Telcos Must Work With the Messaging Ecosystem to Maximize Revenues From 5G

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Summary

While much of the focus around 5G is about super-sized networks and super-sexy apps, telcos should not discount the potential that 5G holds for refreshing their legacy messaging services. 5G Messaging is not just about service continuity, it is also about enriching consumers’ interactions with brands, and keeping telco messaging in the mix for the growing market in machine-to-machine and human-to-machine communications (massive IoT). Achieving the full potential of 5G Messaging will require a strong ecosystem with committed partners across the value chain.

With 5G Messaging telcos can consolidate 5G services, generate revenues, and innovate

SMS will be a key consumer service for some years to come, and so telcos will need to not only support it in 5G, but make sure that 5G SMS is remains compatible with SMS delivered over their legacy 4G, 3G and 2G networks. But that doesn’t mean that 5G SMS remains a cost center only for telcos. Telcos will need to continue to support SMS in 5G because A2P SMS is also set to remain a high-value revenue-generating service. Omdia forecasts that A2P SMS will generate $101bn in revenues by 2025 (see Fig. 1).

Figure 1: Fig. 1: Global, A2P SMS revenues, 2018-25 Source: Omdia

5G Messaging is also about Rich Messaging, which is realized in Rich Communications Services (RCS) Universal Profile 2.5. 5G Rich Messaging will enable telcos to offer consumers and brands a richer messaging experience, using richer media, conversational messaging, rich cards and carousels, chatbots, location and payments - making it a much more compelling customer engagement channel than SMS. Case studies of marketing campaigns using both SMS and RCS have shown that RCS generates higher customer engagement than SMS, in the realms of at least seven times the engagement rate of SMS, or even higher.

5G Rich Messaging does have its challenges in terms of achieving reach and interconnectivity – there are less than 100 telco RCS deployments, not all of which enable A2P RCS/5G Rich Messaging, yet. But some of the world’s largest telcos and telco groups that have launched 5G have also previously launched RCS services, including Vodafone, Orange, Deutsche Telekom, China Mobile and AT&T. RCS has also gone ‘gold’ in five countries – Japan, the US, Canada, Germany and Brazil - where all telcos have launched the service. China will follow soon, with China Telecom and China Unicom expected to launch 5G Messaging in 2021.

In addition, Google is enabling RCS in more countries with its Guest offering, through which subscribers can use its Google Chat RCS-based service until their telco launches 5G Messaging/RCS. Guest is officially available in France, Mexico, Spain, the US and the UK, but is reportedly available in over 30 other markets. The service extends the geographic reach of RCS even further.

Also, the ecosystem of SMS aggregators, connectivity service providers, hosting providers, and mobile engagement platforms that have been integral to the ongoing success of A2P SMS is also fully behind enabling 5G Messaging or RCS-based interactions between brands and consumers. These companies have not waited for full-country telco rollouts of RCS to launch rich messaging campaigns. Finally, at a standards level, the GSM Association has mandated that all 5G devices must support RCS natively and is positioning RCS as the 5G messaging service upgrade from SMS.

SMS’ role in the M2M/IoT market must also be upgraded in 5G, if the promise of massive IoT is to be realized. Like SMS, 5G Messaging can be used as a connectivity service for interactions between machines, and interactions between consumers and connected devices. Connected IoT device volumes are expected to double from 12.7bn devices in 2020, to 25.44bn by 2024, and global connectivity revenues – to which SMS contributes - will also grow from $67bn in 2020, to $109.5bn by 2024. While most IoT connectivity will be over data connections, SMS will still play a role through, for example, ‘waking up’ devices, or as a comms channel where 5G data coverage is poor.

Telcos should not roll out 5G Messaging in isolation

Telcos should consider the benefits of developing a coherent strategy for 5G Messaging that encapsulates how they roll out telco-based messaging services across their 5G networks and devices, and how these services map to the consumer, enterprise and connected devices markets. But it’s not something that telcos can do in isolation, because their decisions will have implications for other players in the value chain, and also because working with partners can help unlock innovation in the development of new services and business models. Just as an ecosystem has evolved around P2P and A2P SMS, so too will an ecosystem develop around 5G Messaging - likely containing many of the same players, but also providing an opportunity for new partners to participate.

— Pamela Clark-Dickson, Principal Analyst, Advanced Messaging and Communications, Service Provider - Consumer, Omdia

This blog is sponsored by ZTE.