27 Nov 2006

VoIP Episode 6: To VoIP or not to VoIP, that is the question

Cellular operators seem to be confused about VoIP. On one hand they seem to think that the whole world is going IP, hence VoIP is inevitable. On the other hand, they do not want to undermine their number one profitable application: trunked voice. There is also confusion about benefits of carrying VoIP on cellular radio access networks.

Most cellular operators see VoIP as a dangerous proposition because it cannibalises their stable voice market share. That's why, until recently, any talk about VoIP over cellular was accompanied by a view that VoIP traffic will be controlled and billed by the operators in a very similar fashion to traditional circuit switched voice. Therefore the concepts of a myriad of sophisticated "boxes" were introduced to enable quality controlled VoIP (as opposed to best effort VoIP over the Internet) along with all the added value services associated with the IMS architecture. So the emphasis is on the user experience, and perhaps the vision is to do voice "sessions" in the same way you use your Instant Messenger with the added guarantee of quality. Operators don't want to merely become bit pipes for other content providers, and they dread the prospects of following the footsteps of DSL providers.

The other driver is to have a more integrated core network. This may be true in the long term, because legacy networks will stay for some time (perhaps a generation) before they get obsolete, so the vision of one integrated core still needs sometime to materialise. Incidentally, convergence (I know, an overused word these days) is really about using less boxes to carry different types of traffic, and it is not necessarily about everything becoming IP based.

In a nutshell, the vision is to bring VoIP to cellular radio in a controlled fashion that guarantees the operator's grip on the revenue. UMTS operators can stop users from using their packet access to transmit/receive VoIP traffic. There are network devices that can "sniff" the types of packets generated by users and if you are running a Skype client for example, they can block it for you. Nokia launched a VoIP blocker to help operators stop cheap peer-to-peer VoIP from competing with their own voice services.

So on one extreme, the operator may want to run the business as a "walled garden" and have full control over content and traffic. The other extreme is to run the business following the ISP model: they give the user a bit pipe (could be fat or slim) and the user does whatever he likes with it. Content providers provide their services to the end user independently of the operator in the same way it is done over the Internet.

The cellular business could also be run in a balanced way between these two extremes, perhaps by "cherry picking" content providers that are allowed to promote their service over the cellular network. Perhaps the cellular business model can shift from generating income from the end user to making money from content providers instead. Perhaps they can diversify their business and get into making content themselves to compete in equal footing with everyone else.

3 has recently announced its launch of mobile Internet in the UK. Their model is "all you can eat" flat fee. They are partnering with Skype, eBay and Google. It is yet to be clear how much control they will have over the traffic, and what revenue streams they will have together with their new Internet partners. It seems likely they followed a "we give you the pipe you do the skype!" model. If this turns out to be true, it can be considered as the end of the cellular industry in the UK as we know it. peer-to-peer VoIP does not need any "expensive?" boxes to control it or monitor it. Users should not expect a quality better than VoIP over the Internet though; this is not trunked grade voice. So It is all about extending the Internet experience to the mobile world in this case, full stop. In contrast to this, do you remember the "IMS tax" we talked about before? It is about the quality vs complexity tradeoff again.

3 has got nothing to loose, they have a loss making business and Hutchinson was rumoured to be thinking of selling the business (I hope they will not sell to Orascom, otherwise the egyptians will run it in the same way they run EgyptAir) , therefore it is not surprising to hear that they have decided to try the rather uninspiring ISP model.

On the other hand, incumbents like Vodafone are not doing any better. They have an endemic problem of lack of creativity and ability to introduce new exciting services. The are too frightened of competition from fixed wireless and fixed wired, and feel the threat coming from every corner.

Cellular operators tend to forget that they have two very strong commodities which the others do not have. The first is mobility. The fact that they can support an advanced level of mobility is something competitors can not even get close to, at least not in the short to medium run. Roaming, portability and ubiquity flow naturally from this.

The other strong commodity they have is the location information, which many services and applications can be wrapped around. In their short sighted and rather uncreative vision, they have only looked at things like emergency services and mapping applications, but very little real work on any real creative applications.

Meanwhile, most operators are still stuck in the same corner thinking: shall we VoIP or shall we not?

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4 comments:

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