Disruption by WhatsApp: New Opportunities and Challenges

New opportunities and challenges for both the electronic communications business and regulators: All electronic communications services (radio, television, on demand content services, film, text messaging, voice telephony) are now  digital and can be stored, transported and delivered in data packages over the Internet using the internet protocol. At the same time, all competing electronic communication infrastructures can now deliver those data packages to end users (a development already predicted in 2004 by Ad van Loon, Founder & Owner of X-Media Strategies in an article on the end of the broadcasting era). On 24 February 2014, at the Mobile World Congress in Barcelona, Jan Koum, Founder of WhatsApp announced that WhatsApp will start offering voice telephony services in the second calendar quarter of this year. The service will be based on the internet protocol and therefore users will need mobile data access (instead of access to a GSM or other type of mobile network which is specifically designed for and dedicated to voice calls).

The large telecom groups already experienced an unexpected disruption of their revenue-generating text messaging services when WhatsApp was introduced. Now they fear that WhatsApp (with the power of Facebook behind it) will also succeed in offering global low cost mobile voice telephony services, which will affect the revenue-generating models of the telecom groups in this market as well. The cable industry, the film industry and the music industry have been experiencing similar disruptions.

Mr Koum reached out to the telecom groups indicating that WhatsApp is ready to work with them to develop new business models which would move customers to subscription plans and tariffs based purely on the use of data (regardless of the services included in those data). He said that WhasApp is already experimenting with the new reality in Germany where it intends to offer a co-branded service with KPNs E-Plus.

The cable industry was already warned for similar disruptions in the video market in 2006 (Arthur D. Little: ‘Next Generation Networks in Europe. Broadband in 2011 and beyond‘) and 2007 (Bain & Company: ‘The Digital Video Consumer. Transforming the European Video Content Market‘) and is therefore better prepared to meet the challenges.

Regulators will need to realise that all fixed and mobile electronic communications infrastructures will need to be capable of offering two-way high speed IP based data transfer services. This means, for example, that frequency spectrum should no longer be assigned on the basis of the types of services rendered (GSM for mobile voice telephone; 3G/4G for data; DVB for video; DAB for audio; etc.) but rather on the basis of the capability of providing the widest possible coverage and the highest possible transfer speeds of IP-based data packages. This will have severe implications for mobile operators and broadcasters and poses an enormous challenge to policymakers and regulators.

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