Just as mobile operators thought they were getting to grips with the conundrum of how to monetize the growth in mobile data, they are now being posed with a new threat: how to protect against the cannibalization of SMS and voice revenues that mobile data growth is enabling through instant messaging (IM) and mobile VoIP (mVoIP).
mVoIP is basically the use of over-the-top (OTT) VoIP applications such as Skype on mobile devices. Three key drivers are making mVoIP a clear and present danger (and perhaps an opportunity) for operators.
First, the near ubiquity of 3G and advent of LTE in many markets means a growing number of customers have access to the high data speeds required for mVoIP. Second, the explosive increase in smartphone penetration has driven a concomitant growth in mVoIP adoption, as one typically needs to download an app for mVoIP. Finally, the stark price differential between voice and data effectively affords an arbitrage opportunity whereby it is 50 to 100 times cheaper (often perceived as free) to make a minute-long VoIP call than a one-minute voice call.
So, how are operators managing the threat of mVoIP? Responses have evolved from outright blocking of mVoIP, through to permitting it, promoting it and even competing with it. A given operator’s chosen stance has depended greatly on its market positioning and regulatory conditions.
Incumbent operators in highly regulated markets, such as Etisalat in the UAE, have simply blocked Skype and other mVoIP apps from being used on their networks. In competitive markets that lack the luxury of such regulatory protection, operators are wary of blocking mVoIP for fear of losing customers to more obliging competitors or attracting bad press. AT&T in the US, for example, allows Skype to be downloaded onto smartphones, but only allows usage over Wi-Fi.
Challengers who have less revenue to protect and aspire to gain market share have moved a step further, promoting mVoIP in an attempt to disrupt the market and drive acquisition. In 2007, 3 in the UK partnered with Skype to offer the Skypephone, allowing free Skype-to-Skype calls. 3 claimed in 2009 that mobile Skype users generate almost 60% more voice revenue and spend almost a third more than non-users, resulting in a margin uplift of 20%.
Finally, some operators are starting to launch their own mVoIP services to compete with Skype and other OTT mVoIP players. Only a couple of months ago, Telefonica launched Tu Me - its own mVoIP and IM app - after having acquired the capability by buying VoIP startup JaJah in 2009. There are now 250,000 active Tu Me customers and, interestingly, the third-largest user base for Tu Me is in the US, where Telefonica has no network and is effectively an OTT player on Gringo mobile networks. No doubt this has led to voice cannibalization, but the operator says that Tu Me might be monetized in the future through advertising or partnerships.