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Carriers threatened by handset makers binding customers to their brand

By Carsten Brinkschulte

The battle between device manufacturers, Internet communities and wireless carriers to own the identities of end-user subscribers is heating up.

Device-specific services such as Nokia’s Ovi, Apple’s iTunes and the Google Android Market app store are rapidly threatening to reduce carriers to bit pipes that have little differentiation beyond their speed of data transmission and what they charge per megabyte.

Many players in the market underestimate the power that messaging and social network services have on the purchasing decision that consumers make when choosing a mobile device.

In fact, there is now evidence that subscribers in the high-growth emerging market regions are increasingly being targeted by consumer-focused marketing and advertising campaigns that push device-specific services.

Fighting chance
Carriers should take note: mobile messaging services such instant messaging are highly addictive services.

Recognizing this, premium device manufacturers are evolving their products into new closed social networks which intend to bind users to their brand.

If handset manufacturers succeed in binding customers ever closer to their brand, it is the carriers that will lose out, as subscribers will simply look for the cheapest network provider and cut-throat price wars will inevitably result.

Carriers, however, can fight back.

There is a definite window for carriers to act to retain the billing relationship with the user by promoting their own value-added services which, in turn, will also help with the problem of churn.

Mobile value-added such as IM and email present a perfect opportunity to fight against the onslaught of the device manufacturers.

Carriers in emerging regions are now increasingly looking to mitigate this threat with carrier-hosted, device-neutral value-added services and carrier-branded devices that, if chosen and marketed correctly, can build stronger customer relationships.

In many emerging markets people still do not have an instant messaging identity and often do not even have an email address. Carriers are therefore creating carrier-branded IM and email identities for these customers.

Once subscribers start using the carrier-branded IM and email IDs and addresses, the likelihood of them defecting to a rival carrier and having to change email and IM IDs is greatly reduced.

So, does it really work?

Mexican standoff
In Mexico, America Movil has successfully reduced churn by offering customers a Telcel-branded IM service.

With its dominant market share, Telcel was in an ideal position to protect its market leadership by creating a Telcel-branded IM community.

In a nutshell, Telcel’s customers can have access to the ‘Msngr Telcel’ service which rivals many of the best features of regular IM.

By creating IM identities for its customers, Telcel bound the messaging service to the brand and made churning to a rival carrier unappealing for its customers who did not want to lose access to their IM contacts.

In emerging markets, where up to 60 per cent of people do not yet have an Email address, carriers have achieved similar results with mobile email services.

Smaller carriers can benefit from going down this route, too.

The key is to offer a messaging solution that addresses a high proportion of the user base. If a solution works only on a small number of handsets then it will not be an effective weapon against churn.

Messaging solutions that work on almost any phone in the market today – from smartphones right down to basic phone – will provide a high addressable market.

The best mobile messaging solutions allow even users of basic handsets to send and receive emails and, for example, FaceBook Chat messaging using email-to-MMS or email-to-SMS gateway.

Pipe up
Carriers now need to make strong plays against device manufacturers to defend against the real threat of being reduced to a dumb bit pipe.

Emerging market carriers such as Telcel are demonstrating today that mobile value-added services, if chosen and marketed correctly, can bind services to the brand, retain billing services and reduce the risk of churn to rival carriers.

Carsten Brinkschulte is CEO of Synchronica, Tunbridge Wells, England. Reach him at [email protected].