David Schwartz is betting on the cable industry to be the next big VoIP driver.
As marketing director at LongBoard, Inc., he is charged with spreading the word about the company’s fixed/mobile convergence applications, products that facilitate signal handoff between Wi-Fi and cellular networks.
In the near future, he says, the big buyers for those products and others like them will be cable providers looking to cut costs and boost profits, as they branch out into the VoIP space.
“Cable operators are very pragmatic, and they are very aggressive in rolling out new services,” he said. In the past, they raced past DSL to be first to market with high-speed connectivity, for example, “and this will be the year that they get into the wireless [VoIP] space.”
If he’s right, cable’s move to wireless VoIP (wVoIP) will follow on the heels of its already strong wireline VoIP commitment. The number of cable VoIP subscribers in North America jumped 900 percent between 2003 and 2004, from less than 50,000 to close to half a million, according to the Infonetics Research report, Cable VoIP Equipment Market Outlook.
Cable is on track for further rapid expansions in the VoIP space. “North American cable companies increased their investments in VoIP equipment to keep up with surging subscriber growth, nearly doubling their spending between 2003 and 2004, from $63 million to $123 million,” Infonetics said in releasing the report.
Mobility is key
Why will cable providers move onto wireless VoIP? Schwartz says economics are driving the situation. In short, cable providers need to find a cheaper way to offer mobile telecom services.
Right now, most cable companies provide mobile phone service by buying wholesale minutes from cellular providers like Sprint, at a steep cost. Then they turn around, re-brand those minutes, and sell them to their customers as a cellular service. Schwartz estimates 85 percent of cable’s mobile telcom revenues go to pay for those wholesale minutes. That leaves cable companies with just 15 cents on the dollar, even before paying their own expenses.
Cable providers, who typically charge $30 to $40 a month for voice services, could boost their revenues by as much as 35 percent by offering a wireless VoIP option, Schwartz said—if they’re able to use a Wi-Fi link for a sizable portion of that traffic.
Right now, an estimated 30 percent of cable users’ voice minutes are accessed within range of a Wi-Fi access point. These may be calls made in the home, or calls made within an enterprise setting. “If I know you are at your desk, I will call your desk phone, but if I don’t know where you are—and usually I don’t—I will call your mobile phone,” Schwartz said.
This is where the ability of a phone to handle both cellular and Wi-Fi connections represents a potential win. The cable companies can deliver VoIP access to any subscribers who can tap into their IP network, and unlike the wholesale minutes from other carriers, that access is virtually free to the cable provider.
“They can make it a money-winning proposition if they can take those minutes that are within that wireless access point and get them back onto their own network,” Schwartz said.
The Wi-Fi link is critical. The idea, again, is for a cable operator to route a call to a mobile phone via its own IP network first, when that phone is within range of a Wi-Fi access point. If it isn’t, the call goes over the cellular network.
Timing will be critical if cable providers want to move on this opportunity. Research shows that the market for wVoIP already is heating up, and will likely get more crowded in the near future.
In a recent survey of more than 300 medium- and large-scale enterprises, In-Stat found that 23 percent of respondents already have deployed wireless VoIP solutions. Another 30 percent said they were mulling wireless VoIP implementation within a few months to a year. Most respondents said they were mostly interested in making phone calls from notebook PCs and PDAs.
In-Stat/MDR predicted that the number of cellular/WLAN subscribers will hit more than 256 million worldwide by 2009, or about 12 percent of all mobile phone subscribers. By 2009, WLAN usage for voice communication is expected to surpass data-only WLAN applications.
Companies like LongBoard are hoping cable providers will heed the call. If these high-speed carriers decide to get into the wireless VoIP space, Schwartz reasons, they are going to need products like his: products that allow for the transparent handoff of calls between Wi-Fi and cellular networks.
Likewise, cable providers will need to work with a range of device manufacturers and with their own customer base to implement these new solutions.
“Now they know the technology is available, so they need to begin to get those business relationships into place,” Schwartz said.