Competing with Free: Learning from Silicon Valley

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The Un-Carrier also offers free in-air text messaging and free international texting and mobile data, which is relatively unheard of.

Facebook began eating into the SMS pie with Facebook Messenger, and then purchased WhatsApp, along with its 800 million users. The next logical step was to integrate voice and video, which it now does, enabling users to chat, talk, or video call each other for free. Users never have to leave the Facebook or WhatApp apps to engage with these additional services. Compared to the native dialer and messaging apps that come stock from the mobile operator, this is more convenient.

For Facebook, and many others, it’s all about time spent on the platform and the potential to integrate additional services, such as mobile payments. CSPs should explore these kinds of revenue models, which build premium on top of free services.

Telecom API: GENBAND and Twilio

Many analysts see the API (Application Programming Interface) as a key to the future of telecommunication services. By creating a platform that allows developers to program access to services such as SMS, voice, and instant messaging, innovation can be rapidly accelerated. There’s only one problem: telcos haven’t successfully driven their revenues with APIs. Enter two companies who have an answer: GENBAND and Twilio.

In case you haven’t been watching, Twilio, which says 700,000 developers now use its platform, got really big, really fast. The company is valued at more than $1 billion, and according to Jeff Lawson, Twilio CEO, the company adds an additional $1 million in revenue per week.

What CSPs can learn from Twilio is the power of the developer community. It’s no secret that CSPs move slowly when it comes to service innovation. By engaging with a massive community of developers, the Twilio API can be plugged into millions of use cases, like the talking toasters Pipeline covered last month. The point is that communications must be viewed as an enabling technology of future use cases, not the end service.

GENBAND is also hot on the heels of traditional telco. In fact, the company was ranked ahead of Twilio on the CNBC Top 50 Disrupter list earlier this year. Unlike Twilio, GENBAND is more focused on transforming the telco. As CNBC summarized, GENBAND is "disrupting telecom by helping the disrupted." The company is a leader in real-time-communications, with the fring alliance and KANDY, its communications platform-as-a-service. When it comes to telephony and communication, GENBAND's offerings definitely support the creation of a free model for such services.

Microsoft

No discussion of competitive threats is complete without Microsoft. Aside from essentially owning the business space with its entrenched user base of Office and Outlook users, Microsoft took a big stab at telecom with the purchase of Skype. The Skype user base is massive and global, and Skype has been the leading carrier of international voice telephony for years. Microsoft has made three significant moves. First, it has integrated Skype into its Office and Outlook products, including the cloud variations, to keep everything “under one roof,” similar to Facebook’s strategy. Second, it has monetized the free service with in-app ads. And third, it has monetized connectivity with Skype Wi-Fi, which is essentially a Skype front-end for premium hot spots.

Value-added freebies

Sweetening bundles and offerings with value-added services is another way to attract and retain customers and improve the customer experience. For small business customers, service providers should play the role of business partner, such as evidenced by Verizon’s SMB unit. Popular offerings from Verizon include e-learning, webinars, a small business blog, and partner discounts, like savings at office supply stores. For consumers, zero-rating the most popular apps is an effective strategy that has the added benefit of enabling the service provider to lean on a third-party to offset mobile data costs.