Hey Operators, What About Voice?
Service providers will need to dramatically alter their business models, by moving marketing dollars and resources into getting people to talk. The alternative is more drastic: Service providers that don’t alter their customers' behavior will have their already often minimal voice traffic disaggregated by VOIP services such as Skype and others. It’s now or never, and the clock is ticking.
Let’s go back to last summer. I was traveling with my family, and one of the stops was in Turin, Italy, to visit with my wife’s second cousins. They live in that city and have a 20-year-old daughter who goes to the University of Turino.
One night, we all were trying to sync up for dinner. As I had my wife and three daughters, we had to split families into multiple vehicles, with Susan (the mom) in our minivan with my kids, and my wife with Armando (the husband). Driving in Friday Turino traffic, Susan’s phone kept on ringing. She would look at her phone, not answer, then make a call to her daughter (Elena). This happened several times. Finally, I asked, “Why don’t you just answer the call?" She said, “I can’t, because Elena hangs up before the call completes." I asked, “Why?” She said, “Elena wants me to pay for the call."
So here’s what happened, and what it means. Elena’s service provider provides a “free” service. If an outbound call is not completed, it generates an SMS and sends it to the callee's phone, with the callback number. The callee -- in this case the mom -- calls the daughter back, incurring the call charge. However, the result of this bizarre sequence of events is that this 20-year-old, third-year university student has been TRAINED by her service provider NOT TO COMPLETE A CALL!
Take another example in the U.K. I’ve asked a bunch of 20- and 30-somethings this question: “Why don’t you call one another?” Because if we call one another, it costs too much (even if some of the more wacky stuff like internetwork charges have started to go away). So, if they wanted to call folks to figure out what pub to meet at for a beer, by the time they are done, they’ve chewed up the cost of a pint making the phone call. SMS tariffing and calling-party-pays have again trained a huge segment of the population not to make phone calls!
The result of this is evident in MOU (minutes of use per month). For many countries with this type of behavior, MOUs are sometimes less than 100 minutes a month, and many countries are between 100 and 150 minutes of use a month, or -- looking at it differently -- three or four minutes of voice calling a day for a phone that’s carried around 15 hours a day or more. I can understand that, when the networks were nascent and capacity slim, keeping voice traffic down was a necessity, but doesn’t anybody see a problem with this? Especially when in other parts of the world, service providers have customer bases driving 1,000 or even 1,500 minutes of use or more?
Take a look at Section 229, Table 16 in the latest Federal Communications Commission (FCC) Report on Competition in the Wireless Industry, which shows differences in penetration and MOU in different geographies. Note that “technology choice” at this point in the game has no bearing on consumption of minutes. Also, don’t start on varying “penetration levels,” as the “110 percent” penetration levels are another convenient fiction that I’ll address in a later post. The U.S. has MOU of 838 minutes a month, and Germany and Italy are 94 and 117 minutes, respectively. SMS revenues are massively higher in "low MOU regions,” but if I’d posit that if I were an operator, I’d be worried about my SMS revenues being cannibalized/disaggregated and understand that properly executed voice strategies will be much more sticky.
At the Mobile World Congress in Barcelona a few months ago, I discussed this topic with a bunch of folks. Walking around the show, I was struck by the fact that, unlike shows in Asia or the Americas, hardly anybody was talking on the phone! There are other issues at play here (more on that in future posts), but one noted industry analyst actually said to me, “Well, maybe we Europeans don’t like to talk on our cellphones.” Italians or Spaniards not wanting to talk? Give me a break.
So folks, wake up. Stop trying marginal plays to decrease voice-per-minute costs to stimulate demand. All that will do is keep voice ARPUs flat, in the face of a broad range of technologies looking to snack and then gorge on your voice revenue franchise. Use your marketing muscle, your scale, your creativity, and a bunch of new community, content, and technology approaches to GET PEOPLE TALKING. And talking a lot.
— Jeff Belk is a principal at ICT168 Capital LLC, focused on developing and guiding global growth opportunities in the Information and Communication Technology space. Special to Unstrung