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Building a Business Case for VoLTE

Jeff Gordon
1/17/2014
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Voice-over-LTE (VoLTE) has long been discussed as one of the telecom industry's next big steps.

While considering various technology options and how to tie them into their networks, operators globally are still endeavoring to make sense of just how big the opportunity is going to be. They're also still considering what the opportunity actually is.

Will VoLTE change the fortunes of their business? Will it transform the nature of the subscriber experience to the extent that it will reverse slippages in ARPU or reduce churn? Will VoLTE underpin new service innovations, strengthen competitive edge, and provide differentiation over OTT services sufficiently to plug the revenue leak caused by these OTT players?

Exciting though this new dawn is, the answer to all these questions is not quite yet as definitive and clear-cut as you might expect. There is no doubt that significant potential exists for VoLTE to do the above: VoLTE can, but will it? That's a different question, and one that boils down to the business case.

The trouble with uncertainty is that it loads risk into business-cases and the conservative knee-jerk is to minimize the investment at risk. Consequently, most operators consider consumer VoLTE as an exercise in simply re-creating today's voice services over their new IP Multimedia Subsystem (IMS) network.

Of course, one could argue, the lack of innovation at this point is part of the problem. Without innovation to add value to the VoLTE services there can be no incremental revenue to fund the investment in VoLTE, and so the business case is built only on possible cost-savings associated with transferring voice traffic to LTE. However, with the long-term need to maintain legacy voice (for fall-back until LTE coverage is complete, and for in-bound roamers) those potential cost-savings will take some time to occur, and even that business case looks shaky.

Certainly, rolling out IMS and VoLTE is a great opportunity to add something new -- to catch up with the services on offer from OTT communication service providers. High definition voice might be a "nice-to-have" for the average subscriber, but is some way from achieving the status of a "must-have," and only matches what would be available over-the-top of LTE using Skype.

In any case, it's just the tip of the iceberg. To even stand a chance of stimulating extra revenue, operators would presumably need to surpass the OTT offerings. And then, again, we're faced with the uncertainty of what the scale of those potential extra revenues would be. Building the business case this way could only fly if the extra cost taken to enhance the services broke all the norms of telco innovation. (This argument could apply to other services, such as rich communication services (RCS), but that is a debate in itself -- no need to bring that up here.)

So it seems that for consumers, VoLTE will be a case of "same again," and an opportunity missed by operators unable to see how to make the numbers work to bring innovation into play.

Enterprise, on the other hand, offers more promise.

The enterprise market requires more than plain old telephony -- it depends on more sophisticated forms of communications, ones that leverage and integrate with new technologies to enable greater productivity from a mobile workforce and reduce the business operating costs.

Telecom operators have a long history of supporting enterprise communications, and the launch of LTE and rollout of the IMS network and VoLTE can act as a catalyst for the next wave: For a start, the enterprise market is well suited to consuming IP telephony supported by IMS.

Moreover, launching a new network is a fresh opportunity for the network operators to develop innovative services targeted at a market segment that needs new capabilities and is prepared to pay for them. The business case here is, in effect, already established.

Some VoLTE rollout can be expected in 2014 for sure, but the peak is likely to come sometime in 2016, as operators currently must evaluate how best to build the service layer they need. The enterprise segment looks like a strong candidate for funding the investment in VoLTE: However, that means operators must plan for their VoLTE service layer to support the innovation needed by these customers.

Of course, if that solution also enables cost-effective service innovation more broadly, then maybe they can delight the consumers too.

