Mobile VoIP: No Profits, Big Problems
The booming growth of mobile VoIP isn't reaping financial rewards for the providers, but it is creating revenue problems for some mobile operators and painting a clear picture that VoLTE deployment, while under cost pressures, can't be indefinitely delayed.
Recent research from Infonetics Research Inc. shows 550 percent growth in mobile subscribers in 2012, with the number of users expected to near 1 billion in 2013. And while Microsoft Corp. subsidiary Skype Ltd. owns about 40 percent of the market, there is no shortage of other over-the-top voice applications, all of which is a major headache for mobile operators, says Diane Myers, principal analyst for VoIP, UC and IMS at Infonetics.
(Who saw this coming? Here's who: LTE Voice Lag Leaves Operators Vulnerable.)
Operators such as KPN Mobile and SK Telecom have been vocal about seeing voice and messaging revenues plummet as the OTT apps gain ground. SK Telecom launched its successful VoLTE service in April, garnering 3.6 million customers in April.
"There is Skype and then there are about nine others that are doing fairly well in terms of having active users," Myers says. "And now we are seeing service providers get into the game -- a kind of 'if you can't beat 'em, join 'em' strategy."
She points to operators including max.mobil, Telefónica SA (which acquired Jajah), Megafon, Orange and others who are offering their own VoIP services to compete. (See Telefónica Buys VoIP Player Jajah).
But in joining the OTT VoIP crowd, mobile operators are quickly discovering that being popular doesn't make mobile VoIP profitable -- far from it. Infonetics' estimation of the revenue per mobile VoIP subscriber is a mere US$7.13 annually.
For the OTT VoIP crowd, that reality means looking for other ways to make money -- possibly through ad insertions or by providing the voice segment of a mashup that pulls in other third-party apps for which people will pay, such as presence or gaming, or by charging extra for video-conference or multi-party video.
Vivox, which provides the voice chat platform for T-Mobile's Bobsled service, sells its voice service extensively for use in gaming applications, for instance. Nimbuzz Group moved its headquarters from Europe to Southeast Asia, where it is partnering with mobile operators which use its platform as their OTT app.
"They are enabling international calling -- with Hutch in Sri Lanka, for instance -- for populations with international calling needs," Myers says. "All of [the mobile VoIP players] are looking for ways to charge for a specific service or charge a network partner."
Calling outside the application -- a "Skype-out" option -- is common and therefore not a differentiator or a way to make much revenue. In fact, Myers says, mobile VoIP apps aiming at international calling for their game plan are likely to eliminate outside calling to attempt to expand their reach.
The end game for many of these mobile VoIP players may be to build up enough of a customer base that they are attractive acquisition targets, Myers suspects, and their prime targets will be the mobile operators.
Many of those operators, meanwhile, are looking to deploy their own voice-over-LTE (VoLTE) services and are quite aware that the market has driven down the value of those services before they even hit the market.
Martin Taylor, CTO of Metaswitch Networks, which has developed a cloud-based, open source IMS platform called Project Clearwater, has talked to many mobile operators on their upcoming VoLTE deployments and hears their concerns about how it's "hard to build a business case to invest millions of millions in an IMS architecture to offer a service that is going to be competing with OTT." (See IMS Gets Some Open-Source Love.)
Those same operators realize they can't not offer a voice service, leaving customers to find their own OTT offering. It's one of the reasons "the horizon on VoLTE keeps receding," Taylor says, and one of the drivers for his company's push to a cloud-based offering that can scale up and down more cost-effectively.
Myers' additional research shows operators are stepping up their IMS deployments to support VoLTE. "Over 90 percent of the operators participating in our IMS strategies survey plan to deploy VoLTE by 2015, up from zero today," she says. "This is going to shape the IMS market in the coming years." — Carol Wilson, Editor-at-Large, Light Reading