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WhatsApp Shows How Phone Carriers Lost Out on $33 Billion



Facebook Inc. (FB)’s $19 billion purchase of mobile-messaging startup WhatsApp Inc. is a stark reminder of how much money phone carriers are losing out on as competitors let users text and chat at no charge.

Free social-messaging applications like WhatsApp cost phone providers around the world — from Vodafone Group Plc (VOD) to America Movil SAB (AMXL) and Verizon Communications Corp. — $32.5 billion in texting fees in 2013, according to research from Ovum Ltd. That figure is projected to reach $54 billion by 2016.

As more customers have switched to smartphones with better Internet access, people are relying more on applications such as WhatsApp to communicate. Instant-messaging services have taken off outside the U.S. where carriers don’t throw unlimited texting into voice and data plans. The rise of these applications has offered a cheaper source of communication, especially for correspondence between different countries, undercutting the texts that had once been a key source of income for carriers worldwide.

“The trend has been that messaging is eating away into that revenue, in some countries more than others, and that trend will continue,” Chetan Sharma, an independent wireless analyst in Issaquah, Washington, said in an interview. “The impact of free messaging has been felt worldwide. WhatsApp has clearly been the cream of the crop.”

Representatives for Newbury, England-based Vodafone, Mexico City-based America Movil and Overland Park, Kansas-based Sprint Corp. (S) didn’t respond to requests for comment on the impact from free messaging applications. A representative for Dallas-based AT&T Inc. (T) declined to comment.

WhatsApp Growth

The Bloomberg World Telecommunications Index of 89 companies rose 0.6 percent today.

Facebook, the world’s largest social network, said this week that it’s buying WhatsApp in a deal that values each of its 450 million active monthly users at $42. Free for the first year and 99 cents annually thereafter, WhatsApp is almost always cheaper than texting, especially across national borders.

With a particularly strong following in Europe, India and Latin America, the service is rapidly displacing traditional text messaging as the preferred method for young people to stay in touch on mobile devices. Mark Zuckerberg, Facebook’s 29-year-old chief executive officer, said he expects WhatsApp to reach more than 1 billion people worldwide in the next few years.


WhatsApp, Rebtel, Viber, KakaoTalk and other services use the Internet to send data instead of a cellular network, allowing users to send text, multimedia and voice messages for free, or close to it.

Texting Decline

As free services continue to gain in popularity, U.S. text-messaging revenue will decline 3 percent to 4 percent this year from $21 billion in 2013, Sharma estimated. Globally, carriers’ texting revenues will peak by 2016 and then start to drop as well, he said.

The apps have eroded such revenue for several years and were a big reason why U.S. carriers began to include unlimited SMS in many of their service plans, Roger Entner, an analyst at Dedham, Massachusetts-based Recon Analytics LLC, said in an interview. The first SMS, or short message service, text was sent over Vodafone’s network in 1992.

“The wireless carriers were very concerned that WhatsApp and others would intermediate them,” Entner said. “So the wireless carriers found the most consumer-friendly solution — they gave it away, too. And that took away the incentive to join WhatsApp.”

Mexico Popularity

However, carriers in other parts of the world still charge high fees for texts, and their revenue will be affected as WhatsApp’s popularity spreads, Entner said.

In Mexico, for instance, almost 90 percent of all instant messaging goes through WhatsApp, according to Ernesto Piedras, director of the Competitive Intelligence Unit, a telecommunications consulting firm based in Mexico City.

“From about a year and a half ago, WhatsApp use in Mexico has become overwhelming,” he said in an interview. “It’s convenient to use, and the more people have it, the more people use it.”

Six to eight years ago, phone companies in Mexico generated about 15 percent of their revenue from text messaging, Piedras said. Now it’s less than half of that.

WhatsApp also had an impact in Holland, where carrier Royal KPN NV (KPN) didn’t offer free texts as a part of its bundles, Mark Little, a London-based consumer analyst at Ovum, said in an interview.

International Plans

“KPN’s SMS revenues plummeted because people used something better and free,” he said. “Other regions haven’t made the same mistake.”

Many carriers’ international-texting revenue may be in limbo. Five percent to 10 percent of U.S. wireless subscribers send a significant number of texts to friends and relatives overseas, Charles Golvin, an independent wireless analyst, said in an interview. They often pay 20 cents to 25 cents for a plain text message, and as much as 50 cents per multimedia message.

“Facebook might encourage U.S. users to be more aware of WhatsApp as an alternative,” Golvin said. “We might see the carriers start to reduce their fees for international messages, or bundle their international messages into a package.”