— Jeff Gordon, CEO, OpenCloud

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DOShea
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DOShea,
User Rank: Blogger
1/20/2014 | 10:34:49 PM
Not so fast
So, it sounds like maybe we should temper our recent enthusiasm around VoLTE. News of new phones and engneering menus and possibly carrier launch plans have been a pretty frequent occurrence in just the last month, but I guess that shouldn't be confused with carriers actually having their business cases figured out.
Jeff Gordon
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Jeff Gordon,
User Rank: Blogger
1/20/2014 | 8:00:01 AM
Building a Business Case for VoLTE
Ray - Many of the service providers have built up a pretty good understanding of the mobility and communication needs of enterprises (and quite a few OpenCloud customers have the right mix of developer capability and competitive spirit to do well developing applications and services for that market).  However, this is innovation we're talking about, and the game is about someone having a great idea and then that idea being delivered to market.  Kevin Mitchell notes the importance of cost for the residential market, but the idea must also be delivered to market quickly and cost-effectively (i.e. competitively) for enterprise markets.  But whose idea is it? – That's more interesting.  The more people that can contribute, the greater the chances are that one of them will come up with a blockbuster of a new service.  So, even for those operators that can develop services for themselves, opening the network up for independent development is a really good idea anyway (note that it doesn't always mean a new API needs creating).  What operators mustn't do is lock themselves into one vendor and rely solely on that vendor for all their innovation.

Kingcharles asks "who needs VoLTE if you can get VoIP over LTE" – That touches on one of the most profound questions facing telecom network operators:  Do operators want to compete in the communication service space, or just focus on network access and leave the services for others?  If operators want to continue to serve the enterprise markets as communication and mobility service providers then they'll need more than just a pipe.  Competing in the service space doesn't imply VoLTE (per se) but it does imply some service owned by the operator that they have the freedom to develop.

RitchBlasi suggests buying in services from an OTT provider.  That could be an way forward but what about the wealth of enterprise specific (and customised) services that the operators have built up?.  And who would have control over innovation?  It's back to the above point again:  If you want to serve a market you need the freedom to do what it takes to compete effectively – and dependence on others restricts your freedom.

Also, I don't think OTT providers have an absolute advantage in scalability.  This links into a couple of comments that appear to present "cloud vs IMS" as a mutually exclusive choice of one thing or the other.  IMS and VoLTE solutions already exist that can be deployed as software in virtualised "cloud" environments.
ipkg
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ipkg,
User Rank: Light Beer
1/18/2014 | 4:47:55 AM
Re: Cloud Voice Platforms not IMS
Cloud VoIP platforms is not solution for GSM/UMTS LTE operators.

IMS is the real worked solution We are using in Kazakhstan new roll-out project to cover all country by GSM/UMTS VoLTE.

It is already tested FLASH feature and Voice succes from LTE to UMTS in 7 seconds. 

To reduce energy Site Leasing cost we are using blade RRU's GSM/LTE in same RRU.

 
kingcharles
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kingcharles,
User Rank: Lightning
1/17/2014 | 5:19:54 PM
Re: Cloud Voice Platforms not IMS
Exactly, who needs VoLTE if you can get VoIP over LTE...
Kevin Mitchell
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Kevin Mitchell,
User Rank: Light Sabre
1/17/2014 | 3:09:32 PM
Cloud Voice Platforms not IMS
IMS is the supposed way forward, but it's 10 years in the making and not arrived for mobile yet. Is IMS the right choice?

For most providers: no. In fact, for many providers, we think that owning and running a voice network of any sort isn't the answer that will deliver profitable results.

In the residential market voice is trending to being a feature versus a standalone revenue-producing subscription service. As such, it needs to delivered in the lowest cost, least risky way possible.

For years SPs have demanded not just the latest and greatest tech, but a transformation of the business model. As such there is a strong momentum for an emerging voice delivery model that addresses that need. Here at Alianza we believe a new technology (which is standards based and could be IMS) and business model is essential for VoIP given market dynamics and the various strategic growth initiatives that could use the CAPEX/OPEX needed to normally fund a voice network. This new model is cloud voice platforms.

 
RitchBlasi
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RitchBlasi,
User Rank: Light Sabre
1/17/2014 | 2:39:00 PM
VoLTE
I believe they can develop whatever they want once the market begins to mature. That said, it's probably simpler to buy one of the OTT providers whose solution can scale accordingly.
Ray@LR
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Ray@LR,
User Rank: Blogger
1/17/2014 | 10:07:05 AM
Voice service innovation
Jeff

Do you think the service providers have the capabilities inhouse to develop new IP-based multimedia services and applications for enterprises? Or will they all need to reach out to the developer community and need to develop the approriate APIs to enable suitable third party apps development?

Ray
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