Is Mobile VoIP A Telco Killer?

Customers change slowly, but they won't pay for voice calls forever if alternative apps save money and improve quality.



For many, it's a foregone conclusion that mobile VoIP (mVoIP) will demolish what remains of telco voice revenues. Recently, Juniper Research piled onto this prevailing wisdom when it released its report on Mobile VoIP, which projects a $5 billion loss of voice revenue by 2015. Thanks in large part to the quickly expanding availability of 3G and WiFi networks as well as LTE and HSPA+, Juniper forecasts that mVoIP will swiftly become the de facto standard for mobile users.

What makes mVoIP so potentially disruptive is its ability to let people send and receive phone calls via an Internet connection on a mobile device, thus avoiding the voice network altogether. Since the call takes place on an available network such as a 3G or 4G data connection or WiFi, the caller doesn't burn minutes or pay long-distance fees. In the past week, Rakuten, one of Japan's largest Internet companies, acquired leading mVoIP player Viber for $900 million. Could this acquisition signal that the tipping point is nigh?

The thing about such digital disruption, though, is that it's messy and tends to upend the most grounded predictions. How much and how quickly disruption eliminates value like voice revenue depends on many complex factors. But let's focus on one most tech executives know intimately: the human lag factor.

[Could startup Artemis's wireless networking technology change the mobile industry? Read Artemis Networks Calls or Wireless Revolution.]

People are being asked to change all the time these days. And let's be honest -- change is not what we do best. For more than a million years our ancestors seemed content to beat creatures with sticks. Then someone introduced the "tie rock on stick" idea, and we evolved. I'll bet good money, though, that there were holdouts. It likely took more than a few sticks + rocks to the head to bring the laggards around. (Ah, the good ol' days.)

In the case of mobile VoIP, millions have discovered low-cost or free voice apps such as Skype, Fring, Nimbuzz, and Viber, and they're willing to sacrifice some quality to get lower costs today. Given the dramatic improvement of quality -- and frankly, the poor service quality provided by most mobile operators -- why isn't everyone using these apps today?

The vast majority of us are not. We sign contracts, add some apps, and are for the most part fairly content to use the "out of the box" service. Let's call it the Law of Human Inertia: We tend to use what is given to us. And herein lies the opportunity for the telco operators.

Embracing mVoIP doesn't have to be a money-losing proposition for carriers, nor is it a free-but-flaky product for users. The successful telcos will figure out ways to monetize their services, such as delivering old-fashioned service performance assurance or creating novel features and functionality that both consumers and business users value enough to pay a premium. (Remember the iPhone?)

Human inertia gives the telcos time to redeem themselves. How long this window stays open is anyone's guess. There is likely a disruptive startup out there that will offer a mobile VoIP experience that's good enough to buy. Even the fiercest stick wavers will find value in a ubiquitous, high-quality service that works out of the box.

Engage with Oracle president Mark Hurd, NFL CIO Michelle McKenna-Doyle, General Motors CIO Randy Mott, Box founder Aaron Levie, UPMC CIO Dan Drawbaugh, GE Power CIO Jim Fowler, and other leaders of the Digital Business movement at the InformationWeek Conference and Elite 100 Awards Ceremony, to be held in conjunction with Interop in Las Vegas, March 31 to April 1, 2014. See the full agenda here.

E. Kelly Fitzsimmons is a well-known serial entrepreneur who has founded, led, and sold several technology startups. Currently, she is the co-founder and director of HarQen, named one of Gartner's 2013 Cool Vendors in Unified Communications and Network Systems and Services, ... View Full Bio

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