While falling short of the revolutionary claims of the late 1990s, over-the-top voice-over-IP (OTT VoIP) players have left their mark on fixed telephony. Now the focus has switched to the mobile market, and players such as fring, Google and Skype are forcing mobile operators – whose once-powerful grip on the mobile value chain has already been loosened by device manufacturers – to sit up and pay attention.
There are several reasons mobile offers a better fit for OTT VoIP services than fixed line: device intelligence, price, integration with other appliances and greater segmentation. Smartphones give consumers significant computing power along with the hardware to support advanced acoustics – and a portable computer-phone is a great solution to the ergonomic restrictions of the PC. Regarding price, clear arbitrage opportunities remain, particularly for international calls/roaming.
Mobile devices increasingly are the focus for the integration of a range of communications media, from email and SMS to Facebook/Twitter and telephony, while mobile handsets already segment the customer base substantially – a trend that offers a good fit to the closed user-group basis of most OTT VoIP plays (e.g. iPhone 4 owners will know other iPhone 4 owners and will be aware of it).
Accordingly, and as stated in our forthcoming report on how mobile VoIP offers operators an opportunity to evolve their core portfolio, Analysys Mason believes growth in OTT VoIP usage will increasingly come from mobile devices (see Figure 1). At the end of 2010, approximately 87 percent of OTT VoIP subscriptions were fixed subscriptions; this will fall to around 60 percent at the end of 2015 as OTT players build a mobile customer base supported by strong smartphone growth.
Operators need to take action to minimize the threat from OTT providers, although spoiler tactics, such as blocking VoIP on their networks, would be a short-sighted approach. First of all, operators need to adjust their pricing. High call charges are the OTT VoIP services' biggest driver – with the international and roaming segment seeing the greatest impact. Regulatory action will go some way toward lessening demand, but operators need to make targeted reductions to their voice tariffs.
In addition, operators need to take more control of the (perceived) relationship between voice/data spend in bundles. One OTT player argued: "fring relies on your data plan/Wi-Fi for chats, calls and video calls. fring does not use your valuable voice minutes or SMS," but in the context of caps on data usage and continued decreases in mobile termination rates, it is easy to imagine the reverse: Why use your valuable data plan for voice calls, when you can use unlimited minutes from your inclusive plan? Operators also can cross-subsidize with a range of services as they are not just limited to voice/data, whereas OTT players are limited in their ability to bundle.
Operators also need to learn positive lessons from the rise of mobile VoIP. The excellent fit between OTT VoIP and mobile devices suggests operators should take advantage themselves and evolve their core product set. Operators need to invest in voice services that exploit the new ways that different market segments use their mobile handsets. With competition from fring, Google, Skype and others, the challenge will be to ensure operators retain control of the primary voice interface on mobile handsets (the "native dialler"). One approach is to develop an address book that links directly to different tariff offers, such as management of the friends and family list.
Stephen Sale is the lead analyst for Analysys Mason's Voice research program. He may be reached at Stephen.Sale@analysysmason.com.