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Telcos' Opportunities for RCS in

the Enterprise
Consumer take-up lackluster but GSMA and
Google provide RCS boost

Publication Date: 26 Oct 2017 | Product code: TE0003-001070

Pamela Clark-Dickson
Telcos' Opportunities for RCS in the Enterprise

Summary
In brief
The partnership between internet giant Google, telco industry body the GSM Association (GSMA),
and global operators to develop and facilitate the adoption of enhanced communication services
based on the GSMA's Rich Communication Services (RCS) specifications is beginning to bear fruit.
Consumer adoption of RCS services is growing, and the ecosystem for RCS-based application-to-
consumer (A2P) communications is starting to take shape. Telcos may have lost the initiative on
person-to-person (P2P) to chat, but they still hold the whip hand in A2P, due to the popularity of SMS
as an enterprise messaging communications channel. Android Messages and the RCS Universal
Profile has opened a brief window of opportunity for telcos, and, as with P2P SMS, it is an opportunity
that is theirs to lose.

Ovum view
Mobile operators have been reticent in engaging with RCS, and monthly active users
(MAUs) remain low by comparison with chat apps. The rapid development and growth of
chat apps resulted in a crisis of confidence among telcos as to whether or how they
should upgrade their legacy voice and messaging services. Relatively few mobile operators
outside of the large operator groups (Vodafone, Deutsche Telecom, Telefonica, and Orange)
have launched RCS services.
The reinvigoration of RCS over the past two years is primarily down to Google, via its
acquisition of Jibe Mobile in September 2015. Google has pushed the GSMA and
participating telcos and OEMs to unify behind the RCS Universal Profile for Advanced
Communications. It has also developed the Android Messages native RCS messaging client
and introduced an Early Access Program (EAP) to facilitate business use of RCS via
messaging-as-a-platform (MaaP), and it is enabling RCS interconnection between operators
via the Jibe hub.
Telcos may have dropped the ball on P2P communications, but there is still everything
to play for in A2P; a successful transition from SMS may even help RCS's chances in
the consumer market. RCS Universal Profile Release 2 enables enterprises to use rich
communications to engage with customers, building on the existing A2P SMS ecosystem. A
good user experience with a brand via its RCS-based campaign may encourage further
consumer adoption of RCS. However, brands also want the widest possible reach, which RCS
may not have in the markets that brands are targeting. Lack of reach could be an inhibitor for
enterprises, even given RCS's capability for fallback to SMS.
Telcos will be unable to charge consumers for RCS services, but they could generate
revenues from enterprises. Chat apps already offer free in-app messaging, voice, and video
calling, which precludes telcos from charging their customers to access these services in
Android Messages. However, assuming telcos can play a similar role in the RCS-based MaaP
ecosystem as they do in the A2P SMS ecosystem, they should be able to generate revenues
from business use of RCS.

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Telcos' Opportunities for RCS in the Enterprise

RCS still faces significant challenges. These challenges include building scale, enabling
interconnection, concerns about Google taking a role in the RCS ecosystem, and Apple's lack
of support for RCS.

Recommendations
Given that momentum appears to be building around RCS due to the involvement of
Google, telcos should decide whether it makes sense for them to also launch RCS
services. Chat apps such as WhatsApp, Facebook Messenger, and WeChat are now of such
scale that it is difficult to see their position in the market diminishing. Telcos need to decide
whether it is viable for them to respond to the challenge of chat apps by upgrading their own
consumer communications offerings, before it is too late to take meaningful action.
To ensure standards harmonization and maximum effectiveness, telcos should launch
services based on the RCS Universal Profile, rather than on earlier versions of the
standard (such as Blackbird). Scalewill be vital to the success of services based on the
RCS Universal Profile, and this can only be achieved by telcos offering RCS services that are
interoperable with those offered by other networks.
Telcos should be aware that Google is not the only player in town. Samsung is also
offering an RCS platform, including clients, application servers, a hub, and a monetization
platform, which are based on the RCS Universal Profile. Telcos wary of working with Google
have an alternative option in Samsung, and they can also develop their own platforms.

Market status
Operator deployment and consumer take-up of RCS services
have been slow
Services based on the GSMA's RCS had amassed only 137 million MAUs globally by June 2017,
despite the efforts of the tier-1 European-headquartered operators Vodafone, Deutsche Telekom,
Orange, and Telefonica, the efforts of the US telcos Sprint, T-Mobile USA, and AT&T, and the more
recent active participation of Google. And even though these telcos launched RCS services some
time ago, they appear to have been leapfrogged in terms of user numbers by Indian operator Reliance
Jio, a new entrant that launched commercial services, including the Jio4GVoice RCS service, on its
LTE 4G network in September 2016.

By February 2017, Jio4GVoice, also known as JioVoice, had been downloaded from Google Play 50.8
million times and had more than 25 million weekly active users, according to Mathew Oommen, the
telco's president of network global strategy and service development, speaking at the GSMA's
Network 2020 seminar at Mobile World Congress (MWC) 2017 in Barcelona. T-Mobile USA is the only
other telco to have publicly announced KPIs for an RCS service, stating in February 2016 that it had
5.5 million users of its Advanced Messaging service, sending 40 million messages a day (for a run
rate of 14.6 billion messages a year). The telco has not made more recent data available.

