Joyn is SMS version 2.0, but will it help carriers stem the OTT tide?

Mike Dano

Remember SMS? Wireless carriers sure do. Text messages cost 10 cents each and require virtually nothing in the way of network resources. Compare that with the falling price of a MB of data and the rising expenses associated with pacing users' demands for data connections. Wireless carriers loved the solid profits that SMS used to deliver--and that's why they're rallying around joyn.

Announced at this year's Mobile World Congress trade show, joyn is the marketing name given to the GSMA's Rich Communications Services effort. RCS has been around for years--the standard is now heading into its fifth release--but it's now being positioned as a response to the dramatic growth of third-party, over-the-top IP messaging services like WhatsApp, Apple's (NASDAQ:AAPL) iMessage and Facebook's Messenger. Such services eliminate the need for users to pay for operators' SMS services and, perhaps more critically, push carriers further into the background of users' communication activities.

Indeed, recent figures from Ovum indicate that consumers' increasing use of IP-based messaging services on their smartphones cost telecom operators $8.7 billion in lost SMS revenues in 2010, and $13.9 billion in 2011.

"We haven't done any innovation around communications services for years now," admitted Petja Heimbach, vice president of next generation communications services at Deutsche Telekom and a primary player in the joyn effort. Heimbach's comment reflects a surprisingly candid attitude toward the situation: He acknowledged that OTT messaging apps like WhatsApp represent a potentially significant threat to carriers' profits, and that wireless operators so far have done little to prevent users from moving to third-party messaging services.

So what exactly will joyn do to reverse the tide? Heimbach explained that, at launch, it will offer three key services:

1.       Video sharing during a voice call,

2.       Multimedia chat,

3.       And file transferring, including during a voice call.

The benefits of joyn are probably best explained in this Vodafone promo video for the service.

For anyone familiar with iMessage, BlackBerry Messenger and other, similar services, this doesn't sound like much. But Heimbach explained that joyn will work exactly like SMS: It won't require anyone to sign up for the service, it will rely on phone numbers and users' address books as connection points and it will automatically work across any phone with the proper software.

According to the GSMA, HTC, Huawei, LG, Nokia (NYSE:NOK), Research In Motion (NASDAQ:RIMM), Samsung, Sony and ZTE are all in various stages of putting the software into their phones. On the operator side, AT&T Mobility (NYSE:T), Bell Mobility, Bharti Airtel, Deutsche Telekom, KPN, KT, LGU+, Orange, Orascom Telecom, Rogers Communications, SFR, SK Telecom, Telecom Italia, Telefónica, TeliaSonera, Telus, Verizon Wireless (NYSE:VZ) and Vodafone have all pledged to support joyn. Several European operators have committed to commercial service launches this summer. In the United States, AT&T didn't respond to questions on the topic, while Verizon declined to comment beyond the GSMA's release. Sprint Nextel (NYSE:S), which is not listed as supporting joyn, said it didn't have anything to announce on the issue. And T-Mobile USA didn't respond to requests for comment on its support of joyn.

Not surprisingly, the general consensus among analysts on joyn is decidedly negative.

"On joyn, we found skepticism among executives in our conversations," wrote Rutberg analyst Rajeev Chand in a recent assessment. "One operator executive stated, 'The problem with joyn is that operators need to get together and form committees to make decisions. How can that process compete with the pace of innovation from startups?' Further, operators and startups have very different objectives. Whereas operators focus on 'how to charge' for RCS, entrepreneurs focus on 'how to get adoption' for their OTT services."

"The initiative is gathering momentum and services are close to becoming a commercial reality," wrote CCS Insight analysts in a recent assessment on joyn. "Mobile operators will be able to compete with Internet service providers, but we are skeptical that RCS will generate meaningful revenue. Operators in emerging markets will fare better thanks to the absence of smartphones and limited availability of alternative communication services."

Chand concluded that the only way joyn can succeed is if operators work together to deploy the technology and ensure it works as advertised. "You can actually make big, big, differences. You can do global change if you get all the operators working together," he said, cautioning: "It's going to be very hard to succeed in this OTT world on a stand-alone operator basis."

If that's true, recent history indicates joyn may not be worth betting on. Do you remember the GSMA's push in 2008 to define common metrics and measurement processes for mobile advertising? Vodafone Group, Telefónica O2 Europe, T-Mobile International, FT-Orange Group and 3 all supported the effort. It has since slipped quietly into obsolescence, where many believe the Wholesale Applications Community and Isis are headed also.

"The operators are waking up and finding out their strengths." DT's Heimbach said of joyn. He said joyn helps prove that "we are operators are credible innovators in the market."

However, Heimbach said third parties like WhatsApp will always be able to innovate faster than a group of carriers. He said this shouldn't affect joyn though since it will work across all supporting phones and networks. He also said joyn service would be available to third-party developers, and that joyn is "carrier grade," a selling point that probably won't make much difference to the average user.

Heimbach's argument is relatively compelling, as far as carrier initiatives go. At least joyn is in the communications and messaging space, where it makes sense for wireless carriers to invest. (Unlike Isis and mobile payments--why should wireless carriers be involved in my financial transactions?) But I think Heimbach's line of reasoning falls apart when it comes to pricing. He said European carriers expect to implement "clever pricing" when they launch joyn this summer, though he declined to provide details. I don't care how clever the pricing is--it can't beat free, which is how much all of the other OTT messaging apps currently cost.

Joyn is a respectable answer to OTT messaging, and it may well garner some interest among users. But given the choice between "carrier grade" and free, I'm going to choose free every time. +Mike Dano