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This article was published on October 31, 2008

Why embracing mobile VoIP is vital for carriers

Why embracing mobile VoIP is vital for carriers
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Business development manager in Shanghai, always up to play with shiny gadgets, firecrackers or eat Shabu shabu. (Japanese hotpot)         Business development manager in Shanghai, always up to play with shiny gadgets, firecrackers or eat Shabu shabu. (Japanese hotpot)                                                                                                                                                                                                                                                                                                                                                                                                                                  • Check out                                                                                                                               • Got Twitter? ♥ -> @Joop

How and why mobile carriers focus on their current revenue model too much and why this will lead to missing out on the emerging global VoIP market.

As you might remember, VoIP technology was initially used on desktop computers only. When these PC-to-phone applications like Skype came out, there were devastating problems for established telecom businesses. The uprising of Wi-Fi and 3G bundled mobile phones are creating a market that did not exist before. Actually, mobile VoIP created a need of which the late majority of customers are not aware of yet today. (Philosophical, I know)

Mobile carriers should embrace VoIP solutions to avoid competition on this emerging market. In practice, they have to alter their income streams from operating calls to data plans. Embracing mobile VOIP would avoid entrepreneurs to take over the market in the future. Instead, mobile carriers are suppressing the use of VOIP on mobile phones. However, mobile VoIP users are emerging quickly, “analyst firm Disruptive Analysis suggested ‘VoIP-over-3G’ would grow from zero to 250 million users worldwide within five years.” The reason why mobile operators are still neglecting this market are general for many cases of disruptive innovation.

The switch to VoIP is imminent; today we see a trend of ‘ordinary’ mobile phones running Blackberry OS, Windows Mobile and the Iphone OS. However, product legislations, buggy software and a high learning curve prevent it to be a mainstream product yet. Examples of software include Skype, Voipbuster, iCall and WQO.

Google announced that their mobile platform Android would not support any VOIP applications. Other example of legislated protection of market is the disabling of VoIP telephony by carrier Vodafone; something that goes against most of the market based economic systems, competition laws ensure and promote competition. Truephone sued Vodaphone in 2007 for blocking VoIP services.

The customer does not know what they want and management is measuring the wrong things to maintain their leading position. In the mobile VoIP example, there are four big reasons for carriers to neglect the market:

  1. The management of most leading companies have to much at stake – and are too stubborn to embrace a new core business. It requires a true visionary to make such a radical switch.
  2. For Dutch operated KPN telephony, operating mobile telephone calls accounts for 66% of the turnover. This reliability on income from mobile telephone is similar at many big mobile operators, implying that the global tendency to maintain the operating market is liable. Changing the main income stream would put tremendous
  3. Customers are fine with paying to call, simply because they are not educated yet.
  4. The introduction of VoIP might not cover current data plan pricing since the competitive priced income on data plans might not cover license costs and will adjust profit expectations in the future.
  5. Shareholders of the carrier operators will insist of focusing on the ‘cash cow’ of the company.

It is only a matter of time before an entrepreneur sees the obvious advantage of reduced costs for customers and decides to launches a mainstream VoIP product that will compete with the core business of established mobile carriers. Hutchison Whampo was mentioned in Business week to launch the INQ1 ‘web phone’ for less then $50. Apple’s iPod touch has become a serious threat to the iPhone with simple software. Mark my words: Mobile carriers who fail to bring a decent and cheap alternative to their expensive mobile platform will lose competitive edge in the next four years.

[For quotations and background, read the full article]

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