Progress on RCS has been achingly slow since the initiative was first mooted in 2007, two years
before the launch of WhatsApp, which aimed to replace the (then) relatively expensive SMS with an
internet-based messaging service. 10 years on, WhatsApp is the world's biggest chat app, with 1.2

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Telcos' Opportunities for RCS in the Enterprise

billion global MAUs. Facebook Messenger, WhatsApp's sister app, also has 1.2 billion global MAUs,
while China's WeChat has 938 million MAUs. The capabilities of chat apps have also leapfrogged
traditional telco voice and messaging services, with many now operating as platforms for content and
commerce, as well as communications.

The first RCS services launched in Spain and South Korea in 4Q12. However, as of end-2Q17, only
51 operators globally offered commercial RCS-services, according to Ovums Enhanced Telco
Communication Services Tracker: 2Q17 (see Figure 1), and two of the three South Korean operators
had discontinued their services.
Figure 1: Global distribution of commercial RCS services, end-2Q17

Source: Ovum

Frustratingly for the telco industry, the RCS concept of providing universally connected enhanced
messaging, voice, and video communication services preceded the development of all of today's key
chat apps except for Blackberry Messenger (BBM).

The consumer adoption of RCS has been plagued by inhibitors specific to the technology itself, such
as the lack of native availability of RCS on handsets, minimal interconnection between operator
services, and a fragmented, drawn-out approach to the development and adoption of the RCS
specifications. The latter resulted in a split between the European and North American telcos with
respect to the specifications used for RCS implementations. Also, the types of enhanced
communication services for consumers that were enabled in RCS pale by comparison to those offered
by chat apps such as WhatsApp, WeChat, and Facebook Messenger, which have achieved significant
adoption.

Another key inhibitor has been the attitude of mobile operators themselves, according to Dr. Petja
Heimbach, chair of the GSMA's IP Comms Leadership Team and VP of communications products at
Deutsche Telekom. Speaking at the Network 2020 seminar at MWC 2017, Dr. Heimbach said some
players thought that it was not possible for mobile operators to move from offering legacy voice and
messaging services to new communication services, leading to mobile operator reticence to
participate in RCS.

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Telcos' Opportunities for RCS in the Enterprise

Google's entry returns unity to fragmented RCS standards


Google's September 2015 acquisition of Jibe Mobile, an RCS platform and hubbing provider, and its
partnership with the GSMA and multiple telcos in February 2016 to create the RCS Universal Profile
for Advanced Messaging and develop an Android RCS client which is based on the Universal Profile,
appear to have returned an element of unity to the RCS initiative. As of July 2017, the RCS Universal
Profile for Advanced Messaging is backed by 60 telcos, 11 OEMs, and two OS providers (Microsoft
and Google). A significant proportion of the 60 telcos either are engaging with RCS for the first time or
have renewed their interest; these operators include China Mobile, Etisalat, Indosat, Megafon, Rogers
Communications, Telenor Group, Telstra, KPN, TIM, and Verizon. Meanwhile, the initiative's OEM
partners include leading Android device manufacturers, such as Samsung. For obvious reasons,
Apple is excluded. However, Apple has historically demurred to involvement in the RCS initiative,
likely because it does not believe there are any advantages for its business in enabling RCS services.

Since the launch of Release 1 of RCS Universal Profile for Advanced Messaging in November 2016
(see Table 1), and the relaunch of Android Messages (formerly Messenger for Android) as the Android
RCS client, nine telcos have either gone live with or committed to launching RCS services based on
the Universal Profile and Android Messages. These are: Sprint, Rogers Communications, Telenor
(which will launch in 13 markets in Europe and Asia), Vodafone (which is already live with Android
Messages in 10 European markets), Orange, Deutsche Telekom, Philippines operator Globe Telecom,
Cosmote Greece, and Celcom Malaysia. By comparison, in the 12 months to end-3Q16, just seven
operators (including four Vodafone opcos) went live with RCS services. At the time of writing, there
had been 50100 million downloads of Android Messages, up from 1050 million in November 2016.
Table 1: Key features of RCS Universal Profile for Advanced Messaging, Releases 1 and 2
Release 1 (November 2016) Release 2 (July 2017; additional features)

Capability discovery A2P messaging

Chat Chatbots

Group chat Plug-ins for third-party content

File transfer Rich cards

Audio messaging Privacy control

Video share Spam protection

Multi-device Smart reply

Enriched calling Action buttons

Location sharing

Live sketching

Source: GSMA

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Telcos' Opportunities for RCS in the Enterprise

Operators that have developed and deployed their own RCS clients based on previous versions of
the specifications, and specifically RCS Blackbird will continue to offer and support these services
as they go through the process of rolling out Android Messages and migrating users to it.

Even though relatively few consumers are engaging with RCS services, Google has been working
with the GSMA to develop RCS as a platform for enterprise messaging, otherwise known as the
messaging-as-a-platform (MaaP) initiative. MaaP is being positioned as an upgrade to A2P SMS,
which would enable businesses to send their customers RCS-based communications and content,
falling back to SMS for customers who do not have RCS-capable devices. It would also enable
businesses to develop use cases for RCS-based Internet of Things (IoT). In July 2017, the GSMA
announced the launch of RCS Universal Profile Release 2 (see Table 1), which adds the MaaP-
oriented specifications. The idea is that enhancing customers' communications experiences when
interacting with their service providers will help drive further consumer use of RCS services.

