Why IMS became a commercial disappointment

Posted by Dimitris Mavrakis Wednesday, March 18th, 2009

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Vendors at this year’s Mobile World Congress were surprisingly quiet about IMS. After an initial marketing push that positioned IMS as the panacea for future service delivery and a means for operators to retain their coveted walled gardens, the acronym now seems to have entirely disappeared from vendors’ vocabularies.

So how did IMS fall out of favor, and are operators still deploying it?

In 2004, mobile operators were very excited about the prospects for IMS. It promised a fully vertical architecture for delivering services that would allow operators to retain control of the subscriber base. IMS also promised differential charging and quality levels for services based on subscriptions.

However, the appeal of IMS faded in the ensuing years as mobile operators realized that it would require significantly higher than expected Capex to implement, and that it would involve disruptive changes for their organizations and the way they did business.

Even so, IMS is now gradually coming to market and slowly entering operators’ networks, but for different reasons than those originally envisaged, and there are several reasons why a full scale IMS deployment has been, is, and will remain unattractive for mobile operators.

Walled garden philosophy: One of the key benefits of IMS was to be that operators could enforce a walled garden around their subscribers where those customers would keep spending. Applications would have to be developed by operators to keep subscribers happy however, something that operators might have neither the manpower nor the capital to do successfully.

Subsequently, the arrival of Over The Top (OTT) players including Google, Skype, Nokia (Ovi) and Apple’s App store has given subscribers the freedom to choose between operator branded applications and web-based services. The success of these services and subscriber behavior clearly illustrate that the walled garden argument is irrelevant in today’s mobile market.

Lack of applications: The main argument for deploying IMS was to be the creation and delivery of new services. Back in 2004, Push-To-Talk (PTT) or Push-to-X (push to send picture, video or any other content) was receiving interest, but consumers in developed markets (where IMS would make sense) were not interested. It now seems that a presence-enabled phonebook will be the most appropriate application for IMS in the mass market, but there is still a lot of ground to cover in areas such as the Rich Communication Suite (RCS), where work is ongoing.

Perhaps the greatest failure of IMS is that while it offers a new and efficient framework for delivering services over the mobile network, there is no single application associated with its deployment that can create significant revenue opportunities.

Expensive upgrade: In the absence of a single application that can provide some form of return on investment for IMS deployments, cost savings are perhaps the only argument for a fully integrated IMS upgrade. However, the architectural changes required for IMS are Capex intensive, as several components of the mobile core network have to be upgraded or even replaced. Mobile operators are finding alternative ways of introducing innovative services in their networks and are now slowly building all-IP networks. Some operators are opening their network APIs and establishing developer communities in order to create innovative services and fragment the development effort into communities.

Operator driven: IMS was largely operator driven and attempted to bridge the telecoms market with the Internet world. However, the shift from telecoms to Web-based services has been stronger than expected in recent years, transferring much of the functionality associated with service delivery away from operators’ networks and towards the Internet cloud. Successful services now bypass the operator and use them instead as a dumb pipe to deliver content to end users. Facebook, Skype, App Store, Ovi, Android Marketplace and Blackberry App World are notable examples. Operators would have to invest significant capital and effort into IMS, or any other initiative, to offer services of similar breadth.

Market reality

Despite these barriers, IMS is slowly - and quietly - entering the market. Innovative mobile operators are using it primarily to enter the fixed market (see Mobilkom’s A1 over IP service which offers a mobile number through a softphone in computers - with lower charges compared to the mobile network).

Infrastructure vendors are also trying to persuade mobile operators to invest in IMS for long term benefits. IMS hardware is now offered as an integrated product which usually fits a single rack. Operators can in turn invest modestly in IMS, try to enter the market with new services and then scale if these take off. It is estimated that a compact, single rack, functional IMS architecture costs approximately US$500,000 (as of 2Q09).

There are also initiatives that aim to repackage IMS into a more open, flexible architecture that is used to bridge the web and telecoms worlds. Telefonica’s WIMS initiative is attempting to connect the two realms by using selected components of an IMS architecture. Telefonica and Alcatel-Lucent are primary drivers, but there was significant interest among large companies at MWC, including Microsoft and Nokia, as well as among smaller IMS vendors.

Although IMS did fail in the strict sense of what it initially offered, it is now being customized and tailored to fit operators’ needs.

This blog post is a result of research for an upcoming report which focuses on Mobile Network APIs. The report will look at open APIs, developer communities and how IMS (and alternative technologies) will help operators become service providers and will provide insight in associated business models.