is a viable option to deploy the SMS service on LTE. Operators may choose one of the approaches mentioned above. The required cross-network interoperability is not hampered between operators that implement SMS migration to IP differently. Enabling MMS in IP networks For MMS, the second largest mobile messaging service in terms of revenue and usage, the integration with the broadband network is even simpler. As MMS is by design an IP messaging service, it works seamlessly on 3G and LTE. The message notification, which is traditionally sent using SMS, can be delivered as an IP push message, as LTE devices are expected to have an IP address when connected to the network. This will make MMS in a broadband network context more cost effective when compared to MMS in a WCDMA / 3G network. Based upon the above, it is safe to conclude that both SMS and MMS can work seamlessly in an all IP network, and that these traditional services can be enriched with valuable end-user features such as group messaging. This effectively ensures that SMS continues as a service, while the underlying technology is evolving. From a business perspective, this offers a number of clear benefits: 1. Decrease the cost of communication One of the main drivers of providing communication services based on IP technology is cost. Modern IP-based platforms are more scalable and cost effective compared to the traditional SS7 based designs. By implementing SMS over IP, the network cost for SMS can be reduced significantly, as high volume SS7 signalling can be off loaded to the broadband network for an increasing volume of LTE connected devices. This only requires a SIP implementation on the devices for the transport of SMS. 2. Improved means for differentiation Messaging is currently differentiated on price per message or bundle size. When operators position messaging as an integral part of the wireless broadband subscription, they are better able to differentiate the messaging offering. They can for example offer a single messaging bundle, which is used across different devices. In addition, through policy management, operators can start to differentiate various messaging bundles based on priority, value added features such as parental control and group messaging, and fair use messaging policies. So even for the traditional SMS and MMS services, there are plenty of revenue enhancing opportunities, in combination with the introduction of broadband networks. Especially when building upon the continued expansion of the messaging ecosystem for SMS and MMS. 3

4 3. Improved perception of cost for consumers As the latest phones are equipped with high resolution cameras offering potential for HD video, message size is expected to dramatically increase in the years to come. This effect will be seen in both app based as well as carrier controlled messaging services. MMS size limitations for example, are already being increased from 300 KB to 1 MB per message. By making sure that SMS and MMS messages transported over the broadband network are not counting towards the balance of the data package, operators can make a good case for SMS and MMS as more cost effective than the new messaging alternatives. After all, content delivered through over-the-top messaging services can take a substantial bite out of the data bundle, especially if roaming on a WCDMA/3G/4G network in a foreign country. Offering new messaging services using IMS Next to the continuation of existing messaging services, new network technologies also enable the introduction of new messaging services. There is clear consensus about the long-term direction of communication services on mobile broadband networks: ultimately mobile voice over IP (mvoip) will be delivered on the next generation network, supported by a SIP based signaling system referred to as IP Multimedia Subsystem, or in short IMS. The IMS standards also cater for new types of messaging capabilities. Various standardisation and service definition efforts have been made to shape potential new messaging services based on IMS. The most concrete results have been reached with the so called Rich Communication Suite (RCS). RCS is a client server definition for a combined set of communication functions catering for voice, video and messaging, within a single device client. It builds upon the premise of the address book as the starting point of communications, which is combined with up-to-date presence information of the contacts in the address book. RCS includes a new messaging service which provides the user experience of instant messaging as found on popular social networks such as Skype and Facebook. An important enhancement on this concept is that users can migrate a messaging session across multiple devices. This way, a messaging conversation started on the PC at home, can be continued on a mobile device on the go. According to Acision, a critical element for the commercial success of RCS is the seamless interworking between users with an RCS device, and users with traditional SMS and MMS capable phones. It is essential that any user can instantly reach any other user, regardless of the device capability and network connection. This truly differentiates RCS from any other new internet / app messaging service, as it will kick-off with a reach of over 6 billion users. 4

5 RCS has an evolutionary approach based on an architecture called Converged IP Messaging (CPM). Besides the instant messaging service, some additional capabilities defined in CPM includes a permanent message store for all types of messages, which can be accessed from any device. CPM also caters for other types of broadband connected devices such as laptops, tablets and even extends to set-top boxes, SIM enabled WiFi routers, and new classes of devices such as new domestic terminals. These will provide a user view of a palette of rich services or applications, and app stores will allow new services to be marketed directly to the user. Seamlessly connecting these CPM enabled devices with SMS and MMS capable devices will be a key success factor for the introduction of future messaging enhancements. In addition, the mobile industry must find new ways to cater for the requirements of the already extensive messaging ecosystem which is currently based upon SMS and MMS services. Ideally, content and application providers should be able to benefit from new messaging capabilities offered by RCS and CPM without significant adaptations on their side. From a commercial perspective, full IP messaging services can be offered in a differentiated way for increased revenue generation. Policy management is essential for guaranteed quality of experience, and different levels can be offered against corresponding price levels. Especially at crowded locations, and at peak times, premium policies are essential for ensuring priority for sustained IP connections to the base station, and optimal bandwidth negotiation for multimedia content messaging to achieve a smooth messaging user experience, even while containing high-end content types such as HD-Video. Additionally for RCS type messaging, advanced rating and charging schemes can allocate messaging transactions to the messaging bundle without impacting the broadband data bundle. As discussed in the above, this ensures competitive messaging offerings against the over-the-top service offerings. Introducing IP messaging services without IMS While IP based communication services will, in the long term, be supported through IMS, many operators will be introducing wireless broadband networks without IMS in the short run. The primary reason for the introduction of LTE is is to address the enormous need for bandwidth. The immediate need for voice and messaging over IMS is not there yet because 4G handsets currently also support 2G and 3G technologies. If messaging alone does not present a compelling business case for a mature IMS investment, operators may be looking for an IP messaging alternative that helps them to compete with the new device / app based ping services without dependencies on IMS. After all, the broadband network does provide both cost advantages and opportunities to provide new and differentiating messaging scenarios. Similar to the over-the-top messaging services (ping applications), operators can provide new messaging experiences based on specific client server solutions which are not based on IMS registration. This allows operators to trial collaborations with over-the-top players that have made a head start with creating a more appealing user experience. By doing so, operators are also in a position to leverage app-based advertising which can provide a platform for new revenue models. 5