In a related development, just before MWC 2017, Google announced the launch of an Early Access
Program (EAP) for businesses, enabling enterprises and messaging connectivity providers to partner
on the development and testing of RCS enterprise messaging services (see Table 2). EAP
participants Virgin Trains, Walgreens, and Orange demonstrated RCS business messaging use cases
at MWC 2017, including chatbots. Again, the inclusion of chatbots on RCS has been a long time
coming, with RCS vendor Solaiemes (acquired by Comverse in 2014, and now part of Mavenir) first
demonstrating this capability for RCS in 2012.

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Telcos' Opportunities for RCS in the Enterprise

Table 2: Member companies, EAP for RCS business messaging


Connectivity/mobile engagement Mobile marketing platform and service Cloud communications providers
service providers providers

Aldeamo 3C Vonage (Nexmo)

CLX Communications Experian Marketing Zipwhip

CM Telecom IMImobile

ICF Olson Mobivity

Impact Mobile Movile Messaging

Link Mobility Take

MessageBird Vibes

mGage Waterfall

OpenMarket

SAP Digital Interconnect

Silverstreet

Zenvia

Source: Google

Market dynamics
After a slow start, Google has some of its ducks in a row
Google has faced its own challenges in developing a successful mobile communication app. It first
created several separate communication apps, including Google Talk, Google+ Messenger, Google
Voice, and Hangouts, before combining elements of each to create the Google Hangouts
communication platform. Unfortunately, none of these apps has been hugely successful by
comparison to the larger chat apps with which Google might have been expected to compete, given
its resources and scale. Following Google's launch of the standalone Allo smart messaging app and
Duo video chat app in 2H16, the company said in January 2017 that it would shut down the Google
Hangouts API, and pivot Hangouts to be more enterprise-focused.

In working with the GSMA and mobile operator partners on RCS, and in continuing to develop its own
standalone communication apps, Google is putting significant effort into achieving its goal of being a
dominant force in communication services on Android devices, which represented 86% of global
smartphone sales in 2016. Android Messages is being positioned as the default messaging client on
Android devices in the same way that iMessage is standard on iOS devices. A key priority for

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Telcos' Opportunities for RCS in the Enterprise

Android Messages has been delivering an upgrade to the SMS experience that is also interoperable;
achieving this is important for building scale of RCS services.

Google's work on RCS in 2016 focused on three key areas, says Amir Sarhangi, the company's head
of RCS: developing Android Messages as a native device client, consolidating its cloud RCS
capability, and enabling interconnection. It was important for Google to work on these areas since, for
the telcos, they represented barriers to adoption.

The key work tasks for Google with respect to Android Messages involved adding RCS capabilities
based on the Universal Profile for Advanced Messaging to its Messenger for Android app, which was
subsequently rebranded Android Messages to strengthen the consumer proposition. The app-based
approach to providing an RCS service means that new RCS features can be delivered as a software
update as they are developed or in response to customer feedback.

Concurrently, Google ported the Jibe RCS Cloud to the Google Cloud Platform. Jibe RCS Cloud is a
hosted service aimed at helping telcos to launch RCS services quickly and more easily; Sarhangi
says that this can be achieved in six to eight weeks, adding that the capability is already available in
six countries. Google recognizes that enabling operators to launch RCS services quickly is as critical
to achieving scale as the native availability of Android Messages on devices. Sprint, Rogers
Communications, Globe, Orange, Telenor, and Deutsche Telekom either use the Jibe RCS Cloud
already or have committed to doing so.

Google also wants to help the GSMA achieve the same kind of universal connectivity that legacy telco
services such as SMS and voice enjoy today, and again, the Jibe RCS Cloud will play a role in this, as
it enables hubbing for RCS services. Telcos that deploy RCS services based on the Jibe cloud
platform will also automatically have access to the Jibe's RCS hub.
Sprint is first off the mark with the new RCS Universal Profile
US operator Sprint was the first telco to launch the Android Messages enhanced messaging service
based on the RCS Universal Profile for Advanced Messaging, in November 2016. Sprint is pitching
Android Messages as an upgrade to SMS, in that it keeps SMS but adds features such as group chat,
photo sharing, and read receipts. Initially, Sprint enabled the service as an update on selected LG and
Nexus devices, while owners of other types of Android devices were required to download Android
Messages from Google Play. However, from 2017, all new Android devices from Sprint will come with
Android Messages as the default messaging client, removing a significant entry barrier to RCS to
date: convincing mobile users to download and use an RCS app.

Android Messages is not Sprint's first foray into RCS services. The telco is already offering the RCS-
based Messaging Plus for Android and iOS, which enables chat and group chat, voice and video
calling, and the sharing of content and location. Sprint partnered with Google's RCS platform provider
subsidiary, Jibe, to offer Messaging Plus, but it is unclear whether Sprint means to continue offering
this service.
Google's partnership with Telenor is a big deal
Google's partnership with Telenor for RCS means that Telenor subscribers who already have Android
Messages will receive the RCS capabilities through an app update, while those who do not can
download the app from Google Play. Also, new Android devices available through Telenor will come
preloaded with Android Messages as the default messaging app, meaning that the combined RCS-

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Telcos' Opportunities for RCS in the Enterprise

SMS capabilities will be available natively to users (like iMessage), and that they will be available
across multiple handset makes and models (unlike iMessage).

