Does RCS threaten WhatsApp and SMS dominance in enterprise messaging in India?

The SMS and WhatsApp dominance in the Indian enterprise messaging space might soon be a thing of the past. With Samsung and Apple recently announcing support for Rich Communications Services (RCS), a change is expected in the enterprise messaging market in the country.

A key development for the growing RCS ecosystem is the support by tech giant Apple, which recently announced that it would be bringing the RCS messaging standard to iPhones later this year with iOS18. This will allow iOS and Android users to communicate with each other without the need for third-party messaging apps. In addition, there is evidence of growing support from the service providers and the Indian government for RCS adoption.   

RCS is an advanced version of SMS with support for high-resolution images and videos, read receipts, group chats and end-to-end encryption, among other features.

WhatsApp rate cut

The first of the changes are already visible with Meta's WhatsApp announcing a massive price cut of around 63% for enterprise messaging to counter the growing competition from Google and Apple's imminent entry in this segment later this year.

"Effective August 1, 2024, we are lowering rates to be competitive with alternative channels and encourage businesses to bring more end-to-end post-purchase customer journeys to WhatsApp," said Meta, WhatsApp's parent company, in a recent blog post. The new rates are applicable for One-Time Authentication (OTP), order/delivery management, account updates, payment reminders or feedback surveys.

"WhatsApp slashing utility and conversation API pricing by more than 50% on average will kickstart a pricing war in this burgeoning conversational business messaging segment in India. The RCS being natively supported in Android phones though subject to OEMs [original equipment manufacturers] and carriers' support has been proliferating across Android as Google's push along with Apple showcasing support for the RCS functionality in iOS18 has forced Meta to make a move to protect its share," said Neil Shah, Vice President of Research at Counterpoint Research.

"WhatsApp's recent 63% price cut for utility messaging in India aims to make it a cheaper alternative to traditional SMS and RCS for one-time authentication, order updates, and similar uses. However, WhatsApp has increased the rates for marketing messages to curb spam. Despite this, SMS remains a dominant alternative for critical communications from banks and government bodies in India," said Avinash Naga, research manager, network and telecommunications at IDC.

Telco support

What further helps RCS is the support from the telcos and the government. Vodafone Idea, India's third-largest service provider, has recently partnered with Google. "The competitive landscape is shifting with Google's collaboration with Vodafone Idea to promote RCS as an operator-controlled messaging ecosystem, and Apple's upcoming integration of RCS into iOS 18 … These developments could challenge WhatsApp's dominance and intensify competition, particularly as major telecom operators like Reliance Jio and Bharti Airtel are expected to further engage with RCS," Naga said.

Indian telcos, through the Cellular Operators Association of India (COAI), recently voiced concerns about enterprises "circumventing and bypassing the legal telecom route" by using WhatsApp and other unregulated platforms to send enterprise messages to customers. According to media reports, COAI has asked the government to declare platforms like WhatsApp an "illegitimate route" for enterprise communication in a letter to the Telecom Secretary. It also highlighted security concerns relating to the sending OTPs through WhatsApp and other similar platforms.

Telcos have also been demanding "same service same rules" for over-the-top platforms like WhatsApp, because both offer similar services, but OTTs are not contributing in building digital infrastructure. In this context, it is hardly surprising that the service providers want to support RCS.

"The issue with WhatsApp is that it is unregulated. There are a lot of data residency issues between Meta and the Indian government. In addition, service providers are losing revenue to WhatsApp. Currently, in WhatsApp, no stakeholder makes money, whereas with RCS all actors in the value chain from carriers to SMS aggregators do make money and the government gets to regulate it better," said Nitin Seth, founder and CEO at Conversive, a digital messaging company. 

"Integration of RCS by major telecom operators and Apple's upcoming support could reshape enterprise messaging dynamics in India, presenting both opportunities and challenges for WhatsApp," said Naga.

Despite several market forces aligning in favor of RCS, it will take some time for it to become a mainstream technology. With over 400 million users, WhatsApp is one of the most popular messaging platforms in India and challenging its dominance will take time. 

"RCS is a new technology and just like other mobile technologies, it will take time for acceptability from key players. Mobile operators like Jio, Vodafone and Bharti Airtel are promoting it and mobile platforms like Google's Android and Apple's iOS are adopting RCS, so yes, it can actually replace WhatsApp and can be a good upgrade to the plain old SMS," commented Seth.

"However, it depends on how the intermediary CPaaS [communication platform as a service] or BSP [business solution provider] platforms such as Tanla, Gupshup, Sinch, Infobip, Exotel and Kaleyra price to businesses for the platform which comes with extra value adds from multi-lingual AI chatbots, automation to analytics," said Shah.

In the end, RCS may not completely replace WhatsApp or SMS but will emerge as another way for Indian businesses to reach their customers.