Most U.S. carriers have moved to flat-rate, unlimited text messaging offers. AT&T, for example, has a $10 a month plan that includes international texts. Users on that plan are limited to 100 messages and charged 20 cents per message afterward.

‘More Everything’

When asked about the threat to text-messaging revenue from apps like WhatsApp, Debi Lewis, a spokeswoman for New York-based Verizon, said the company includes unlimited messaging as part of its shared data plans. Last week, Verizon added unlimited international text and multimedia messaging to the “More Everything” pricing plans.

For Telus Corp., Canada’s second-biggest wireless operator, data charges account for 45 percent of its wireless network revenue, according to Joseph Natale, the Vancouver-based company’s chief commercial officer.

“Increasingly, we’re seeing customers use more applications for communication, whether they are text-based or social media-based applications or over-the-top type voice applications,” he said in an interview last week. “Over time, what will happen is that voice and text will become more of a feature attached to your data plan.”

“At some point everything becomes a data service,” Natale said.

Texting isn’t dying anytime soon, Ovum’s Little said.

“At the moment, the telcos have actually been responding to the use of free social messaging by including lots of free SMS in their” bundles, he said. “However, WhatsApp does offer a very sleek and simple, high-quality user experience that one might argue the old interface of SMS or texting doesn’t.”


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Google faces a fine of up to $11 billion for the way it ties Google Search and Chrome to the Android mobile operating system.


Google’s Android mobile operating system is based on open-source software, but some of the most useful parts of it – Maps and Search, for instance – are proprietary, and the company makes sure that anyone wanting to use those features has to use other services that make it money too.

If an investigation by the European Union’s antitrust authority finds that that behavior constitutes abuse of a dominant market position, it could expose Google to a fine of up to $11 billion.

While the fine won’t have much effect on Android users, device makers or service providers, the legal remedies that usually accompany such findings could mean bigger changes to the way Google licenses Android, and in particular access to its search tools and Play store.

If Google were forced to change those agreements, it could become easier for major phone manufacturers to sell devices with “forks” of the Android software that provide better security or privacy than Google’s default, or to include search engines or browsers better suited to the needs of businesses.

What the Android antitrust case is about

What most people see as the Android operating system is part open source, part proprietary. AOSP, the Android Open Source Project, is the core software that handles interactions with the phone hardware and allows calls and internet access over the wireless network. Anyone can use and develop it.

However, another key component is GMS, Google Mobile Services, which Google describes as “the best of Google.” It’s the part of a phone’s software that most people think of when they talk about Android, and includes Google’s voice-controlled mobile assistant; Maps and the Chrome browser; as well its Gmail, Youtube, Photos and chat apps. Most crucially of all, it includes the Google Play store, giving access to millions of other apps, games, movies and TV shows, music tracks and magazines.

You don’t have to pay to use or distribute GMS, but you do have to enter a license agreement with Google. Those agreements are at the heart of the case.

When did the EU start the Android antitrust case?

In April 2015, the European Commission opened a formal investigation into whether Google had breached EU antitrust rules by entering into anticompetitive agreements or abusing a possible dominant market position. Such actions could have hindered the development and market access of rival mobile operating systems, applications and services to the detriment of consumers and developers of innovative services and products, the Commission said at the time.

Android is the most-used mobile OS in Europe ahead of Apple’s iOS, as it was when the Commission began its investigation. Since then, however, two other competitors have dropped out of the smartphone software market: Microsoft Windows Mobile and BlackBerry OS.

  • The Commission focused its investigation on three allegations:
    Whether Google illegally hindered the development and market access of rival mobile applications or services by requiring or incentivising smartphone and tablet manufacturers to exclusively pre-install Google’s own applications or services;
  • Whether Google has prevented smartphone and tablet manufacturers who wish to install its applications and services on some of their Android devices from developing and marketing modified and potentially competing versions of Android (so-called “Android forks”) on other devices, thereby illegally hindering the development and market access of rival mobile operating systems and mobile applications or services;
  • And whether Google has illegally hindered the development and market access of rival applications and services by tying or bundling certain Google applications and services distributed on Android devices with other Google applications, services and/or application programming interfaces of Google.
European Union Competition Commissioner Margrethe Vestager, announcing formal antitrust charges against Google in Brussels in April 2015.

Has the EU formally charged Google?

In April 2016, EU Competition Commissioner Margrethe Vestager sent Google a “Statement of Objections” – formal charges that it expected the company to answer. It accused the company of a breach of EU antitrust rules, abusing its dominant position by imposing restrictions on Android device manufacturers and mobile network operators.

Google, it said, had implemented a strategy on mobile devices to preserve and strengthen its dominance in general internet search. That strategy meant Google Search was pre-installed and as the default or exclusive search service on most Android devices sold in Europe – and also prevented rival search engines using competing mobile browsers and operating systems to enter the market.

