Light Reading
The 550% growth in mobile VoIP is hurting mobile operators, even though the OTT providers aren't seeing much revenue

Mobile VoIP: No Profits, Big Problems

Carol Wilson
LR Mobile News Analysis
Carol Wilson, Editor-at-large
7/17/2013
50%
50%

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

(8)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
philharvey
50%
50%
philharvey,
User Rank: Light Beer
7/22/2013 | 5:01:01 PM
re: Mobile VoIP: No Profits, Big Problems
Dan, is public hotspot Wi-Fi calling really analogous to a carrier managed VoLTE service?
Kim Peinado
50%
50%
Kim Peinado,
User Rank: Light Beer
7/18/2013 | 7:41:14 PM
re: Mobile VoIP: No Profits, Big Problems
Thanks for this great article, Carol. One data correction: Infonetics reported that “The number of global OTT mobile VoIP subscribers shot up more than 550% in 2012.” The stat in this article incorrectly states that there was a "550 percent growth in mobile subscribers" -- "mobile subscribers" should read "OTT mobile VoIP subscribers." Thanks - Kim
brookseven
50%
50%
brookseven,
User Rank: Light Sabre
7/18/2013 | 4:30:42 PM
re: Mobile VoIP: No Profits, Big Problems
I use it at Starbucks all the time and have done so when traveling internationally in hotels.

seven
DanJonesLRMobile
50%
50%
DanJonesLRMobile,
User Rank: Light Sabre
7/18/2013 | 3:57:33 PM
re: Mobile VoIP: No Profits, Big Problems
I've found it useless on public hotspots.
brookseven
50%
50%
brookseven,
User Rank: Light Sabre
7/18/2013 | 3:54:50 PM
re: Mobile VoIP: No Profits, Big Problems
I find WiFi calling very effective. Has cheaply (for 0) allowed me to replace my landline.

seven
DanJonesLRMobile
50%
50%
DanJonesLRMobile,
User Rank: Light Sabre
7/18/2013 | 2:17:27 PM
re: Mobile VoIP: No Profits, Big Problems
Wi-Fi calling sucks though, makes me fear what VoLTE calls will actually be like in reality.
brookseven
50%
50%
brookseven,
User Rank: Light Sabre
7/18/2013 | 5:33:33 AM
re: Mobile VoIP: No Profits, Big Problems
Carol,

I have the WiFi calling option from T-Mobile. It is a VoIP option that does not require a different number or application. Basically it works just like your cell and does not take minutes. I believe this derived from the older UMA work that T-Mobile did.

Just something else out there.

seven
gconnery
50%
50%
gconnery,
User Rank: Light Sabre
7/17/2013 | 11:01:44 PM
re: Mobile VoIP: No Profits, Big Problems
Here, I have a little tiny violin I can play for them...

Its been obvious for a while now that operators need to make their money in the future off the DATA. All of the US operators have switched their packages so that they'll continue to make the same amount of money (more even) if people stop texting and stop calling and just do those things using data. If some foreign operators didn't get this message some time ago they weren't paying attention.

Aside from the ridiculous gouging for international calls, there's the obvious--cell phone calls are barely understandable. The quality is laughable and hasn't improved in a decade. I keep a home phone line just so I can make calls that I can here. Of course right next to it is my office phone that uses 8x8's IP service.

If operators can get HD voice options, including VoLTE, going they might be able to drag this out a little longer. At best.
Educational Resources
sponsor supplied content
Educational Resources Archive
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Huawei Video Resource Center
Interview With Rick Talbot, Principal Analyst, Current Analysis

10|31|14   |   2:12   |   (0) comments


At the NFV Open Cloud Forum 2014, Rick Talbot shared his positive feedback about the holistic and open approach that Huawei adopts for SDN and NFV. He also found the open sharing at the event valuable as it features different perspectives from Huawei experts, telecom operators, industry analysts as well as security experts.
LRTV Huawei Video Resource Center
Interview With David Snow, Principal Analyst, Current Analysis

10|31|14   |   2:24   |   (0) comments


David Snow talked about his understanding of Huawei and its SoftCOM strategy at the NFV Open Cloud Forum 2014, saying that Huawei's wide approach combining IT and CT expertise, introducing big data and analytics into solutions and contributing to the OpenStack community particularly resonate with him and make the company stand out in the industry.
LRTV Huawei Video Resource Center
Interview With Roz Roseboro, Senior Analyst, Heavy Reading

