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Internet telephony over mobile phones took centre stage at the 3GSM World Congress mobile phone conference in Barcelona last week, with two announcements signalling that the mobile phone industry is waking up to the potentially disruptive technology coming its way.
“Internet voice is going mobile,” said Jorma Ollila, Nokia chief executive, on Monday as the world’s biggest maker of mobile handsets unveiled its first mass- market model capable of supporting voice-over-internet protocol. VoIP is the emerging technology that offers cheap calls to users by routing them over the internet, instead of traditional phone networks.
The Nokia 6136 is also “dual-mode”: as well as working on mobile GSM networks, it can connect to small wireless networks known as WiFi, which unlike mobile phone networks operate in unregulated spectrum.
Nokia’s rival, Motorola of the US, is working on a similar handset and other manufacturers from the mobile industry and those on the periphery, such as Compaq and HP, are working on pocket devices that will support VoIP and WiFi.
In another move underpinning the rapid transformation of the telecoms industry in the digital age, Skype announced last week a tie-up with 3, Hutchison Whampoa’s mobile businesses.
Skype, which was acquired by eBay last year, has become synonymous with the disruptive potential of VoIP. The 75m users of Skype’s computer software can talk to each other for free, once they have paid a monthly bill for broadband access.
Calls to fixed-line phones from Skype are very cheap compared with rates from traditional telecoms operators; however calls to mobile phones can sometimes be more expensive. Fixed-line operators accept that the spread of broadband, which has a flat-fee payment model and enables good quality internet telephony, will only increase the pressure on traditional voice revenues from per-minute charges.
About a dozen large mobile operators are “actively” looking at offering VoIP-based services, according to one senior industry figure. However, the Skype/Hutchison deal illustrates that Skype is trying to move away from being seen predominantly as a means of free calls, and instead as a source of value-added features, such as messaging and contacts lists, for computer and mobile phone users.
Niklas Zennström, Skype chief executive, said that, for 3, it was a value-added service that would attract new customers and improve loyalty. “I think in general revenues for voice calls are going to decline, regardless,” he says.
However, Skype will face much competition in this space.
Microsoft is increasingly moving into mobile software and its Windows Mobile operating system already supports VoIP.
The latest version of software developed by Symbian, 48 per cent owned by Nokia and currently the biggest supplier of operating systems to high-end mobiles, will do the same.
As a stand-alone mobile operator, Vodafone is seen as being more exposed to the inevitable pricing pressure than some rivals.
However, the UK-based operator accepts it is inevitable. “We have to morph from where we are now,” said Arun Sarin, chief executive of Vodafone. “That [VoIP] is clearly a world around the corner . . . it is two to three years away.”
T-Mobile, Deutsche Telekom’s mobile operator, has an established WiFi business and believes mobile operators will be able to cope
with the advent of VoIP, irrespective of the network technology.
“VoIP is not going to be disruptive to this industry,” says Hamid Akhavan, T-Mobile’s chief technology officer. “The arbitrage potential is now closing as voice tariffs come down.”
Frans van Houten, chief executive of Philips Semiconductor, which makes chips for mobile phones, says that, by running their own WiFi services, operators such as T-Mobile can sell features such as easily accessing files on a home computer with a mobile phone. “By bundling them together, they actually tie the user to their services.”
Mobile operators are increasingly adopting the US model of offering “buckets” of minutes for voice and data access to their networks, and with upgrades to 3G networks promising better efficiency and capacity, some industry executives believe that mobile phone users will increasingly pay a flat monthly rate for network access, replicating the fixed-line broadband model.
At that point, the difference between voice and data traffic for mobile operators will disappear and increasingly voice traffic will be carried via a VoIP client over 3G networks.
Also, mobile operators believe that services such as TV, music downloads, e-mail, and navigation, will develop as new revenue streams to offset the decline of voice revenues.
While Skype and other VoIP software alone might not disrupt mobile operators as much as some predict over the coming years, technological developments will mean competition for operators will intensify.