Could VoLTE be a Knockout Punch for VoIP?

Raise the topic of 4G networks with anyone in the tech industry and you’ll often receive a flurry of smiles and wide-eyed dreaming. Ask the same audience what services they expect from a 4G network and you’ll invariably hear talk of high-quality video conferencing, real-time video streaming, effective online gaming and a whole range of other bandwidth-intensive applications. In all my discussions on the topic, I’ve yet to hear anyone mention that they’d also like a good-quality voice service. In fact, this is something that many of us take for granted. Yet in the race for 4G connectivity are we overlooking one of the mobile phone’s original killer applications – voice?

There can be no question that 4G networks represent a new era of mobile connectivity with more access to bandwidth than ever before. Yet as LTE deployments continue to pick up speed, the industry is quickly trying to develop new business models and understand what all-data networks mean for mobile carriers and their customers. Some people seem to believe that because we’re moving to an all-data network everything will seamlessly work: voice, video, texts, emails, etc, over one unified infrastructure. Unfortunately, this isn’t the case, and this is especially true for voice. We must remember that all-data networks have not been built with native voice applications in mind. One need only use Skype or other VoIP solutions at peak times to see the Quality of Service (QoS) is mixed at best.

However, looking at the response from mobile carriers, it appears they want VoIP services to remain at most a best-effort service, especially on their new networks. In fact, so intent upon achieving this, many of the world’s largest mobile carriers have joined forces to develop a new voice standard called One Voice. Including AT&T, Orange, Telefonica, TeliaSonera, Verizon, Vodafone and over 200 other operators, this collaboration is developing an IP voice solution over LTE. Called VoLTE, this technology will essentially use a reserved lane on 4G networks that will be dedicated to voice calls. Unlike VoIP applications that will have to share bandwidth with other applications, VoLTE will be given specific parameters in which to operate, ensuring a much better and more reliable QoS.

For carriers concerned about dwindling revenue from voice services, the development of VoLTE is critical. They need to prove that VoLTE offers a significantly higher QoS than free VoIP services if they are to retain revenues. However, some analysts believe that we’ve now reached the point of ‘Peak Telephony’ and that even with a successful rollout of VoLTE, revenues from voice services are now in terminal decline. This is a trend that we’re already seeing across the industry. Average Revenue Per User (ARPU) from voice services has been dwindling for some time and it’s unclear whether VoLTE can stymie this. Indeed, many expect migration to all-data networks to actually accelerate this pattern. One could even suggest that the only question here is how fast the acceleration will be.

As I mentioned in an earlier blog post, if mobile carriers do continue to lose voice revenues, they are at risk of becoming pure transport carriers or the ‘dumb pipe’. Some industry analysts suggest that this doesn’t concern carriers and that they welcome the use of free VoIP services. However, recent events in Europe seem to contradict this, especially when we consider the media furore over several mobile carriers throttling Skype. Indeed, the whole question of net neutrality needs to be addressed. Mobile carriers’ plans to effectively develop a reserved lane for VoLTE services would seem to contradict the stance of the European Union’s digital commissioner, Neelie Kroes. What’s more, as more and more countries declare net neutrality an actual law, one wonders if VoLTE as it is currently stands is acceptable.

We also need to consider the impact of WiFi here. Over the past few weeks, there have been a number of announcements that clearly indicate a growing momentum in the development of greater WiFi coverage. Parks and many urban areas now provide free access to WiFi and it appears that this trend is only going to increase. As more users take advantage of free VoIP services and free WiFi access, can we expect VoLTE to gain a great deal of traction? Can it effectively reverse dwindling voice revenues?

Unfortunately we are clearly a long way from seeing any major developments here. We’ve only just seen the first testing of VoLTE services on a commercial network and reports seem to indicate that the results were less than impressive. Indeed, some analysts predict that we won’t see actual VoLTE subscriptions until 2012 at the earliest. By this time we can only imagine how VoIP applications will have developed. Microsoft, Google and Apple are major players here and have considerable cash reserves to develop their technology and build strategic partnerships. One need only look at Google and Sprint to see this in action. Still, it’s fascinating to consider how voice will develop over the coming years and how will it fit into the overall mobile ecosystem.

What do you think to the development of VoLTE? Does it have the potential to reverse dwindling voice revenues? Can it pose a threat to VoIP services? Or will VoIP services prove dominant in an all-data environment? Let me know what you think on this one.

  • Modesto de Morais

    In my opinion VoLTE it’s just a new way of running old things! It seems they want to hold some bandwith space only for voice. Why not for video too?
    I understand the mobile operators are afraid about voice business dwindling. Mostly because VoIP business models it jumps out from business models as usual, and aren’t so appealing products because actually the QoS level it’s not so good, as we ever seen.
    Also, I think, it wouldn’t be space for a new tek because the margins are always shrinking on voice business…

    • Gareth Spence

      Thanks, Modesto. I appreciate your thoughts on this one. I certainly agree that VoLTE, in many respects, represents a repackaging of old telephony services on new all-data networks. It seems to reflect carriers’ unwillingness to embrace new methods of operating. As we’ve all seen, traditional voice services and the associated revenues are rapidly declining. Although carriers hope VoLTE will slow this trend, I cannot help but feel that it’s too little too late.

      What excite me are the new opportunities for communication on all-data networks. As this week’s Facebook and Skype announcement shows, we’re continuing to see new tools to communicate on a professional and personal level. This is what carriers need to embrace and enable. How do you see this space developing? What excites you about these new opportunities to connect?


  • Jim Murphy

    Timely article. I just posted on this subject. I think for MNOs to make additional revenue they have to stop worrying about monopolizing voice minutes and start looking to offer IP level differentiated service at a fee over which arbitrary applications can be build. I think this will grow the pie for all.

    • Gareth Spence

      Thanks, Jim. Just reading your article now. Great post. I’ve been looking into a few pieces on this topic lately and am fascinated to see the approaches carriers are taking to develop new revenue streams. Moving away from mobile carriers for a moment, I’m intrigued by the work of BlueVia (a subsidiary of Telefonica). In an effort to provide further value to its customers, it’s decided to remove itself from the development of applications, preferring instead to match its customers directly with developers. BlueVia believes that by doing this it will be able to provide its customers with more innovative services while enabling it to focus on its core business of data transport. Will be interesting to see how this pans out.

      Are you seeing any similar approaches in the U.S.?


      • Jim Murphy

        I am not seeing anything similar in the US, however, I don’t have much visibility into such activities.

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