Google's partnership with Telenor to roll out RCS services in 13 markets across Europe and Asia will
make it the second-largest deployment of RCS services at a telco-group level behind Vodafone, which
has launched its Message+ and Call+ service in 14 markets in Europe, and Android Messages in 10
European markets. Telenor launched Android Messages in Norway in June 2017.

But it's not just about Google: Samsung wants in on RCS, too
Samsung also announced at MWC 2017 that it will expand the availability of its RCS platform, based
on its acquisition of vendor NewNet Communications Technologies. Like Google's Jibe, the NewNet
platform includes native and downloadable RCS clients, cloud-based RCS application services, an
RCS hub, and a monetization platform. Samsung will be able to add its own Android-based handsets
into the equation as well, with all future Samsung smartphones running Android Marshmallow or later
including native RCS messaging capabilities based on the Universal Profile for Advanced Messaging
(not Android Messages). Earlier-model Samsung Android devices will have access to the same
capabilities via a downloadable client.

Samsung says that it is working with operators including Deutsche Telekom, Korea Telecom, SK
Telecom, and Vodafone, and that its platform will enable interconnectivity not only among the
operators, but also with third-party RCS clouds presumably meaning Google. Dr. Heimbach
emphasized that Samsung is fully supportive of RCS, and Ovum understands that the vendor intends
to cooperate with the GSMA and Google, especially as the focus moves toward enabling RCS for
Business.

For its part, the GSMA welcomes Samsung's continued involvement with and commitment to RCS,
since building scale will also be contingent on native RCS capabilities in devices that are available on
the open market, and not just those available from telcos.

Market outlook
MaaP is mooted as the next step for RCS
As previously mentioned, Release 2 of the Universal Profile paves the way for telcos and the wider
enterprise messaging ecosystem, including brands and service providers in various industry verticals,
to offer consumers enhanced communications experiences that build on the popularity of A2P SMS as
a customer engagement channel. Ovum forecasts that A2P SMS traffic will grow from 1.16 trillion
messages in 2016 (18.0% of total SMS traffic) to 1.28 trillion messages by 2019 (23.7% of total SMS
traffic, and then decline between 2019 and 2021 as consumers start to engage more with enterprises
via chat apps (see Figure 2).

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Telcos' Opportunities for RCS in the Enterprise

Figure 2: Global A2P SMS traffic, 201421

Source: Ovum

SMS has become popular as a communications channel between service providers and brands and
their customers, employees, and the public, owing to its native availability on all mobile phones and
operator networks, its universal interoperability between networks and devices, its low cost relative to
other customer engagement channels, and its relatively high reliability, security, and privacy.
Consumers are also quicker to read and respond to A2P SMS than other forms of communication
from their service providers. In addition, A2P SMS is a well-used channel owing to a well-established
ecosystem, which includes mobile operators, SMS aggregators and other types of connectivity service
providers, infrastructure vendors, customer engagement platform providers, and business software
companies. The GSMA and its partners are seeking to build on the capabilities of A2P SMS that have
made it so popular as a form of business-to-consumer (B2C) communications, as they move forward
with MaaP and RCS for Business.

However, SMS has some limitations as a communications channel, and these have become more
apparent as chat apps open their platforms to enable brands and service providers to engage with
their users. Chief among them is the 160-character, text-only format, which, while valid for many use
cases, constrains brands and service providers in what they can convey to or elicit from their target
audiences. Also, SMS does not enable graphical content, which is becoming increasingly important as
communications grow ever more visual. Consequently, SMS-initiated interactions are often fulfilled via
another channel, such as a phone call, an app, or a website.

The character limit also prevents brands from being able to provide their customers with an instantly
recognizable and verified Sender ID. Branded Sender ID is available for A2P SMS, but there is a limit
to the number of characters that brands can use, meaning brands may either choose not to use it
which means their only identification is a long or short code or choose to use a bastardized version
of their brand as the Sender ID. In either case, consumers are often unable to immediately recognize
and consequently trust where the message is coming from.

RCS Universal Profile addresses some of these key shortcomings of SMS. For example, it allows
companies to better identify their brands via the Sender ID with the company's full name and logo
which the brand would need to preregister and verify. In addition, brands will be able to tap into more
comprehensive analytics than they might have access to for SMS-based communications.

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Telcos' Opportunities for RCS in the Enterprise

The premise of MaaP is that it enables enterprises to have more graphical interactions with their
customers, using enhanced messaging services based on the RCS Universal Profile (e.g. Android
Messages), such as rich cards. As with SMS, customers with Android Messages enabled on their
devices will automatically receive enhanced messages from participating brands and service
providers. Messages will default to SMS where Android Messages is not supported or a broadband
data connection is not available.

Consequently, MaaP represents some key potential advantages for telcos. It may help mobile
operators reduce subscriber churn, since consumers may switch to telcos that enable brands to offer
their customers enhanced messaging experiences. Also, telcos enjoy a high level of consumer trust,
particularly as a channel for payments; this trust can be leveraged by telcos to enable payments for
brands that might want to use MaaP and Android Messages to enable transactions.

Google opens a window for telcos


Google's involvement in the RCS initiative has given telcos a window of opportunity in the B2C
communications market, one that telcos sorely need given that their P2P SMS traffic and revenues
have been hit hard by the growing popularity of chat apps for consumer communications. Many of
these chat apps are transitioning, or have transitioned, into platforms for content, commerce, and
business communications as well. The underlying ecosystem for chat app engagement between
enterprises and consumers is nascent by comparison to the A2P SMS ecosystem, but it will rapidly
develop, given the sheer size of the opportunity represented by chat apps such as WhatsApp,
Facebook Messenger, and WeChat.

