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The battle to deliver your wireless phone calls once seemed to have all the makings of an epic showdown between cellphone carriers and mobile voice-over-IP upstarts like Skype.
Instead, the war has evolved into a surprising truce, as fring, Skype, Vonage and a chorus of “me too” voice-over-IP (VoIP) providers already let people call each other over Wi-Fi or the carrier’s wireless data connection on all the major smartphone platforms.
The carriers’ old thinking was: “Mobile VOIP could threaten our voice business.”
Their new thinking: “Who cares when there’s so much money to be made on data?”
“For quite some time, a ton of companies were doing mobile voice and other types of VoIP, and people called it ‘minute stealing’ — it was a race to the bottom, and it was about bypassing, not paying,” William Stofega, director of IDC’s mobile device technology and trends program, told Wired.com. Cellphone companies even sent letters to subscribers telling them their accounts would be terminated, he added, if they continued using mobile VoIP.
But no more.
“There’s been a rejuvenation in mobile VoIP, as carriers have opened up and decided not to fight it so much … [because] at some point in time, a lot of their revenue is going to be generated by data,” said Stofega. “It’s just a 180-degree turn.”
With the floodgates (mostly) open, InStat sees 288 million mobile VoIP users by 2013, while Morgan Stanley expects mobile-VoIP traffic to more than double every year until at least 2014.
The average cellphone is used only 30 percent for data, but iPhones boost that to 55 percent. And smartphone sales increased 43 percent last year, even as general GSM-phone adoption flattened. Morgan Stanley analyst Mary Meeker said in Japan, where wireless networks have evolved further, in part due to a smaller geographic footprint, cellphone usage is now 90 percent data, and soon its wireless data connections will overtake home and office internet connections in terms of volume.
Mobile data is where it’s at in Japan, and that will increasingly be the case here too, as smartphone adoption continues to rise and new tablets and netbooks hit the market.
Cellphone providers don’t mind voice becoming just another app on our phones, whether delivered over Wi-Fi, Vo3G or cellular voice network — even though that may appear to threaten their voice businesses — for five reasons.
1. Mobile VoIP Doesn’t Threaten Voice
Rather than replacing voice connections — which today’s smartphones have, whether you want them or not — Vo3G functions mainly as a substitute for voice-over-IP on a PC, Dean Bubley, founder of Disruptive Analysis told Wired.com. Current 2G and 3G phones leave a persistent voice connection all the time anyway, and besides, unless you’re standing near a cell tower and don’t encounter too much interference during the call, compromised call quality renders Vo3G more of an extra feature.
“Some carriers have frowned on the practice, but in reality, they don’t actually care that much because frankly it hasn’t worked very well,” said Bubley, who attributes the quality problems to lack of consistent good coverage, latency times, battery consumption, variable voice quality and poor integration with phone, phonebook and SMS.
However, some of these barriers are already falling, as 4G coverage rolls out and the iPhone OS and others get better at alerting users about incoming calls without using too much battery life. The remaining barriers can be surmounted by cooperation between app developers and mobile carriers, and they have other reasons to cooperate.
2. Mobile VoIP Helps Carriers
When a cellphone switches to Wi-FI VoIP in the home, it frees up wireless data bandwidth. The increased efficiency of VoIP will help carriers handle a growing demand for wireless bandwidth — especially as mobile videophones such as the fourth-generation iPhone, which is rumored to have a front-facing camera, demand even more wireless bandwidth.
Co-branding with Skype or another VoIP provider would be a competitive advantage in users’ eyes, as would allowing mobile VoIP onto 3G networks.
The popular fring and Line2 apps already let you toggle manually between calling using a voice or data connection, and the free Google Voice service routes calls to multiple phones. That means you can already switch between your cell network, Wi-Fi and 3G connections as needed, for both incoming and outgoing voice calls.
Automating that process and integrating it better with your phone’s address book would improve things considerably, giving cell networks and app developers another reason to forge business deals. (One such deal was an acquisition: Telefonica purchased the mobile VoIP provider Jajah, although it has yet to implement a service that mixes the two.)
3. New In-Call Functionality
Cellphone towers will increasingly carry data rather than voice calls, even if we make as many voice calls as we do now. Photo: herzogbr/Flickr
The potential clearly exists to build additional functionality around data-delivered voice calls — transcription of calls and voicemail, sharing maps and media during or after voice calls, videoconferencing and so on — an approach already being pioneered in early stages by Google Voice, and one in which the carriers would gladly participate, especially if someone else builds all the tools.
The carriers own the data connections, so they’ll get paid anyway, and they stand to earn more by integrating more tightly with certain providers of that technology. For example, they could offer dual-party-opt-in call transcription and map-sharing for voice and data calls between cellphones for an additional monthly fee.
“Operators benefit commercially by users who adopt and expand data packages and in the future, other value-added services,” said fring marketing communications manager Gil Regev, in an early sign that such conversations are already taking place. “To this end, fring already has strategic relationships with several operators throughout the world, such as O2 and A1.”
If wireless networks continue to leave VoIP app developers alone — or even better, partner with them — developers will build this stuff for free, enhancing the carriers’ data offerings, the same way iPhone OS app developers make Apple’s devices more attractive.
4. Voice Is Increasingly Irrelevant
On a basic level, the battle over Vo3G is not worth the carriers’ time or effort because voice usage is shrinking. Shakespeare it’s not, but Twitter and countless other text platforms are evidence that we live in a hyperliterate age, when Facebook status updates, e-mail, SMS and other text-based forms of communication replace what used to require voice.
Younger users, who represent the future of the market, exhibit these tendencies even more strongly. A February Pew Research study found that teens use Facebook and access the internet wirelessly more than any other group.
