Facebook's WhatsApp Acquisition Illustrates Telco Challenges

By Gary Kim February 21, 2014

Facebook’s acquisition of WhatsApp illustrates the magnitude of challenges faced by mobile service providers committed to branded over the top messaging platforms of their own. 

At 450 million users, headed for a billion, WhatsApp will be hard to challenge, as network effects increase the value of using WhatsApp rather than any of the smaller apps.

Orange, with its Libon communications app, now will allow users to chat and share with all of their contacts, regardless of whether they have the app installed. In principle, that addresses the network effect limitation typical of most OTT messaging apps, namely the need for use of the same app.

Libon users now can send instant messages to any of their contacts, regardless of what messaging service they use, or whether they use none at all.

As long as their contact has a mobile or tablet with an HTML5 browser, Libon can share a chat session with that person.

Libon also offers free and unlimited high definition voice over IP calls between Libon users on Wi-Fi or, with the premium option, calls to any landline or mobile in more than 40 countries, as well as smart visual voicemail, Orange says.

Libon also will become the group’s consumer app for all joyn-enabled services at Orange. Joyn is the mobile service provider messaging app standard.

Orange has launched joyn in France and Spain, and is conducting trials in Luxembourg, Poland, Romania and Slovakia with more countries to come throughout 2014.

But mobile service providers face a version of that same problem--scale and network effects--in most new lines of business they are attempting to grow. From Internet of Things services to mobile payments,

Mobile service providers have pinned their hopes in mobile payments on near field communications and use of the subscriber information module as the data store, in order to create a new role for themselves in the retail payments ecosystem.

Now Visa and Mastercard have thrown key support behind a cloud-based approach using Google's Host Card Emulation (HCE) platform.

HCE allows any NFC application on an Android device to emulate a smart card, letting users wave-to-pay with their smartphones, while permitting financial institutions to host payment accounts in a secure, virtual cloud.

By doing so, Visa and Mastercard mobile payment systems simply bypass the SIM card and NFC chip, and will instead verify mobile transactions in the cloud, using the HCE technology in Android.

In a clear sense, mobile operators are finding that success in mobile payments, machine to machine service, the Internet of Things, content services, messaging and other applications now  requires working as part of an ecosystem, not as closed providers of fully-owned apps.

That might require a shift to horizontal provision of functions, not vertical ownership of full services. 

Edited by Cassandra Tucker

Contributing Editor

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