Release 2 of the RCS Universal Profile for Advanced Communications, and by extension, MaaP,
establishes a beachhead for telcos to also play a role in enabling chat-app-like B2C communications,
which builds on the foundations of the A2P SMS ecosystem and involves many existing ecosystem
players. But it is up to the telcos and their partners to make sure that they take full advantage of the
opportunity that now lies in front of them.

This is because, even though consumers have not taken to RCS services in large numbers, it seems
that enterprises may be willing to give the technology a chance. Should enterprises adopt RCS as a
means to enhance their customer engagement capabilities, it is possible that the adoption and use of
RCS services by consumers will increase. Indeed, achieving higher penetration of RCS among
consumers is critical: enterprises may be willing to experiment with new technology, especially if they
are initially incentivized, but they will continue to engage with a new technology only as long as it is
worthwhile for them to do so, and one of the criteria governing continued engagement is the existence
of a viably sized addressable market.

Survey finds enterprise interest in richer communications and


chatbot-like experiences
Ovum's Enterprise Messaging Survey, which was conducted in May 2017 and canvassed 100 senior
executives in seven countries across multiple industry verticals, provides some validation of enterprise
interest in using enhanced SMS or advanced messaging services such as those based on RCS. The
survey found that 36% of respondents' organizations would be interested in using enhanced SMS or
advanced messaging services to engage with their customers, employees, and the public.

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Telcos' Opportunities for RCS in the Enterprise

Ovum also asked participants why their organizations would be interested in using enhanced SMS,
with most (94%) indicating that it would enable richer communications, including images and videos
(see Figure 3). The ability to have a chatbot-based conversational interaction with customers was
given as a reason by the next-highest proportion of respondents (89%), followed by the ability to show
the organization's branding to recipients as the Sender ID (86%). All the features asked about in the
survey are included in the RCS Universal Profile for Advanced Messaging, so the findings suggest
that there is a relatively high demand for them among enterprises.

In addition, a relatively high proportion of respondents (64%) indicated that they would trust a telco-
based enhanced SMS service more than a chat app as a channel for engaging with their customers.
This finding suggests that providing enhanced SMS capabilities offers telcos the opportunity to ensure
that they remain relevant as providers of A2P communication services beyond A2P SMS.
Figure 3: Enterprises' reasons for interest in using an enhanced SMS/advanced messaging
service

Source: Ovum Enterprise Messaging Survey, May 2017

Of the respondents who indicated that their organizations would not be interested in using RCS
services, the highest proportion (64%) said it was because their organization did not see any benefits
in using enhanced SMS (see Figure 4), while exactly half indicated that the additional cost of using
enhanced SMS (by comparison to SMS) would be a deterrent. It is possible that respondents'
concerns over the perceived lack of features for enhanced SMS could be partly related to a general
lack of awareness of what RCS services can offer. Visitors to the GSMA's booth at MWC 2017, where
RCS enhanced messaging services for business were demonstrated, reportedly appreciated the
capabilities shown. Marketers in particular were attracted to the way in which RCS services could
meet their requirements for achieving strong brand recognition and generating more comprehensive
analytics.

In addition, 45% of respondents said that they were already using enhanced messaging via chat
apps, and the same proportion stated that they did not have the resources to integrate enhanced
SMS/advanced messaging into their existing customer-facing platforms. If RCS for Business is to be
successful, the GSMA, Google, Samsung, participating telcos, and members of Google's EAP need to
demonstrate the benefits of enhanced SMS/advanced messaging, establish viable business models

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Telcos' Opportunities for RCS in the Enterprise

that balance the increased costs of providing the service against the benefits it will provide, and make
it easier for enterprises to access and integrate enhanced SMS/advanced messaging into their
existing customer service frameworks and infrastructure.

This objective takes on greater urgency as Apple prepares to roll out iMessage Business Chat later
this year, which is aimed at enabling enterprises to use iMessage to communicate with their
customers. Furthermore, iMessage Business Chat will be integrated with iPhone features Siri,
Spotlight, Safari, and Maps which will make it easier for consumers to search for service providers
on their devices. Apple has also secured partnerships with four key providers of customer service
platforms Genesys, LivePerson, Nuance, and Salesforce which means it is already taking steps
toward integrating iMessage into the business systems that brands are using.
Figure 4: Enterprises' reasons for lack of interest in using an enhanced SMS/advanced
messaging service

Source: Ovum Enterprise Messaging Survey, May 2017

Chatbots give telcos a chance to catch up with chat apps


Adding chatbot support to Release 2 of the RCS Universal Profile is significant; it means that the
capabilities of RCS are not that far behind chat apps (although user adoption and scale remain a
significant challenge for operators). All the major chat apps are offering platforms that enable
developers, including enterprises, to create chatbots and use them to interact with their chat app
users, with varying degrees of automation. For example, Facebook Messenger launched its bot
platform in 2016 and very quickly amassed around 100,000 bots. However, it has not all been plain
sailing: early in 2017 it emerged that only about 30% of all chatbot-initiated requests from consumers
on Facebook Messenger were completely fulfilled by automation a cautionary tale for companies
considering using chatbots as a customer engagement channel.

