By Stéphane Téral, Principal Analyst, Infonetics Research
The good old circuit switched mobile voice $500-billion per year business is under attack from over-the-top (OTT) providers.
Although this has been the state of play for a while, there is no truce in sight but equally no indication that the traditional voice business is falling apart either.
With the increased adoption of smartphones and mobile broadband combined with regulatory regimes that have forbidden mobile operators from blocking mobile VoIP (mVoIP) applications, the market is primed for continued adoption of OTT services.
Frontrunner Skype, now part of Microsoft, dominates the worldwide mVoIP services market. More importantly, because they offer their services for free, there is little room for native VoIP-based services.
Meanwhile, with all the pain they are inflicting on mobile operators, OTT numbers are far from being impressive: we counted a total of 91 million active users in 2011, up from 47 million a year earlier, generating revenues in the range of $1.2 billion.
This pales when compared to a total of more than 5.6 billion mobile subscribers worldwide delivering more than $460 billion worth of voice revenues.
Incidentally, the distinction between users and subscribers deserves a clarification: since OTT is delivered through downloadable or pre-installed applications, the measure of subscribers is based on the number of active users for the service.
Back to the numbers, which explain why mobile operators never launch mVoIP services: Qualcomm pioneered the services back in 2005, conducting early tests in 2007, but in the end, they kept their voice service on good old TDM networks instead (eg, CDMA 1xRTT and GSM networks).
Remember, PLMN (public land mobile network) services were engineered and optimised for voice.
Consequently, there is no rush to offer voice over HSPA+ or shiny new LTE networks (VoLTE), even putting to one side the technical challenges those present, such as single radio voice call continuity (SR-VCC), which apparently were sorted out by Ericsson and Qualcomm at the end of 2011.
That’s not all. We are now witnessing smartphone growth and the migration from voice and SMS services to mobile broadband. The latter makes the headlines but the reality is that, overall, there is still plenty for mobile broadband revenue to do in order to catch up with voice.
Even in places like Japan, where mobile broadband rose to more than 50 percent of total revenue in 2010, they still care about voice because it pays the bills.
Despite its mobile broadband ARPU standing at 58 percent of total ARPU, Softbank Mobile is keeping its PCS service alive and even managed to slightly grow its subscriber base.
In contrast, AT&T and Verizon Wireless, for instance, reported that in Q4 2011 mobile data (including both SMS and mobile broadband) made up 41 percent and 41.5 percent of total mobile services revenue respectively.
Therefore, despite the overwhelming buzz around mobile broadband, mobile internet and 4G, a close look at the reality suggests that voice as we know it is here to stay – and it will take more than a mega Skype to kill it.
Like farmers, mobile operators are milking their GSM cows and ride their HSPA horses as long as they last.