10|31|14   |   3:13   |   (0) comments


Roz Roseboro commented on Huawei's data center capabilities and NFV solutions at the NFV Open Cloud Forum 2014, saying that in addition to covering all three key domains of compute, storage and networking, the company also emphasizes the importance of management capabilities and professional services, which are essential in making NFV a reality.
LRTV Huawei Video Resource Center
Interview With Michael Howard, Co-founder & Principal Analyst, Infonetics Research

10|31|14   |   5:25   |   (0) comments


Michael Howard talked about SDN, NFV, and OpenStack adoption at Huawei's NFV Open Cloud Forum 2014. Particularly, he pointed out that Virtual Enterprise CPE is the top NFV use case that operators plan to invest in over 2014 and 2015 to deliver new enterprise services through virtualized functions.
LRTV Huawei Video Resource Center
Interview With Jerry Caron, Senior Vice President, Current Analysis

10|31|14   |   3:11   |   (0) comments


At Huawei's NFV Open Cloud Forum 2014, Jerry Caron from Current Analysis said that orchestration and management are key to realizing SDN and NFV for global carriers, and the approach that Huawei is taking, with its FusionSphere Cloud OS at the core, is in the right direction to address the challenges.
LRTV Documentaries
Broadband Battles

10|31|14   |   01:39   |   (0) comments


This year's Broadband World Forum featured a number of show floor battles focused on access gear, components and coffee.
Jonestown
Mobile Backhaul: Going to the Dark Side?

10|30|14   |   2:26   |   (1) comment


Heavy Reading's Patrick Donegan shares his view on a dark trend that bubbled up at Light Reading's annual backhaul conference in NYC.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview With CEO of SwitchCom

10|30|14   |   4:13   |   (0) comments


SwitchCom, an IT company based in Angola, recommends a variety of Huawei solutions and hardware to their customers in the energy industry.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview With Ethiopia's Ministry of Water Irrigation & Energy

10|30|14   |   4:08   |   (0) comments


Gosaye Mengistie of Ethiopia's Ministry of Water Irrigation & Energy discusses the collaboration with Huawei in that country.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview with Dongfang Electronics Corporation

10|30|14   |   5:46   |   (0) comments


Dongfang Electronics Corporation, headquartered in Chengdu, China, is one of China's largest manufacturers of power generators and contractors of power station projects.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview with Zimbabwe's Customers

10|30|14   |   3:31   |   (0) comments


Representatives of Zimbabwe's Ministry of Power and Development discuss the energy needs of their country as well as new areas of improvement due to enhanced ICT capabilities.
LRTV Huawei Video Resource Center
2014 Huawei Electric Power Industry Summit: Interview With Colbún Chile

10|30|14   |   4:29   |   (0) comments


In Chile, an aging energy infrastructure was in dire need of a modern update. Claudio Valenzuela of Colbún discusses how Huawei's ICT solutions continue to provide crucial information to improve the grid and how an in-country engineer is a cricial asset.
Upcoming Live Events
November 6, 2014, Santa Clara
November 11, 2014, Atlanta, GA
December 2, 2014, New York City
December 3, 2014, New York City
December 9-10, 2014, Reykjavik, Iceland
February 10, 2015, Atlanta, GA
May 6, 2015, McCormick Convention Center, Chicago, IL
May 30, 2015, The Westin Peachtree, Atlanta, GA
June 9-10, 2015, Chicago, IL
Infographics
WhoIsHostingThis.com presents six of the world's most extreme WiFi hotspots, enabling the most epic selfies you can imagine.
Hot Topics
Microsoft's Skype Embraces WebRTC on IE
Sarah Reedy, Senior Editor, 10/27/2014
FTC Slaps AT&T With Throttling Lawsuit
Sarah Reedy, Senior Editor, 10/28/2014
Wheeler Gets Down With OTT
Mari Silbey, Independent Technology Editor, 10/29/2014
China's MVNOs Hit the Wall
Robert Clark, 10/27/2014
Let's Not Kill SDN & NFV With Silos
Francois Locoh-Donou, Senior VP, Global Products Group, Ciena, 10/28/2014
Like Us on Facebook
Twitter Feed