Ovum's Enterprise Messaging Survey found that 25% of respondents' organizations already offer the
ability for their customers, employees, and the public to interact with them using chatbots. This finding
demonstrates that there is a willingness on the part of enterprises to use chatbots as a customer
engagement channel.

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Telcos' Opportunities for RCS in the Enterprise

Furthermore, the key reasons given by respondents for deploying chatbots mainly centered around
providing better customer service, including providing customers with easier access to content and
services (96%), automating basic customer-facing functions (92%), and improving customer service
and reducing churn (88%) (see Figure 5).
Figure 5: Enterprises' reasons for deploying chatbots

Source: Ovum Enterprise Messaging Survey, May 2017

But it also appears that respondents' organizations are already registering multiple benefits from
deploying one or more chatbots: 76% of respondents said that their organizations had measured
improvements in customer service, 72% had seen increased revenues, and 64% had experienced
reduced churn (see Figure 6). These results paint an encouraging picture for enterprises that are
considering adding chatbots to their customer engagement toolset. However, there was a fairly even
split between respondents whose organizations' chatbots still required some level of human
intervention and those whose chatbots provided a fully automated experience for their customers.
Optimal use cases for chatbots are still being explored, as it emerges that those that automate fairly
simple user interactions are less likely to require human intervention.

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Telcos' Opportunities for RCS in the Enterprise

Figure 6: Enterprises' experiences of using chatbots

Source: Ovum Enterprise Messaging Survey, May 2017

In addition, an ecosystem is starting to form around chatbots, outside of the chat app platforms
themselves. For instance, vendors such as India's Gupshup are providing platforms that enable
developers to create chatbots for multiple chat app platforms. From an RCS perspective, the US-
headquartered Summit Tech has developed RCS bot connectors, the objective of which is also to link
chatbot platforms to operators' RCS services.

The types of use cases enabled by chatbots would be like those enabled in two-way SMS, such as
allowing consumers to change an appointment time, but more user-friendly and graphical. For
example, an airline's chatbot might appear in a user's RCS-based contact list, enabling functions such
as viewing or changing a seating allocation without needing to look at the airline's app or website or
interact with a human agent. Alternatively, the airline could use the RCS-based interaction to facilitate
pre-authentication of the user before fulfilling the transaction via their app or website. Given the
limitations of chatbots, it is likely that they will be used primarily for simpler tasks such as buying a
ticket or scheduling an appointment; more advanced requirements would need some level of human
interaction.

The development of use cases is well advanced


Google and other members of the EAP have already developed use cases around MaaP, including
the UK's Virgin Trains, pharmacy chain Walgreens Boots Alliance, and mobile operator Orange.
Use case: Virgin Trains
Virgin Trains demonstrated its RCS-based customer interaction capability at MWC 2017, saying it will
help it to further improve its award-winning SMS alerts service, which it developed with partner
OpenMarket, the Amdocs-owned mobile engagement platform provider.

Virgin Trains uses SMS to send its customers staggered alerts of platform announcements at
London's Euston Station, to enable better crowd control at the time of boarding. Euston is Virgin
Trains' main UK station, with 72 million Virgin Trains passengers passing through annually. Prior to the

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Telcos' Opportunities for RCS in the Enterprise

introduction of the SMS alerts, each platform announcement precipitated the simultaneous movement
of about 650 people.

To improve the boarding experience, Virgin Trains sends opted-in customers an SMS to alert them
that a platform announcement is imminent, followed by an SMS a short time later announcing the
platform. In addition, 25% of passengers receive the texts ahead of the rest of the passengers, and
announcements on the station boards are delayed by 75 seconds. These measures mean that the
number of passengers moving at the same time is reduced, enabling a smoother boarding experience
for all customers.

But Virgin Trains is keen to further improve its customer interaction at the point of travel, and it also
wants to address shortcomings in branding and customer analytics. For example, one shortcoming of
the current SMS-based service is that the Sender ID shortens the company's brand to "Virgin Train."
Virgin Trains is also keen to obtain more in-depth customer analytics, enabling it to learn not only how
many of their customers receive the messages, but also how many read them.

The company worked again with OpenMarket an EAP partner to create the proof of concept
around RCS-based enhanced messaging that it demonstrated at MWC 2017. The demonstration
showed that Virgin Trains could ensure that its Sender ID was verified and that branding reverted to
"Virgin Trains." It also showed a richer, graphical, and more chat-app-like experience for its
customers, using pictures, videos, GIF sharing, and dynamic content for tickets, loyalty cards, and
coupons (among other things).

The proof of concept included the ability to use smart reply and action buttons for functions such as
sending a passenger a station map, including the platform for their train, and sending them a seat
map showing their carriage and seat. In addition, Virgin Trains also previewed its ability to use RCS-
based messaging to promote its onboard entertainment and catering, including special offers on meal
items and links to content such as downloadable menus. The RCS enhancements described will allow
Virgin Trains to reinforce its branding and provide its customers with a better user experience within
the context of messaging, rather than in an app.
Use case: Walgreens Boots Alliance
Walgreens is one of the largest pharmacy chains in the US, with 8,100 stores nationwide serving 10
million customers a day, in-store and online, and filling 920 million scripts a year. Kartik Subramanian,
director of mobile product management and the APIs and Innovation team for Walgreens' owner,
Walgreens Boots Alliance, told MWC 2017 delegates that more than 75% of US residents live within
8km of a Walgreens or Duane Reade store (also owned by Walgreen Boots Alliance).

