Last week Facebook (FB) made news with their announced acquisition of WhatsApp. Then at the Mobile World Congress show in Barcelona a few days ago they announced WhatsApp would start offering a voice service. What impact will this have on the telephone industry?
As an industry analyst I have followed this space for decades. I have watched consolidation, changing regulation, new technology and new competitors change the space, time and time again.
This industry has changed and continues to change both rapidly and dramatically over the years. So can WhatsApp make a dent in this robust industry?
Bottom line, while Facebook may see WhatsApp as some sort of Holy Grail, and while it may have a positive impact for them, I don’t see this changing the direction or leadership of the industry.
Telephone was a growth engine until around the year 2000. Then with new regulation, new competition and new technology from things like wireless and VoIP, plain old telephone service or POTS started to decline from all the major providers.
This was simply innovation at work. We see providers like AT&T (T) , Verizon (VZ) , CenturyLink and many other smaller telephone companies losing traditional market share. So they started expanding and growing into other areas. Today they are the leaders in wireless, Internet and more recently television with their IPTV offerings called Uverse, FiOS and Prism. They are also moving into other segments as well like home security.
Over the last ten to fifteen years, other companies have entered this voice space as well. Companies like Comcast ($CMCST), Time Warner Cable (TWC) , Cox and other cable television providers sell their VoIP telephone service over the Internet. Other VoIP providers as well like RingCentral, Skype, Vonage and others. Plus the wireless industry is exploding with many competitors to choose from like AT&T, Verizon, Sprint (S) , T-Mobile (TMUS) , US Cellular, C Spire and many others.
Facebook has been interested in entering and reinventing the wireless space for a while. Their first attempt a year or so ago was a complete flop. They introduced their first Facebook phone, which only lasted a few months before it was pulled.
Facebook sees mobile as important for their future so expect to see more movement. Their Apps are successful, and now with WhatsApp they should be more successful in theory.
However where does WhatsApp fit into this new voice world? They are not a phone company. They have no experience with telephone or VoIP service. They will be competing with many companies who have plenty of brand recognition. So what kind of opportunity will they really have?
The plan is during the second quarter of this year, they will add a free voice-calling feature to its text-messaging app for both the iPhone and Android. Next will come Blackberry and Windows Phone if all works well.
They say this voice feature will be free and let people talk all over the USA and in fact the world. They see this as the next step.
While it is impossible to say what the world will look like five or ten years from now, and while this all sounds good and may indeed be a growth platform for WhatsApp and Facebook, I don’t see it having any kind of major impact on the telecom market.
Today there are many competitors in this space. Some are doing very strong business while others are not, but the marketplace is bustling with competition. In that space what kind of impact can a new competitor have on the industry?
While this is a growth opportunity, it won’t impact the industry.
So I would like to congratulate Facebook on doing this deal, which they think is important for their growth going forward. And I would like to congratulate WhatsApp on the deal of a lifetime. And I would also like to congratulate both on adventuring into the wild world of voice communications.
While this may be a growth opportunity for Facebook and WhatsApp, I don’t think it will impact the competitive lineup of the telecom industry. If it is successful it will just be one of many players.
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