The day the earth stood still at RIM headquarters

Delta Partners comments on the effect of the BlackBerry outage on users in October
Roman Izquierdo, Associate Partner, Delta Partners
Roman Izquierdo, Associate Partner, Delta Partners
Beltran Simo, Principal, Delta Partners
Beltran Simo, Principal, Delta Partners


Before reading this article I suggest you do the following experiment:

Take your smartphone and if you still haven’t installed Whatsapp (one of the most popular Instant Messaging (IM) applications) go to the app store and download it. Now check who is online. I bet more than 50% of your contacts (including your boss, your doctor and your accountant) are connected. You can try the same using Viber, IMO or BlackBerry Messenger. The result should be very similar. Surprised? Don’t be. Instant Messaging is a pervasive form of communication and is here to stay.

The key question is how these apps are impacting the mobile industry. The BlackBerry outage of October 2011 yielded some interesting insight.

But first some history on IM apps…

The rise of Instant Messaging apps

RIM’s BlackBerry used to be a product designed almost exclusively for the corporate segment. Then, in a relatively short period, it became more popular than Harry Potter in nothing short of a magic trick among the mainstream urban population.
Two elements propelled BlackBerry into the young urban segment with tremendous success: (1) the introduction of lower cost devices, and more importantly (2) the launch of BlackBerry Messenger (BBM), a ‘killer app’ which allowed BlackBerry users to seamlessly communicate with one another through text.

Mimicking the success of BMM, but leveraging on the much bigger and growing base of Apple and Android smartphones, a myriad of open, device-agnostic Instant Messaging apps started to flood the market. Names such as Whatsapp and Viber immediately ranked at the top of iTunes and Android app downloads. There is no doubt that these apps created a shockwave in the telecom industry and changed (probably forever) the way people communicate.

Although there is significant discussion around the damage done by IM apps to mobile operators, the actual impact is not easy to measure: even though these apps cause voice and SMS revenue erosion, they also increase the attractiveness of mobile broadband. Luckily and as in any good story, every now and then a rare phenomenon comes along to shed light where previously there was only darkness…

The day(s) the earth stood still

One such rare event was the 3-day BlackBerry outage of October 2011. From Monday 10th to Wednesday 12th of October BlackBerry data services went down simultaneously in several countries across the globe, causing panic at RIM headquarters.

Whilst the most notable effect was corporate executives not being able to access their email through their BlackBerry devices, there was a significant amount of complaints in the media coming from the non-corporate world. During those 3 days, millions of non-corporate clients (besides the white-collar execs) blamed BlackBerry for everything, from disconnecting them from the rest of the world to causing the earth to stand still. And the main issue was not even email - it was the beloved BBM. It was as if suddenly we had regressed to the dark ages of actually having to call people to have a real-time dialog… The Canadian Company, the first to find this new ‘goldmine’ and launch a new era in telecommunications, was now forcing the world into a 3-day IM abstinence. Many even thought of crying out for Government intervention to solve the problem.

Luckily for us, from this chaos emerged a unique opportunity to better understand how customers use IM apps (such as BBM) and, consequently, how these services influence operators’ business models. The results have deep implications for mobile operators.

I know what you did last October

We took a very close look at customer behavior during those specific days to better understand the importance of Instant Messaging in how we communicate today. The outage gave us a golden opportunity to analyze traffic patterns before, during and after the event and gauge the impact on usage behavior across different services (in particular SMS and voice).

The results are eye-opening – BlackBerry users affected by the outage altered their communication pattern very materially during those 3 days by…
- …increasing voice usage by 11%
- …boosting their SMS usage by a staggering 85%!
Customers replaced their severed umbilical (read BBM) connection with alternatives, even if these were charged, substituting a text-based service for another (SMS)

 “It’s not about the money!” (It never is)

The October event helps us draw some conclusions and evaluate the impact of Instant Messaging on mobile operators.

Text-based messaging has become a staple and often non-replaceable form of communication, irrespective of the delivery method.

The shift from voice to data-enabled Instant Messaging services has been traditionally justified by the fact that IM is for free. There is no doubt that this factor has been a major driver of adoption, but the “BlackBerry event” shows this is not the only reason for the take-up of IM. During these 3 days, the same customers who before were using messenger apps ‘for free’ showed us that they were willing to pay (and did so) to keep communicating via text. The communication patterns during the outage show that voice was not an option for them in many cases, opting to maintain a text-based messaging to avoid the intrusiveness of voice calling. Apparently the convenience of this communication form prevails over the money factor, at least in the short run.

The adoption of text-based Instant Messaging services is unstoppable and unavoidable – mobile operators should think twice before looking for ways to getting rid of them. The October blip showed that customers will find alternatives to meet their communication needs irrespective of the cost involved (to a rational extent). This serves as a reminder to all mobile operators in highly competitive mobile data markets as to how rapidly value can migrate to other players in the value chain if they fail or opt not to deliver the services that consumers want. Subscribers will incur the costs required to have access to these services, even if it includes switching providers

So, yes the earth stood still at Blackberry headquarters but not for Instant Messenger Users- they found their way to maintain their text based communication.

So what are the implications for mobile operators?

From a mobile operator’s perspective, the BlackBerry outage shows the relevance of Instant Messaging and OTT apps for their subscriber base and the associated cannibalization of traditional voice and SMS revenue. It further raises the importance of properly monetizing operators’ investments in newer technologies (e.g. LTE), capacity increases and additional spectrum acquisitions to keep up with the massive data requirements of the new mobile data environment (see our white paper “Navigating the challenges of Data Monetisation” for more on this)

The experiment also shows customers’ dependency on mobile text-based messaging services, which can be further extrapolated to other forms of mobile communication. Customers’ willingness to pay shows that they attach significant value to the service, much more so than the free ride they currently get with IM apps. And if in the short-term IM may impact mobile operators negatively, we believe that mobile operators – the true enablers of voice, data or whichever new forms of communication – will be the long-term winners of the hyper-connected world. After all, customers can easily replace BBM, Whatsapp or Facebook should they fail – replacing mobile operators is a completely different ballgame. The pipe (dumb or not) is still the unavoidable piece of the equation, something that mobile operators will leverage in the future and which will most likely be reflected in consistently growing data tariffs (check your last year utility bill!).

After all, if mobile operators took away our lifeline (i.e. mobile connectivity) even if just for a day, then most of us would say that the earth truly stood still.

Roman Izquierdo, Associate Partner, Delta Partners
Beltran Simo, Principal, Delta Partners


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