The company already offers a range of mobile customer engagement products. These include SMS
alerts notifying when prescriptions need to be refilled (with a two-way capability allowing customers to
respond) and when they are ready for collection, which together generate millions of SMS. However,
there are use cases that are not specifically messaging-based, such as digital coupons, photo
printing, telehealth, and the ability for customers to order refills for their prescriptions by scanning and
sending barcodes using their smartphones.

Walgreens is keen to explore how it can transition non-messaging-based use cases to the messaging
environment via RCS. One example is photo printing, which Walgreens currently enables via a mobile
app but which could also be fulfilled using RCS messaging. Walgreens customers could use a chatbot
on an RCS messaging client to carry out all the functions that they would expect to be able to access

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Telcos' Opportunities for RCS in the Enterprise

via an app, such as selecting print sizes, the number of prints, and the branch from which they would
like to pick up their order.
MaaP could extend RCS to the smart home and the IoT
In addition to the B2C use cases outlined above, the RCS Universal Profile for Advanced
Communications will enable enterprises to explore opportunities for connected devices, such as those
used in the smart home. In addition to an organization's chatbots appearing in a consumer's RCS
contact list, the contact list could include smart meters, home lighting and environmental controls, and
entertainment systems, such that the consumer could manage their smart home remotely via Android
Messages (although they are more likely to manage their smart home via Google Home).

Getting down to business: Where are the revenues?


Making a business case for RCS services has always been a significant challenge for mobile
operators. The growing popularity of chat apps which offer free in-app messaging, voice, and video
calling has driven mobile operators to transition from charging their customers relatively high prices
for voice and messaging services to charging relatively low prices for large bundles of messages and
minutes or unlimited messages and minutes (often combined with mobile data). Telcos are unable to
charge their consumer customers additional subscription fees for new RCS services, which would
offer similar services to those provided by the chat apps for free. Consequently, the business model
for RCS consumer services is primarily in reducing customer churn to chat apps by providing an
enhanced communications experience, rather than generating direct revenue.

Ovum understands that the commercial arrangements for RCS interconnection between telcos have
been defined, and are broadly based on the commercial arrangements already in place for services
such as voice and SMS. However, the GSMA, participating mobile operators, Google, and Samsung
are seeking to simplify interconnection for RCS services, with an emphasis on spam prevention.

However, MaaP could potentially open an avenue of monetization for telcos, since it would allow them
to provide enhanced B2C communications via services based on the RCS Universal Profile for
Advanced Communications, for which they could charge enterprises a premium over A2P SMS. It
would be desirable for telcos to charge enterprises to use RCS-based messaging, since not doing so
could result in problems such as spam. It is possible that telcos could pursue an ad-funded model for
providing RCS services, given that RCS would give them the opportunity to use rich-media
advertising. However, it is unlikely that telcos will offer ad-funded RCS, since using advertising to fund
communication services has previously proved unpopular with customers.

Ovum's Enterprise Messaging Survey 2017 found that, of the respondents who indicated that their
organization would be interested in using enhanced SMS, more than half (56%) would expect to pay
at least 1.5 times the price of ordinary SMS, and 31% would expect to pay at least double (see Figure
7).

In addition, the perceived benefits outlined in Figure 3 would likely help enterprises justify paying a
higher price for enhanced SMS; they would be able to provide their customers with a better, more
secure communications experience. Enhanced SMS would likely also present monetization
opportunities, including the ability for consumers to engage more easily in revenue-generating
transactions with their service providers.

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Telcos' Opportunities for RCS in the Enterprise

Figure 7: Enterprises' expectations of enhanced SMS price relative to ordinary per-message


SMS price

Source: Ovum Enterprise Messaging Survey, May 2017

Respondents were also asked what their organization's preferred pricing model for enhanced
messaging would be, with 39% indicating that they would like to pay per message bundle (for
example a bundle of 10 messages), with the price varying depending on total messaging volumes
(see Figure 8). The next-highest proportion of respondents, 17%, said their organizations would prefer
to pay a flat-rate fee per message, while 11% said their organizations would prefer to pay a monthly
fee for unlimited messages per subscriber, and 11% preferred a per-message fee with the price
varying depending on total messaging volumes. The pricing model for an RCS-based interaction
needs to facilitate the conversational nature of the interaction, which will bear a greater resemblance
to an instant messaging conversation than the more transactional-type interactions that are enabled
via SMS. Ultimately, the pricing model should not discourage enterprises from having conversations
with their customers that are as long as they need to be.
Figure 8: Enterprises' preferred pricing models for enhanced SMS/advanced messaging
service

Source: Ovum Enterprise Messaging Survey, May 2017

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Telcos' Opportunities for RCS in the Enterprise

Many challenges still lay ahead for RCS


Scale is necessary for consumer and enterprise engagement
The involvement of Google has clearly given RCS a boost, but its success is by no means certain. As
mentioned previously, building scale is a huge challenge, both in terms of telcos launching RCS
services and consumers using such services. With 137 million MAUs, telcos' RCS services still lag
significantly behind chat apps such as WhatsApp, Facebook Messenger, and WeChat. There is also a
lack of transparency from most RCS telcos about the KPIs for their services, making it difficult to
judge the relative success of RCS on a per-market basis. As the focus for RCS moves from the
consumer to the enterprise, the existence of a large enough addressable customer base within a
market also becomes an important decision-making factor for brands and service providers, as they
consider upgrading from A2P SMS to RCS for Business. The size of the addressable customer base
will also influence whether or when connectivity service providers decide to invest in enabling
interconnection between telcos' RCS services, although Google and Samsung may be able to solve
this potential problem with their respective RCS hubs.
Interconnection is largely nonexistent
If RCS is to achieve the same level of scale as chat apps, then interoperability between operator
services (and not just between opcos in the same telco group) will be as necessary as making RCS
natively available in devices. So far, France and Germany are the only two countries to have live,
interoperable RCS-Blackbird-based services. In North America, US telco Sprint and Canada's Rogers
have also agreed to enable interoperability between their respective Android Messages deployments,
facilitated by Google's Jibe hub.

