Operators are becoming less fearful about mobile VoIP

Several years ago The Economist newspaper ran a front-page article speculating on the demise of the telephone business as a result of the transition to IP-based communications. It argued that the mobile business was at greater risk than the fixed sector because a higher proportion of revenues came from voice calls.

Fast-forward to 2012 and mobile operators are just starting to embark on the transition to (voice) IP.

• Operators in the United States and Korea have launched voice services over their LTE networks (VOLTE).
• In Europe a number of cellular operators have announced their plans to launch RCS services (under the Joyn brand). Services include chat and group chat.
• A number of operators are partnering with over-the-top IP voice and messaging services (eg What’s App, Bobsled) and launching their own versions of these services over cellular and WiFi networks.

To judge from these initiatives operators are less worried about mobile VoIP than might have been expected. They are learning how to use pricing to minimise cannibalisation of (packet-switched) voice services by bundling together voice, SMS and data. We are moving rapidly from a limited voice, limited SMS and unlimited voice paradigm to an unlimited voice, unlimited SMS and limited data approach to pricing.

In many respects we are seeing the same trends and strategies play out in the mobile sector as in the fixed telecoms market ten years or so ago. For a short period of time it appeared that VoIP start-ups such as Vonage were going to take a large slice of the fixed operator business but that was before we moved into an era of unlimited pricing and operators’ own managed VoIP service strategies. The one important difference between the fixed and mobile market is that mobile operators do not have the benefit of receiving fees from end users if they switch to a rival VoIP provider.

At the same time it is true to say that a lot of what we are seeing at the moment in the mobile market represents price experimentation. Dutch operator KPN was one of the first to transition to integrated pricing to stem the loss of revenues resulting from its customers switching out of SMS and into What’s App. But it has since disaggregated voice and SMS from data. In a competitive market it is extremely difficult for any operator to change its whole approach towards pricing without losing market share. KPN, it would seem, has acknowledged that there are still a large number of people who are not really interested in data and want a price plan based around voice and SMS. Conversely, there are mobile users who want data-only price plans and are happy to pay for voice and SMS on a per event basis.

It is too early to say how the changes in mobile voice pricing will affect usage trends. Informa Telecoms & Media estimates that there were 9.8 trillion circuit-switched calls made across fixed and mobile networks globally in 2011. The market is stagnating as a result of a migration to IP calls and a growing preference among both consumers and business users for electronic rather than verbal communication [there were 60 trillion “data events” in 2011, comprising messages, downloads, web pages and other data sessions across fixed and mobile networks]. But the one segment of the mobile market that is likely to see growth is international and roaming calls where price levels are falling sharply as a result of regulation and the growing availability of VoIP services.