Carriers Must Offer IP-based Services to Survive, Study Finds

Partnering with application developers—lots of them—seems the surest road to continued economic viability for telcos.

By Adam Stone | Posted Feb 25, 2009
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The major carriers are ready to wave the white flag. Long focused on the belief that they could offer telecom customers a sufficient range of services beyond voice, they now are recognizing the need to partner with applications developers in order to bring services to market.

Such are the findings of a new survey by analyst firm J. Arnold & Associates, which polled top executives at about a dozen Tier 1 and Tier 2 carriers, on behalf of Mountain View, Calif.-based developer Jajah.

"The telcos are very good at understanding their customer base, but they don’t have the culture or the in-house capabilities to develop these new services," said Paul Naphtali, Jajah vice president of global marketing.

What kind of services? All kinds, and that is the second layer of strategy uncovered by researchers. "In the past the feeling was that there would be this killer app," Naphtali said. But things didn't turn out that way. "Choice is now the killer app."

By "choice," Naphtali is referring to the notion that a carrier’s best bet is to put a wealth of services on the table and let consumers pick and choose for themselves. That’s one more reason for carriers to partner with outside developers: If it’s challenging to develop a handful of apps, it will only be that much more difficult to develop a sack-full.

The research points toward phenomenon such as iPod Touch, with its "15,000 apps and counting," as the Apple literature boasts. To build a phone packed with apps for gaming, music, messaging, GPS, and so on (and on), "the carriers don’t have that technology," Naphtali said.

At present, third-party developers will often bring apps direct to the consumer, and carriers are eager not to get cut out of that flow. Voice is still their workhorse, but they understand IP has a lot more to offer.

As a disclaimer, it is worth noting here that Jajah has a certain interest in carriers’ pursuing the trend it has identified. The company provides "the full suite of services required to develop, deploy, and monetize IP communication services anywhere in the world," as its literature states. Jajah has relations with Intel, Yahoo!, and Comcast, among others, just the type of relationships for which it says carriers will be clamoring.

There will no doubt be a slew of developers, large and small, looking to take advantage of carriers’ new zeal for partnerships. While they will likely bring a range of services and business models to the table, Naphtali predicts it will require only two criteria for a developer to get in the game.

Apps will have to be carrier-grade, and they will have to be easy to use.

In the past carriers have steered clear of partnerships partly on the grounds that third-party offerings might not meet the demand for flawless service. Carriers don’t want to risk tarnishing their reputations on software that cannot function at their level.

With many developers ready to cross that threshold, the issue of ease now comes into play. It has to be simple to install and simple to use.

Working in developers’ favor is the fact that downloading apps is quickly becoming common practice. The rising tide of downloadable services has pressed developers to ensure their stuff is plug-and-play ready. Demonstrated success could help them get a foot in the carriers’ doors.

App-to-phone downloading has had another effect that is relevant to this discussion. The fact that most apps are specific to particular devices has put carriers on their toes. "That phenomenon that has led the carriers to see that their subscribers are now less loyal to their provider than they are to their devices and the solutions that are on those devices," Naphtali said.

To some extent, carriers want to see solutions tied to particular devices, which pushes developers to produce apps along specific lines. At the same time, it makes some sense to approach as wide an audience as possible.

Jajah has opted for the latter course, building agnostic solutions that allow it to partner with carriers across the boards, but Naphtali said this is not the only path.

"There are going to be a whole raft of possible partnerships," he said. "It’s all on the table for this year."

Some may choose not to partner at all, to continue hawking their wares in the direct-to-consumer market.

"We don’t think that is the viable solution," Naphtali said. "Telecom is the second-biggest industry in the world after oil, and they are not stupid, so why take them on when they are ready to partner with companies who are telco friendly?"

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