Going over the top: Who is going to profit from the rise of WhatsApp and Viber?

The apps are costing phone providers billions.

Smartphone owners now have so many apps at their disposal for communicating with friends across the internet for free, it's like they're confronted with a selection box of assorted digital chocolates. Dozens of companies are jostling for their attention, waving about treats such as voice calling, supersized emoticons (or stickers), gaming and more.

But popular technologies aren't created without ruffling feathers. The mobile carriers who have traditionally been the gatekeepers of our voice minutes and our text bundles have, by virtue of the unlimited data plans that facilitate these apps, loosened their grip on us – and they're losing money: an estimated £9bn in 2011 and rising. Meanwhile, Facebook and Google aren't going to let start-ups muscle in on their territory.

WhatsApp, the most popular of the so-called OTT (over-the-top) apps, has already been linked with two potential purchases; first by Facebook, and then by Google – for a rumoured $1bn. These rumours have been denied, but the whirl of interest surrounding WhatsApp and its OTT cousins is indicative of a marked change in our chatting and texting habits.

WhatsApp, which allows users to send free messages, has been around for four years. As both the sender and recipient need to be running the app, it has meant a relatively slow take-up. But the growth of these apps tends to snowball. It's said that 97 per cent of Spanish smartphones have WhatsApp installed, for example, while WeChat is beloved of the Chinese, Kakao Talk the South Koreans, Line the Japanese. But local is becoming global; more than 250 million people worldwide now use WhatsApp, and more than 175 million use a voice and text app called Viber.

The competition is frenetic; all these apps are looking to become the universal messaging choice. (Apple's iMessage and Blackberry's BBM work only on the manufacturer's own devices.) The apps mark their differences in various ways; WhatsApp, for example, is straightforward, ad-free and costs a few pence a year, while Line's games unlock sticker packs, turning communication into a game.

All this information flows back and forth for free, provided you don't exceed your phone's data allowance. Once you've spent time using these apps, the absurdity of networks offering text and minute bundles becomes hilariously apparent. Some people in the UK are still paying as much as 12p per text, while OTT messages scamper unmetered under the radar. Many customers are concerned only about the data package, because it caters for nearly all their needs – and this isn't good for the mobile carrier; it becomes little more than a dumb data pipe.

"It's an ongoing concern for those guys," says Ernest Doku, technology expert at uswitch.com. "They're forced to allow customers to leech these data services – and this doesn't make them any money." Few will weep for the carriers' predicament; some might say that they had it coming, with tables of complex tariffs (Dolphin? Red XL? Full Monty?) making it difficult for consumers to compare. Indeed, the explosion of interest in OTT apps in Japan was driven by the carriers' misguided policy to allow their customers to send SMS messages to people on the same network. This was sorted out only in the summer of 2011. In many countries, OTT has been encouraged by restrictive practices.

SMS and traditional voice calls aren't about to disappear, but SMS revenues are diminishing and we're told it's affecting carriers' ability to invest. In fact, OTT can offer a revenue opportunity; each time a voice-calling app calls a landline, the carrier receives a termination fee. But this offers only a crumb of comfort. "The carriers are trying to adapt to the new model," says Doku. "The 3G infrastructure isn't always able to handle the volume of data – but the arrival of 4G will carve out an interesting situation, because there will be new differentiators in terms of coverage and speeds on offer." Where 3G has struggled, 4G will cope with text, voice and video traffic, but traditional calls and texts will become an anachronism. Get a fifty quid Android phone running Viber, and you can contact any smartphone in the world, unmetered, at no extra cost.

No wonder that Facebook is flexing its muscles. Three weeks ago, British users of its communications app, Facebook Messenger, were suddenly able to make free calls to friends.

Additionally, Facebook has been placing restrictions on competing apps by preventing them from accessing your list of Facebook friends to check if they're already using the app – a critically important feature for any new OTT pretenders. Voxer and MessageMe have found themselves punished in this way. Facebook has observed our appetite for OTT, and seen that it's not just about us saving pennies; we love the way they make communicating a richer experience.

Making money is, however, proving to be a problem, and the rumoured $1bn price tag for WhatsApp raised a few eyebrows. But its existing 250 million user-base would be tremendously useful to Google, which has long planned a free, cross-platform messaging service. But "free" is a misnomer, of course.

None of these services are truly free; you pay with information, or time spent looking at adverts. The question that's going to face consumers is this: would you rather pay a few pence for calls and texts, or allow Google or Facebook to take that responsibility in return for some of your data? As ever, the trade-off between our money and our privacy is a deeply intriguing one.

Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
Sport
footballShirt then goes on sale on Gumtree
Voices
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
Life and Style
ebookNow available in paperback
News
A poster by Durham Constabulary
news
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
Emily McDowell Card that reads:
artCancer survivor Emily McDowell kicks back at the clichés
Arts and Entertainment
Twin Peaks stars Joan Chen, Michael Ontkean, Kyle Maclachlan and Piper Laurie
tvBadalamenti on board for third series
Life and Style
tech
Sport
Standing room only: the terraces at Villa Park in 1935
football
Sport
Ben Stokes celebrates with his team mates after bowling Brendon McCullum
sportEngland vs New Zealand report
News
Amal Clooney has joined the legal team defending 'The Hooden Men'
people
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Gadgets & Tech

    Guru Careers: Software Developer / C# Developer

    £40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

    Guru Careers: Software Developer

    £35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...

    Ashdown Group: UI Developer - (UI, HTML, CSS, JavaScript, AngularJS)

    £25000 - £40000 per annum: Ashdown Group: UI Developer - (UI, JavaScript, HTML...

    Ashdown Group: Graduate UI Developer - HTML, CSS, Javascript

    £25000 - £30000 per annum: Ashdown Group: Graduate UI Application Developer - ...

    Day In a Page

    Abuse - and the hell that came afterwards

    Abuse - and the hell that follows

    James Rhodes on the extraordinary legal battle to publish his memoir
    Why we need a 'tranquility map' of England, according to campaigners

    It's oh so quiet!

    The case for a 'tranquility map' of England
    'Timeless fashion': It may be a paradox, but the industry loves it

    'Timeless fashion'

    It may be a paradox, but the industry loves it
    If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

    Could have done with Osama bin Laden staying alive?

    Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
    New exhibition celebrates the evolution of swimwear

    Evolution of swimwear

    From bathing dresses in the twenties to modern bikinis
    Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

    Sun, sex and an anthropological study

    One academic’s summer of hell in Magaluf
    From Shakespeare to Rising Damp... to Vicious

    Frances de la Tour's 50-year triumph

    'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
    'That Whitsun, I was late getting away...'

    Ian McMillan on the Whitsun Weddings

    This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
    Kathryn Williams explores the works and influences of Sylvia Plath in a new light

    Songs from the bell jar

    Kathryn Williams explores the works and influences of Sylvia Plath
    How one man's day in high heels showed him that Cannes must change its 'no flats' policy

    One man's day in high heels

    ...showed him that Cannes must change its 'flats' policy
    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine