InsightFuel Thoughts on the market from the Amdocs Market Insight & Strategy Team

I recently came across a new, impressive mobile VoIP service called Viber.  It was just launched in December and it’s downloadable from the iPhone App store (Android version coming soon).  They appear to be much more user friendly than the traditional players such as Skype.  For instance you don’t have to sign in to Viber, you just check your iPhone contacts to see who is already on Viber, and then make the call directly.  This simplicity has led to 1 million downloads in the first 3 days and 10 million downloads in less than two months since launch.

With new entrants such as Viber, I wonder how it will change the adoption of mobile VoIP.  Gartner predicts that mobile VoIP minutes provided by OTT players in developed markets will grow from 0.3% of mobile voice minutes in 2010 to 10% in 2015¹.   This growth is mainly tied to smartphones, which provide the open OS systems needed for mobile VoIP apps and the ability to take your phone anywhere.   While 10% isn’t necessarily a huge amount, it will squeeze service provider voice revenues, especially as they are already steadily declining. 

So, how should service providers deal with the mobile VoIP threat?  One approach is to block the VoIP traffic or restrict access.  For example, AT&T and Deutsche Telekom initially blocked VoIP applications such as Skype but have since slowly allowed access, now even charging a supplemental fee as in T-Mobile Germany’s case.

On the other hand, we are seeing more and more service providers partnering directly with VoIP players.  The once predominately “closed” Verizon is now partnering with Skype, offering a line of Skype phones and VoIP calling over their 3G network.  Mobilkom Austria’s A1 is partnering with two VoIP providers, Fring and Nimbuzz.  And one of the best examples is 3 UK, who has partnered with Skype since 2006.  Their partnership has been more successful than most could imagine, especially considering 3 UK didn’t charge for data usage at all and the Skype calls were completely free.  In fact, in 2009 CCS Insight Consulting and 3 reported that 3 UK’s Skype users had 45% higher domestic voice revenues, 20% higher margin, 9% churn improvement, and used 17% more minutes than non-Skype users.   Not bad, right?

Partnering may work in the short-to mid term, but is it sustainable? 

Other service providers are focused on launching their own VoIP services to better compete.  For example, based on their acquisition of JAJAH, Telefonica O2 has launched Global O2 Friends, a VoIP service that provides the ability to make international calls by dialing a local number.  We should see more VoIP launches in the near future and we’ll see additional opportunities for service providers once LTE is fully implemented as VoIP will be the standard.

I believe mobile VoIP is inevitable and new players such as Viber will continue to attract customers.  That means that service providers must begin taking steps to control the loss of voice revenue through new pricing and packaging, partnerships with VoIP players and ultimately launching their own VoIP services.  

¹Market Insight: Over-the-Top mVoIP Poses Threat to Traditional CSP Mobile Voice, Charlotte Patrick and Akshay K. Sharma, Gartner, 15 October 2010