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Voice over data and lower mobile call prices

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Mitchell's picture

In the future, voice will be carried over data, and consumers can expect significantly lower prices for voice calls over mobile networks when this happens. This is word from new Cell C CEO, Alan Knott-Craig.

Speaking during a Radio 702 interview, Knott-Craig said that it is inevitable that voice will be carried over data in the future. The timing will depend on sufficient data capacity on mobile networks, he added.

Voice prices will decline when voice calls are carried over data, simply because of the much lower price of data, said Knott-Craig. The lower rates will also require different mobile business models to accommodate the lower margins.

Knott-Craig warned that the quality of the voice carried over data may be lower than traditional mobile voice services, but expects consumers to settle for slightly lower quality if the price is much lower.

In South Africa, AppChat – a new mobile company founded by former ECN CEO, John Holdsworth – plans to launch a voice over mobile data service in mid-2012, promising to significantly reduce mobile call rates.

Holdsworth explained that AppChat has been set up with the specific purpose of passing on the benefit of reduced wholesale costs and lower interconnect rates to consumers.

“We want to make sure that the difference between R1.25 and R0.40 lands in the wallets of mobile subscribers, and not the coffers of incumbent mobile operators,” said Holdsworth.

“Ultimately mobile prices will fall, mobile traffic will increase, subsidies will be cut to the bone and mobile dealer commissions will be reduced. New entrants will acquire market share and the large incumbent operators will have to up their game in order to compete.”

“The rapid rollout of IP-based networks; the explosive growth of data-based services and devices; ICASA’s plan to implement wholesale open access; and lower interconnect rates will see the biggest change in the mobile market for 15 years.”

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http://mybroadband.co.za/news/cellular/46688-voice-over-data-and-lower-m...

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Mitchell's picture

And more...

Mobile voice over data (a.k.a. voice over IP – VoIP) services offer consumers a more affordable way to make voice calls from their mobile phones. This poses a serious threat to the cellular operators’ traditional voice revenue, and it is not clear how they will battle this threat.

According to Cell C CEO, Alan Knott-Craig, it is simply a matter of time before voice over data becomes the standard on mobile networks. He added that consumers can expect significantly lower prices when this happens.

Knott-Craig argues that the capacity on mobile networks remains a constraint to ensure high quality voice calls, but he added that this is changing. With new technologies like LTE, which increases spectral efficiencies and boosts capacity, mobile broadband quality will improve.

However, it is a conundrum for mobile operators: they have to strive for the best possible data network, but these high quality data networks make very good (and cheap) voice over data calls possible.

Even if the quality of mobile VoIP calls is not as good as traditional mobile calls, Knott-Craig expects consumers to settle for slightly lower quality if the price is much lower. The use of Skype for international calling is a good example.

High mobile voice prices on borrowed time

Many mobile VoIP services are starting to emerge, promising to significantly reduce the price of making calls on mobile networks.

AppChat, a new company started by former ECN CEO John Holdsworth, is one such a service which sent a strong message to the mobile operators that the time of high-margin voice revenues are running out fast.

AppChat plans to launch commercial VoIP services in South Africa using both smartphone applications and their own mobile virtual network operator (MVNO) SIM cards.

Other significant telecoms players, including MWEB and Internet Solutions, are also increasing their focus on mobile VoIP products.

“Ultimately, mobile prices will fall, mobile traffic will increase, subsidies will be cut to the bone and mobile dealer commissions will be reduced. New entrants will acquire market share and the large incumbent operators will have to up their game in order to compete,” said Holdsworth.

“The rapid rollout of IP-based networks; the explosive growth of data-based services and devices; ICASA’s plan to implement wholesale open access; and lower interconnect rates will see the biggest change in the mobile market for 15 years.”

Knott-Craig echoed Holdsworth’s views, saying that mobile operators will have to adapt their business models to change from a voice-based environment with high margins, to a data-based environment which is a high-volume, low-margin business.

How to respond?

To date, the cellular operators do not seem to have an answer to combat the threat of low-cost mobile voice over data services.

One option, which the mobile operators do not like speaking about openly, is to charge significantly higher fees for VoIP traffic on their data network.

Operators like Vodacom and MTN have already lodged pricing of R25 per MB for VoIP traffic with the Independent Communications Authority of South Africa (ICASA), but this rate is not enforced. However, charging higher rates for VoIP traffic is nothing more than putting a plaster on the problem.

A more sustainable solution may be to launch their own VoIP services as part of a wider product basket, or even launch VoIP-specific data products with guaranteed service levels.

According to Vodacom spokesperson Richard Boorman, VoIP quality is inherently variable as it competes with other traffic and cannot always keep up – hence the breaks in conversation.

“We envision a future approach whereby VoIP traffic is prioritised to ensure a decent service, and that a premium would be charged for this. This is more likely to happen once LTE is up and running,” said Boorman.

It is not clear how mobile operators will overcome the attack on their lucrative voice revenue by mobile VoIP services, but what is certain is that they will have to adapt to a fast-changing telecoms world to survive.

- http://businesstech.co.za/news/mobile/10327/vodacom-mtn-cell-c-and-8tas-...