Cellular Carriers Considering VoIP

At a recent Banc of America Securities conference on media, telecom and entertainment, Verizon Wireless Executive Vice President and CTO Dick Lynch described his company’s plans to eventually offer VoIP over the company’s cellular network. “I think 2008 or 2009 is the time when we’ll see it start to take hold in a real commercial sense,” Lynch said.

The greatest barrier to such a deployment, Lynch said, is the speed of the network itself. “What we need to make voice over IP real in the sense of the mainstream voice application solution is to have EV-DO Revision A, because that provides us a faster uplink—it moves the uplink up to a peak rate of about 1.8 Mbps,” he said. “Once we’ve done that, and we’ve added quality of service and a few other things that need to get done, I think voice over IP is clearly on the evolution path.”

At the same time, a new report from the research firm Analysys suggests that cellular carriers are vulnerable to competition from wireline and fixed wireless carriers through voice over Wi-Fi. “VoIP may look more attractive to those seeking to bypass mobile operators’ voice tariffs,” says Dr. Mark Heath, co-author of the report.

Alain Mouttham, CEO of the SIP-based software company SIPquest, says that 41 percent of cellular calls in Europe are made in locations which are either Wi-Fi enabled or can easily be Wi-Fi enabled, such as homes, offices, or campuses. Mouttham says this provides cellular carriers with an excellent business opportunity. “With voice over Wi-Fi and with rich media over Wi-Fi, they can provide 3G-like services but at a much, much, much lower cost,” he says.

At the same time, Mouttham admits, cellular carriers are understandably concerned about losing voice minutes when customers access voice over Wi-Fi instead of cellular. “Still, I absolutely do believe that the cellular service providers will be able to actually minimize this cannibalization and actually increase their revenues by offering those broadband services which can be accessed over Wi-Fi,” he says.

And they may not have a choice. Helene Joncas, SIPquest’s Vice President of Marketing and Business Development, adds that competition (both from other cellular carriers and from wireline and fixed wireless providers) will eventually require cellular carriers to offer VoIP services, whether they want to or not. “The cellular service providers are better off addressing that right now than trying to regain those customers back,” Joncas says.

The most significant barrier to implementation, Joncas says, is business-related, not technological: Cellular carriers will have to work out the necessary roaming agreements with other service providers. And that puts carriers that already have hotspot deployments in a particularly good position. “T-Mobile is a cellular provider, but they also have one heck of a lot of hotspots, so they’re already integrated,” she says. “They don’t have to deal with somebody’s else’s hotspots—and that’s one of the reasons why they’re definitely leading the way.”

And as dual-mode handsets become more prevalent, Joncas says, voice over Wi-Fi will become increasingly attractive to both consumers and enterprise users. While enterprises are willing to spend $400 or $500 on a dual-mode handset, she says, consumers won’t step up until the price gets closer to $100. “The initial price point is definitely something that’s going to be more open to the enterprise market, but the initial activity in the marketplace indicates that consumers will probably be able to start availing themselves of those phones around the second half of 2007,” she says.

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