Feb 17, 2010
Qualcomm products mentioned within this post are offered by Qualcomm Technologies, Inc. and/or its subsidiaries.
Voice has been the backbone of mobile since the first cellular networks were launched in the 1970’s, and has remained so, even with the growth of SMS and mobile broadband data. Competition though, in voice and messaging, has given rise to flat rate voice and data packages – an almost all-you-can-eat proposal, comprising a monthly text bundle that only a hyperactive teenager can consume. Multiple verticals have been proposed to complement voice and text revenues; advertising, mapping, gaming, eCommerce, and even M2M. Most of these data services have yet to generate the substantive profits forecast by analysts and companies eager to promote their vision of a brave new mobile data world.
With voice still accounting for the majority of operator business, operators are seeking to protect their main revenue stream in the face of perceived competition from Voice over IP (VoIP) providers. One of the topics echoing around the halls of Mobile World Congress this week is Voice over LTE (VoLTE). Since LTE only supports packet data, the circuit switched mobile voice bastion will eventually come to an end. To be successful, VoIP will need to meet the current voice quality expectations of consumers. Or does it? As a user of VoIP for the past 6 years I have heard criticism of the sometimes poor quality of service. But it is, in effect, free. Yes I have to pay for my broadband connection, but there is no additional cost to supplement my mainstay web activity. And the IP video call, even at low bandwidth, is a great way to connect back home to family when on business trips.
The elasticity of demand in the price vs. quality equation for voice would appear to rub against the grain of common sense. While businesses in general want quality, though not at excessive prices, consumers in many instances are willing to accommodate a somewhat lesser quality, if it is free. The VoLTE camp is working to the presumption that quality is paramount. This may be true, but possibly not in all cases.
Web companies have come at the pricing-quality service proposition from the opposite end of the service spectrum. Grow the eyeballs by making it free. Facebook, Skype and others have built up customer bases that place them on the global stage alongside mobile operators. It may be easier for these companies to move up the price curve with enhanced voice and messaging services, HD voice and video for instance, than it is for mobile operators to reverse the downward voice revenue spiral. Enterprise though will not suffer a low service quality, since instant communication is the backbone of their competitiveness. The future of voice is therefore likely to generate more segmentation amongst users. The aforementioned teenager is a messaging junkie and will probably use Twitter and Facebook as the primary communications tools: other segmentation groups will form according to varying usage patterns.
There is an industry initiative to unify VoIP on LTE and this will ensure that the service experience meets user expectations – whatever they are. If history and future predictions teach us anything though, its that it rarely works out as we expect. In particular, it will take time for voice to migrate to IP. This means many years, not many months. The preconditions for success will have to all be in alignment before mass market adoption can occur.