Various Opportunities, Interesting Potential (VoIP)

Microsoft is in the process of acquiring Skype – which has partnered with Facebook. Do these new developments signal that the sky is falling for service providers?

The quick answer is “no.” First of all, some analysts are even predicting that partnering with Facebook may hurt Skype, turning it into a type of dumb pipe. Regardless of the outcome of that specific partnership, service providers would be wise to adopt a “If you can’t beat ‘em, join ‘em!” mentality, because although the immediate going might be rough, VoIP just might eventually stand for “Various Opportunities, Interesting Potential.”

An example of this interesting potential is Comcast’s announcement that subscribers equipped with special gear will soon be able to use Skype on their HD sets.

VoIP strategies and planning can no longer wait. Service providers have already begun blocking, partnering and launching their own VoIP solutions. Each approach is potentially beneficial to service providers.

Blocking lowers the risk of cannibalizing voice revenue and protects network performance. An example of this approach is T-Mobile Germany’s past decision to block Skype traffic on smartphones with mobile Internet connections. The downside to this approach is negative publicity/customer anger. In fact, customer dissatisfaction most likely played a role in T-Mobile Germany’s later decision to allow Skype with the payment of a premium charge –$14 U.S. or upwards depending on the tariff. It is important to note that the future viability of the blocking strategy may be in jeopardy after The Netherlands became the second country in the world to enshrine the concept of network neutrality into law.

Service providers partnering with over the top (OTT) players can add value with network services, including QoS, security and fixed-mobile convergence, and offer a differentiated service. An example of this approach is Sprint’s decision to allow all of its subscribers to use their existing Sprint phone numbers for Google Voice. One potential drawback is the potential for conflicting interests among the partners.

Launching their own VoIP services will allow service providers to effectively target certain segments (such as students, international callers and business travelers) and lower operator costs through better service design. More importantly, providers can offer unified communications and a unique customer experience by integrating services, such as combining VoIP with video and location.

My sister-in-law lives in Italy (you should taste her cooking!) and we began Skyping with each other a number of years ago. Skype has definitely become more user-friendly and reliable over the years. As the same becomes true for mobile VoIP, service providers will continue to analyze the different options closely to make sure they aren’t missing the boat. There is certainly reason for optimism, in spite of the challenges.

* Special thanks to Eric Danis for his editorial assistance with this blog entry.

7 Comments

  1. Ofer
    Posted July 27, 2011 at 11:22 am | Permalink

    History proves that billing customers for services that were once free,is a mistake. Once it is done, it is just a matter of time, until competitors will offer it for free again (Unless there is a kartel, as we know in some countries :-) )
    I believe that integrating VoIP services into existing offerings (slightly increasing total plan’s price) would benefit the operators more, and add value to the customers’ usability, enhancing their experience. Same goes for the “per Megabyte” charging.

    Time will tell.

  2. Jonah
    Posted July 27, 2011 at 11:53 am | Permalink

    How ironic is it that Skype now has to worry about becoming a dumb pipe? Signs that Skype is growing up and becoming a ‘real’ telco?

    I think charging customers just to use Skype is a mistake, if it is for the same quality of service. But charging them to use Skype (or other VoIP services) at a higher quality of service might be attractive to some customers. I agree that Skype has become more reliable, but if someone offered me telco-grade quality Skype calling for an additional fee, I might just go for it.

  3. Eric
    Posted July 27, 2011 at 1:28 pm | Permalink

    Ofer and Jonah,

    You make interesting points. But how do service providers put safety precautions in place to ensure that Skype and other OTT players don’t use these partnerships as a foothold to take their customers? (I just recently wrote a blog about Borders outsourcing its online arm to Amazon for nearly a decade, which proved to be a fatal mistake: http://blogs.amdocs.com/voices/2011/07/26/what-service-providers-should-learn-from-the-rise-and-fall-of-borders/

  4. Posted July 28, 2011 at 8:54 am | Permalink

    the key is a flexible, scaleable product platform for telcos which imbeds VOIP and variants of voice and data services inside an evolving offering. For example, corporate users having access to payment, video and voice options along with traditional services inside an intelligently cascading stream of offers across services. this way social can be part of a relationship play in some form. The configuration of these offers must rest with customers which is the key to engagement and exit barrier. for telcos, competing on line item level offers with OTTs is eventually going to lead to value destruction. giving control to customers say using the tablet and smartphone revolution is the biggest hurdle since operators are lethargic in their DNA when it comes to enabling products and services.

  5. Dana Porter
    Posted August 1, 2011 at 7:11 pm | Permalink

    Thanks for the comments guys – I actually agree with the comments here. Once something is free – in order to be able to charge for it you need to provide value added services. How do you do that? You integrate or embed VOIP into other services. I also agree the corporate sector will be the first area with this potential.

  6. Posted August 11, 2011 at 8:16 am | Permalink

    An important factor to consider here is that neither voice nor VoIP is not “a service” in itself. It’s just an umbrella term for the transport of speech over long distances.

    In the past, pretty much the only voice application was telephony, barring a few oddities like PTT.

    Now, there are 1000′s of voice applications, an increasing proportion of which don’t look remotely like a traditional phone call. A good example: voice chat in a multiplayer game.

    We are now seeing the emergence of flexible voice platforms – aided by using VoIP as the bearer. Again, telephony or near-telephony will only be a subset. I’ve seen a Skype slide showing a baby-monitor as a use case, for example. Many of these voice apps are *better* than telephony as they are software-integrated, have better context-handling, and fit better with human behaviour than the unnatural constraints of a phone call.

    The operators have huge problems here – as long as telephony was the only voice service, and they controlled it via numbering & regulation, they could charge excess fees. Now, users can choose the right voice application for a specific purpose, reverting to telephony only as a lowest-common denominator.

    This is a consequence of a lack of innovation & understanding of voice vs. telephony. Some operator folk I meet cannot articulate the answer to the question “Why do people make phone calls anyway?”

    (I explore all these issues at my Future of Voice masterclasses)

    Dean Bubley
    Disruptive Analysis

  7. Dana Porter
    Posted August 11, 2011 at 9:45 am | Permalink

    Dean – thanks for your great observations. I remember a conference I attended 3 years ago where one of the speakers said, “Voice is no longer the core of communications – it’s just a feature.” VoIP certainly accelerates this and I agree innovation is required to see how to monetize it.

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