VoIP over UMTS: The Finale - Embrace the trend or block the threat?

This post is a try to summarise and distill a theme from the previous posts about VoIP over UMTS, without getting much into the technical detail, but rather by proposing a view of the telecomm market and motivations for VoIP.

First, let us get the definitions out of the way:
VoIP over cellular:
Carry the voice conversations of mobile users using VoIP by routing them over a packet-switched network, instead of the traditional dedicated, circuit-switched voice transmission lines.

The Market landscape:
Fixed Line broadband prices are falling. Fixed operators offer a huge bandwidth at cheap prices. With a WiFi extension it is possible to become semi-mobile. Fixed line operators realised that they have to diversify their business instead of relegating themselves to become ISPs and ISP carriers. Therefore came up with the Fixed-mobile Convergence concept. They want to win part of the mobility market by putting together compelling UMA offerings. Mobile operators undoubtedly will fight back, probably with home/enterprise collapsed architecture base stations.

Mobile operators see DSL as a headache, because suddenly they have to compete to offer high throughput. They have been fighting an uphill battle with WiFi (and soon WiMax) since they shifted their focus to “high throughput”. Mobile operators are generally unimaginative and still think in terms of “talk”, “text” and recently “broadband”, instead of capitalising on their greatest assets: mobility and location information.

The Proliferation of Wireless broadband has changed the mobility landscape. There are WiFi hotspots on every corner. WiFi Social networks are emerging. (FON): a company that gives you a customised router and allows you to share your broadband with other FONers. Businesses can also make money.

From the regulatory point of view, there is an increasing pressure on reducing mobile roaming charges. Also, it is still ambiguous how mobile data termination charges will be collected, at the moment there aren’t any, which makes VoIP an appealing solution.

Advent of “convergence” has put vendors in a predicament. Now they are trying to sell “standardised” architecture to very different types of customers.

Whenever the industry gets excited about new technology, financial institutions and banks become skeptical because they want to see some ROI on existing investments before committing any new ones.

If they don't embrace VoIP, mobile operators face a threat from it. Enterprise VoIP is already perceived to be a major threat. At the moment they are resist the trend and offering differentiated services to their enterprise customers, e.g. extension dialling

Shift in Markets structure:
The industry is moving away from a vertically integrated arrangement, where operators (think vodafone) own the infrastructure, the frequency, the transport, and applications, the portals, the content and the handsets. The future will be different, companies will own infrastructure to carry multiple types of traffic and a myriad of access technologies (fixed +wireless). Other companies will specialise in content provisioning, others will concentrate on marketing and user acquisitions.

It will be interesting to see how incumbents will shift away from current business models. There is space to diversify revenue streams: For instance, new technology will enable operators to challenge traditional promotion channels. Location information is a great asset and many interesting applications can be wrapped around it.
At the end of the day social re-engineering can open up new business models and allow the industry to get into new businesses. For example, adopting “work from home” ethos will allow telcos to compete with many industries such as: Real estate, car industry, and transportation service providers!.

VoIP over UMTS: motivation and market drivers:

• There is a big hype behind VoIP over cellular, largely because of the attention it attracts in fixed networks and internet world.
• There is a perception that VoIP over cellular will be cheap. This may be true if the operator already has an under-utilized packet core network for example. Nevertheless, offering operator controlled VoIP is not necessarily cheap. Having to run an IMS network to control VoIP introduce what is called “IMS Tax”, where the mobile operator has to deal with increased traffic for the same number of calls, and loose one of their greatest advantages: the ability to carry CS voice efficiently.
• There is also a view that VoIP over cellular is inevitable because once LTE is out CS voice is dead.
• If an operator wants to deploy IMS capabilities, VoIP can be bundled with other added value services and experiences, which hopefully will make a good compelling offer.
• There is a perception that VoIP offers some advantages in terms of capacity , quality and efficiency.
• Convergence: “VoIP fits well with the all IP convergence concept”. The fact of the matter is that convergence is not exactly “all IP”. Convergence is : "the process of replacing several legacy networks (boxes) based on old technology with a single network for all telecomm services, and for all telecom access (fixed + wireless)". So the theme is: a simplified, scalable and integrated transmission and core network.
  

What is the right VoIP over UMTS operator strategy?

There are two generic strategies which are opposite to each other, and a spectrum of possibilities in between. Essentially, the operator can either offer VoIP is a cheap substitute of voice calls, with limited investment in infrastructure and very much in line with the traditional internet provisioning model, or alternatively, offer a differentiated and high quality voice which is part of a more compelling and complete offering.

Cheap:
- The Premise: Subscribers want to do cheap voice calls.
- Provider mentality: “We give the pipe, you do the skype”.
- Follows the broadband ISP model by providing access to the internet and no additional differentiated services.
- Best effort voice calls.
- User experience is not seamless: standalone applications for VoIP and users have to know how use them.
- Ubiquity to the internet user, who can access their VoIP provider accounts from any terminal using any type of access. (unless blocked by a scrupulous operator).

Premium:
- Premise: Subscribers want to do reliable voice calls.
- Walled Garden mentality: “My network, my revenue”. Operator wants to charge for your VoIP calls.
- Guaranteed quality.
- Seamless user experience: user does not know his calls are carried over VoIP
- User ubiquity undermined by walled garden, perhaps have to pay for ubiquity.
- Differentiate the voice offering by value added services. VoIP becomes part of a complete compelling offer. (not voice centric).

Conclusion:

On the long term, VoIP over cellular is inevitable. However, there are serious issues to be addressed by the cellular mobile operators if they want to still exist few years down the line. They have to make up their mind what business they want to be in, and have to adapt to the new world of horizontal integration. It is very likely that the term "mobile operator" will diminish or disappear with new revenue streaming and business models emerging.

Contact me to get a power point presentation slides on VoIP over UMTS strategy)

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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