If Google successfully executes its plan to roll out Android Messages with telcos in more countries
over the coming months, there will be greater opportunity for the company to use the Jibe hub to
enable interoperability among national and international markets. But in the short term,
interconnection efforts will be hampered by the fact that, from a standards perspective, telcos' live
RCS services are split between RCS Blackbird and RCS Universal Profile. The interconnection of
services between operator networks is not straightforward, and the task becomes more complicated
when interconnecting services are based on different standards, or even different versions of the
same standard.

Meanwhile, industry insiders suggest that should there be a proliferation of RCS hubs beyond those
provided by Google, Samsung, and others, it is likely that a "super-hub" will emerge, which would act
as an independent provider of RCS interconnection between competing hubs. A super-hub could
potentially be enabled by a player such as SAP Digital Interconnect or Syniverse, which already play
similar roles for other types of communication services.
Google: Friend or foe?
Google's drive to create an iMessage-like experience on Android devices with Android Messages is
understandably regarded with suspicion by some operators. Telcos view Android Messages as a
threat to their existing businesses, including legacy voice and messaging (both P2P and A2P), in
much the same way as chat apps such as WhatsApp and Facebook Messenger. By extension, telcos
that have deployed RCS services based on a previous version of the standard could also regard
Android Messages as a threat to these services. In addition, Google offers the Allo smart messaging

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Telcos' Opportunities for RCS in the Enterprise

and Duo video calling apps, and it is possible that Google could integrate the capabilities of one or
both apps with Android Messages in the future, which may have negative implications for telcos.

Ovum understands that Google is offering telcos free RCS application servers for two years, lowering
the barriers to telco adoption of the RCS Universal Profile and Android Messages by taking costs out
of the equation. However, it is unlikely that Google's motives are entirely altruistic; there is the
possibility that the internet giant could deploy to Android Messages the same kinds of sophisticated
data collection techniques it uses to target advertising across its other services. Although it is
extremely unlikely that telcos would enable Google to insert advertising into their Android Messages
services, it is possible that Google could use any data it collects via Android Messages for other
purposes.

Mobile operators may have already ceded some control to Google for P2P messaging, with Android
Messages, but industry insiders warn that telcos should retain control of their RCS infrastructure and
how it is accessed (e.g. by brands), so that they can continue to play a role in the A2P communication
ecosystem via MaaP.

Google will also need to demonstrate that it can support telcos' regulatory obligations with respect to
communication services, such as legal intercept and data privacy. This will be especially important if
Google is hosting Android Messages and MaaP for telcos on the Jibe cloud. Meanwhile, telcos'
regulatory obligations will almost certainly rule out the ability for Android Messages to enable end-to-
end-encryption (E2EE), which has become a standard feature in other chat apps. Although the lack of
E2EE might deter consumers, there may be an opportunity for the GSMA, Google, and telcos to
develop a secure messaging variant of Android Messages specifically for use in the enterprise.
Still no support for RCS from Apple
One of the key challenges in the adoption of RCS is that Apple does not support it natively in iOS and
has given no indication that it will do so in the future, which will make it impossible for RCS to achieve
the universal penetration that SMS enjoys. Globally, iPhones have a much smaller installed base than
Android devices: 11.3% of smartphones compared to 87.6%. However, in markets such as the UK,
the US, France, and Germany, the iPhone installed base is more than 20%, and in Japan it stands at
28%. This installed base of iOS users means a significant proportion of a telco's customer base will be
unable to access RCS services, unless they are provided via a downloadable application, which, in
turn, will compete against Apple's own strong suite of enhanced messaging services provided natively
in iMessage.

Appendix
Methodology
This report is based on primary and secondary research obtained from sources including interviews,
conference sessions, Ovum's Enterprise Messaging Survey 2017, and desk-based research. It also
uses data from Ovum's Enhanced Telco Communications Services Tracker: 2Q17 and Mobile
Messaging Traffic and Revenue Forecast: 2016-21.

Further reading
2018 Trends to Watch: Communications Services, TE0003-001064 (September 2017)

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Telcos' Opportunities for RCS in the Enterprise

Enhanced Telco Communications Tracker: 2Q17, TE0003-001048 (August 2017)

Mobile Messaging Traffic and Revenue Forecast: 201621, TE0003-000976 (November 2016)

Author
Pamela Clark-Dickson, Practice Leader, Digital Communications and Social Networking, Consumer
Services

pamela.clark-dickson@ovum.com

Ovum Consulting
We hope that this analysis will help you make informed and imaginative business decisions. If you
have further requirements, Ovums consulting team may be able to help you. For more information
about Ovums consulting capabilities, please contact us directly at consulting@ovum.com.

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