“[Mobile carriers should] be much more worried about Facebook than about Skype,” according to Bubley. “The margins and pricing on voice are going to come down over time anyway, because of competition and regulation. The total number of minutes that Skype, fring or whatever could substitute for is relatively small … compare that to the threat from the loss of customer control and loyalty that you get with something like Facebook, which is a platform [with] advertising.”
Before the ability to access Facebook (or whatever comes next) becomes as important to a user as the ability to make or take voice calls, carriers that want to compete will need to have changed their identities from voice to data provider, and the ability to offer mobile VoIP, even if no one wants to use it as their primary line yet, is part of that transition.
5. Cell Networks and Mobile VoIP Developers Are Natural Partners
As gatekeepers, U.S. wireless networks could charge mobile voice app developers for access — or improved access — to their data networks. They already do so in Europe, which in some ways can be considered a next-generation version of the U.S. wireless market. In Germany, T-Mobile and Vodafone customers can use Skype for monthly fees of $13.60 or $6.60 per month, respectively.
“[Carriers] need to get their pound of flesh in applications — yeah, [voice] is going to be [delivered by] packets, but they have bigger issues to solve in terms of how they make their money around apps, platforms and other things,” said Stofega. “It’s better to concede this and fight the bigger battle later.… It’s going to go on someone’s network, and someone’s going to pay for it.”
Ben Verwaayan, the CEO of network equipment manufacturer Alcatel-Lucent, which signed a deal to roll out a fourth-generation LTE internet network for AT&T in February, said as much to The New York Times earlier this year. “If everything is free, then operators will not be able to survive,” is how he put it. “The [mobile VoIP] battle is not about technology but the business model.”
Bubley disagreed, making a good point about how the U.S. market currently differs. He said 3G networks will not be able to charge VoIP companies in the United States, because at this point, mobile VoIP is more of an extra feature than a replacement for a voice line. However, that will change on 4G networks such as LTE or WiMAX.
LTE, which AT&T plans to roll out at some point, lacks a way to do voice other than as packets of data according to Bubley, who said standards bodies basically forgot to address voice. As 4G rolls out, it would be easier to rely on the mobile VoIP applications already developed by Skype and others, and he says there’s a chance mobile operators will do exactly that, rather than spending time and money on their own voice-over-IP apps.
Losing the Battle to Win the War
No matter how you slice it, mobile VoIP is a battle that’s not worth fighting for the carriers, and is actually a development well worth encouraging.
Delivering wireless data is the real prize here, which is why AT&T’s iPhone subscriptions generally run more than $3 per day. And as far as wireless data goes, mobile VoIP is a harmless, helpful, value-adding addition to their suite of services, rather than a bogeyman to be feared.
“[Some] people communicate through Facebook status, Twitter, IM on Facebook — different demographics do different things, but it’s emblematic of the fact this [mobile VoIP battle] isn’t a fight worth pursuing too vigorously,” agrees Bubley. “If you’re the carriers, you probably don’t want to encourage people to use Skype unless you’ve cut a deal, but I don’t think you want to annoy some of your best and most enthusiastic customers by making it unnecessarily difficult.”
So why, then, can’t the Skype iPhone app make calls over 3G (jailbreaking aside)? An AT&T spokesman referred us to the company’s October statement that it has “taken the steps necessary so that Apple can enable VoIP applications on iPhone to run on AT&T’s wireless network.” So, this could be as simple as waiting for Apple to release the next iPhone.
Mobile operating systems Free mobile VoIP calls Calling normal phones
fring Android, iPhone, J2ME, Linux, Nokia, Symbian 8, Symbian 9, Windows Mobile, UIQ Skype or any SIP network Standard SkypeOut fee plus call-forwarding charges
Gizmo5, formerly SIPphone (owned by Google) Nokia, Palm, Windows Gizmo5 or any SIP network 1¢/minute
iSkoot Android, Blackberry, Motorola, PalmOS, S60, UIQ, Windows Mobile, Windows Mobile PocketPC Skype Standard SkypeOut fee plus call-forwarding charges
Jajah (now owned by the Spanish mobile operator Telefonica) Blackberry, Java, Motorola, Nokia, Palm Treo, PocketPC, Symbian, Windows CE, Windows Mobile Jajah 3¢/minute for U.S.-to-U.S. calls; international prices vary
MobileTalk (8×8) Android, Blackberry, iPhone, Motorola, Nokia, Palm, Symbian, Windows Mobile N/A Rates vary (designed for international calling)
Mobivox All (you call a local Mobivox number and get rerouted internationally) N/A 2.1¢/minute to 38 countries
Nimbuzz Android, Blackberry, iPhone, J2ME, Symbian, Windows Mobile Nimbuzz, Skype 2¢/minute within U.S.; international rates vary
RebTel All (Can be used from any mobile phone or PDA) + iPhone app, Android app “Free Call” trick 1.5¢/minute in U.S.; international rates vary
Skype Android, Blackberry, iPhone, Symbian Skype Mobile for Verizon 3G smart phones From 2.1¢/per minute; international rates vary
Talkonaut Android, J2ME, Symbian S60, Windows Mobile AIM, iChat, Google Talk, MSN, SIP, Yahoo Varies by route (provider names)
TruPhone Android, Blackberry, iPhone, Nokia Google Talk, Skype, TruPhone 2.1¢/minute to U.S. landlines; international rates vary
Vyke Blackberry, Nokia, most phones except iPhone, Windows Mobile, Nokia N900 Vyke 4¢/hour
Yeigo Java, Symbian, Windows Mobile Yeigo 3¢/minute in U.S.; international rates vary