6 On top of such new messaging scenarios and advertising opportunities, operators have the unique capabilities to differentiate their messaging offerings and provide superior messaging services to their subscribers. After all, only operators can offer seamless exchange with SMS and MMS, providing messaging reach to the entire mobile base. This is in sharp contrast to over-the-top providers who only cater for a limited reach to a closed user base. In addition, operators can ensure premium user experience for their own messaging services through effective messaging policies; while over-the-top providers have to settle for best effort and cannot guarantee a perfect quality of experience. Especially for exchanging multimedia content, this easily becomes a prerequisite. These combined operator advantages warrant for an operator messaging premium, which can be offered through different messaging plans and bundles in conjunction with broadband access packages and dual-mode access subscriptions. From a technical perspective, operators may find there are alternative ways for the implementation of such messaging services. Acision recommends designing such services based on decoupling the messaging client interface from the network infrastructure. This way operators can start offering a rich messaging experience based on a messaging client that uses standard client APIs, while the network messaging infrastructure can be based on an intermediate messaging platform leveraging the existing services SMS and MMS. These existing services are used for ubiquitous interworking to the wide mobile community. When the operator decides to launch IMS for mvoip or RCS, the intermediate messaging platform can integrate with the IMS network, relegating such functions as registration on to the network to the IMS core and ensuring a seamless user experience while leveraging the advantage of integrated voice and messaging services over IMS as offered by RCS. The investments in an IMS-independent messaging platform can be fully leveraged, providing the highest ROI alternative, with the opportunity to keep the subscribers close to the network services. For operators without an established IMS subsystem, this may be the shortest route to providing a rich RCS-like messaing user experience to their subscribers, and creating additional revenue streams out of messaging. Conclusion: driving the change in messaging Even though the recent developments in the mobile market seem to give cause for worries about the operator messaging revenues, the evolution towards broadband networks provides excellent opportunities for sustainable messaging revenues. As a first objective, operators must ensure continuity for SMS and MMS services on the mobile broadband network, leveraging the habits and reach of over 6 billion mobile users. Operators can build on the massive messaging ecosystem to expand messaging revenues through advanced features and enterprise messaging growth. In addition, operators can seize new revenue opportunities by implementing advanced messaging services on the broadband network. Even if IMS is not part of the short-term operator plan, IP based messaging services can be introduced to either compete or collaborate with over-the-top alternatives. When based on standardised client APIs, the new IP messaging platforms can likewise easily support the introduction of IMS network enhancements and the introduction of full RCS scenarios. As such, irrespective of what the market may dictate in the years to come, this offers operators a number of clear steps for the short run. And if not all smartphone devices will support RCS services natively, rich client based messaging services can be launched with simple operator branded messaging apps which can be published in the various app stores for Apple, Android, Blackberry and Nokia devices. 6

7 Next to this, operators can leverage SMS reach, broadband network capabilities, and charging scenarios to offer more compelling messaging services to the customer base without the need for large scale investments. By redirecting messaging streams from the mobile networks (e.g. CDMA, GSM) onto the broadband networks where possible, operators may gain substantial savings, and thus growing the margins on their current messaging revenues. Seamless SMS and MMS interworking, policy based priorities and enhanced messaging bundles with value added services (such as parental control and group messaging) present strong differentiators which will maintain traction with the messaging base. Broadband networks will not only bring additional data access revenues, but by driving this change of approach to the messaging service, operators can enjoy sustained messaging revenues, and fundamentally change the competitive messaging landscape. Copyright Acision BV All rights reserved. This document is protected by international copyright law and may not be reprinted, reproduced, copied or utilised in whole or in part by any means including electronic, mechanical, or other means without the prior written consent of Acision BV. Whilst reasonable care has been taken by Acision BV to ensure the information contained herein is reasonably accurate, Acision shall not, under any circumstances be liable for any loss or damage (direct or consequential) suffered by any party as a result of the contents of this publication or the reliance of any party thereon or any inaccuracy or omission therein. The information in this document is therefore provided on an as is basis without warranty and is subject to change without further notice and cannot be construed as a commitment by Acision BV. The products mentioned in this document are identified by the names, trademarks, service marks and logos of their respective companies or organisations and may not be used in any advertising or publicity or in any other way whatsoever without the prior written consent of those companies or organisations and Acision BV. 5714/v2 7

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