It also accused Google of giving smartphone manufacturers and mobile network operators financial incentives to exclusively pre-install Google Search on their devices, or of making such installation a condition for access to the Play store.

A Statement of Objections is a formal document issued by the European Union’s antitrust authority, the European Commission, in cases of anticompetitive practices or abuse of market dominance. It sets out how the Commission believes a company has breached EU law, and gives the company a chance to defend itself, either in writing or in an oral hearing.

The next steps

If, after reviewing the company’s response, the Commission still feels it has a case, it either invites the company to make formal commitments to remedy the situation, or it publishes a decision of its own imposing remedies, a fine, or both.

There’s no deadline for the Commission to complete its investigation, but indications from Brussels are that it will publish a decision in the Android case before August 2018.

In the Google Android case, the Commission could theoretically fine it up to $11 billion, or 10 percent of parent company Alphabet’s $110 billion worldwide revenue in 2017 – but recent antitrust fines have come nowhere near that level.

There’s a separate investigation ongoing into the company’s AdSense online advertising service, looking at the restrictions it places on the ability of third-party websites to display search ads from its competitors. That could expose the company to a similar-size fine.

And, of course, the Commission has already hit Google with one antitrust fine, for abusing the dominance of its search engine to promote its own comparison shopping services. That cost it $2.7 billion in June 2017, around 3% of its prior-year revenue.

Other recent fines for abuse of a dominant market position are in the same ballpark. In January 2018 it fined Qualcomm $1.2 billion, or just under 5% of annual revenue, while Intel’s $1.3 billion fine in June 2014 represented about 3.8% of revenue.

Given the nature of the Commission’s complaints, it could impose remedies requiring Google to change the way it licenses the GMS add-ons to Android, including its search engine and the Play store, or seek commitments from the company that it will make such changes.

That could mean mobile phones with access to the Play store, but with some other search engine or browser set as the default in place of Google Search or Chrome, appearing on the market from major manufacturers.





Source:  Computer World

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Samsung is back with its Samsung Carnival offers and discounts on smartphones, headphones, and speakers. While the company hosted the sale on Amazon in 2017, it brought the Samsung Carnival to Flipkart earlier this year. The sale features offers and discounts on several Samsung Galaxy lineup of handsets and other products. The latest sale on Flipkart started on Tuesday (June 12) and will go on till Thursday (June 14). Notably, the discounts come alongside other exchange benefits and no-cost EMI schemes. The major Galaxy handsets that are available with discounts during the latest sale include the Galaxy S8, Galaxy S8+, Galaxy On Nxt, Galaxy On Max, Galaxy On5, and Galaxy J3 Pro. Also, there are offers on Smart TV models, refrigerators, and other electronic products. It is worth noting that the ongoing Flipkart sale on Samsung products also provides 10 percent instant discount on HDFC Bank debit and credit card transactions as well as EMIs.

During the Samsung Carnival sale on Flipkart, the Galaxy S8 is available with a Rs. 12,000 discount and is priced at Rs. 37,990. Meanwhile, the Galaxy S8+ is available with a Rs. 10,000 discount and will cost Rs. 43,990. Additionally, the Galaxy On Nxt 64GB inbuilt storage variant comes at a price of Rs. 10,900, down from the launch price of Rs. 17,900. Also, the 16GB inbuilt storage model of the smartphone can be purchased with a Rs. 2,009 discount, priced at Rs. 8,990.

Interested buyers looking for an affordable Galaxy model can go for the Galaxy J3 Pro 2GB RAM/ 16GB storage at Rs. 6,690, down from the launch price of Rs. 8,490. Flipkart has also listed the Galaxy S7 Edge 32GB variant at Rs. 32,900, down from the original price of Rs. 41,900. The smartphone had received an official price cut in February and is formally available with a starting price of Rs. 35,900. Also, the Galaxy On5 is available at Rs. 5,999, down from Rs. 8,990.

Apart from the discounts on smartphones, the Samsung Carnival sale on Flipkart features consumer durables as well, including the 32-inch Samsung 32J4003 Flat HD TV that is available at Rs. 16,999. Also, Samsung’s Smart Convertible 5-in-1 Refrigerators are available for purchase with prices starting at Rs. 16,040.

The Samsung Carnival sale on Flipkart also features discounts on Samsung headphones and speakers, up to 50 percent discount on Samsung mobile accessories, cases, and chargers, and up to 40 percent discount on select Samsung monitors. Notably, the Gear Fit 2 Pro is now available at Rs. 10,990, down from the launch price of Rs. 13,590.

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