Verizon has been making aggressive moves to break out of the CDMA corner. The first operator to truly drive LTE deployments, the company now covers some 80% of the US population with it’s new high-speed network.
LTE is, of course, very high speed, but as we’ve discussed in the past, it is also very low latency. I believe latency is becoming the most important metric. Latency is critical for any real-time communications – and particularly voice over IP.
With near nationwide LTE coverage, over the top (OTT) VoIP providers see Verizon’s network as an ideal platform for actually *replacing* the mobile operator’s core voice service.
What’s an operator to do? Verizon could try to ‘out VoIP’ the VoIP providers – innovate faster and create more value quickly than the other guys.
But I think with their new “Share Everything” plan, they have decided to simply take domestic voice/SMS off the table. A smartphone ($40/month) or feature phone ($30/month) has a flat ‘connection’ rate ostensibly to access Verizon’s network. Bundled into that flat rate is unlimited voice and SMS.
This approach is similar to the evolution of consumer voice on the fixed network. For years consumers bought ‘telephone’ service, which came with a piece of copper into the home.
Quickly fixed operators stopped selling ‘phone service’ and started selling DSL. People bought DSL lines (or data access), which includes POTS and the ability to make phone calls. Quickly POTS was sidelined in favor of Internet access, and voice calls were simply thrown into the mix.
We're moving beyond voice and message into access and value-added data services. Verizon's move to wrap up voice/messaging into a flat-rate plan is a smart move... for Verizon.
Back in 2009, as the anticipation for LTE was building, some companies in the mobile industry started a campaign to address a minor, oft-overlooked hole in the migration to LTE – telephony.
As is well known today, as an all IP packet environment, LTE was intentionally designed to *not* support any of the ‘old’ circuit voice/SMS services. The idea was to ________ (fill in the blank: encourage? force? coerce? incent?) mobile operators to invest in a entirely new, duplicate voice/SMS core infrastructure.
One group, dreaming of a bucolic, ‘lazy river’ approach to network transformation, created the VoLGA Forum. The VoLGA Forum embraced a pragmatic approach toward evolving to an all IP access network: harness an existing 3GPP specification to bridge the old circuit voice system onto the new LTE network and giving time for the brand new all-IP voice system to mature.
And there was a different dream - more dramatic, more pizzazz , more of a ‘leap of faith’. Leave the old circuit network behind and we'll all jump with full faith onto the new, as yet undefined (at the time) system.
Well, reports are coming back from the LTE World Summit, held this week in Barcelona, that perhaps the ‘leap’ is a bit longer than anticipated – a lot longer.
"If you haven't built the perfect data network for OTT players, then you have more time," said Ove Andreasen,director of mobile systems for Danish operator TDC A/S stated during the LTE event. "You could argue we're too late now if they stay as strong as they are."
Looks like we'll have to dream a little longer...
Mobile operators continue to be under incredible financial pressure. Revenue per minute of voice continues to decline while new over-the-top apps like Pinger and WhatsApp are eroding SMS revenues.
Meanwhile, mobile data usage is skyrocketing, but as many industry analysts point out, the revenue per megabit isn’t keeping up with the capital investments required to support the demand.
In short, demand is up while revenue is down. It sounds like the “Internet Economy” has struck the mobile industry.
In response, operators are aggressively moving into new technologies like LTE. The primary driver for moving to LTE is that, as a transport, it’s significantly less expensive than UMTS/HSPA.
What other ways can operators wring costs from the network?
It turns out that 50% or more of mobile data usage happens indoors, specifically at home and in the office. Of course, those locations are blanketed with Wi-Fi.
Today many subscribers are turning to Wi-Fi in the home to supplement their mobile data needs. Mobile operators are encouraging this behavior with price caps that force consumers to look for Wi-Fi to get their mobile data fix.
But in this capacity, Wi-Fi isn’t actually adding benefit to the mobile operator’s core network services other than to push subscribers off. Wi-Fi is still regarded as a dumping ground for mobile data that operators can’t monetize.
However, Wi-Fi can function as an extension to the macro radio access network, actually boosting the subscriber’s mobile coverage and adding capacity where subscribers need it most – indoors.
By delivering the same experience between LTE and Wi-Fi, mobile operators can embrace Wi-Fi as a new low-cost RAN, while deriving increased offload benefit and improved customer satisfaction through improved coverage.
Extending the core LTE voice and messaging applications (VoLTE) over Wi-Fi ensures subscribers get a consistent experience over Wi-Fi and LTE.
Rather than dragging Wi-Fi along to carry un-profitable web traffic, mobile operators can harness the technology to become the in-building radio access network – providing a better user experience, particularly indoors, at a lower cost than LTE.
This week, Kineto announced it now supports the GSMA’s VoLTE profile (IMS voice & SMS) in its Smart Wi-Fi client. Smartphones with the Smart Wi-Fi client will now be able to receive the mobile operator’s voice/SMS service (VoLTE) when attached to Wi-Fi.
I have always believed LTE and Wi-Fi were two sides of the same coin – both are high-speed, low-latency flat IP networks. LTE covers the macro/outdoor world, and Wi-Fi is by far the dominant in-building wireless technology. Marrying the two technologies into a seamless experience delivers a compelling experience for mobile subscribers.
In the move to LTE, mobile operators are adopting VoLTE, an IMS/SIP-based voice and SMS profile that replaces (replicates?) the existing circuit voice/SMS services used in GSM/UMTS networks.
As mobile voice/SMS account for well over 50% of mobile operator revenues, ensuring these capabilities are available on LTE is critical. So extending VoLTE to Wi-Fi just makes sense.
A smartphone at home (or in the office) will want the same high speed experience as the outdoor LTE network, and Wi-Fi, already deployed in >400m indoor locations around the world, is ready to deliver.
This got me thinking: What, if any, is the role of an LTE femtocell?
Femtocells, mini base stations designed for home use, have turned on hard times lately. Yet there is some talk of resurgence as the industry moves to LTE – the logic being that LTE networks will be patchy for the time being, and an LTE femto to boost in-home coverage will help accelerate adoption.
But let’s consider the role of a 3G femtocell today, and see if it applies to an LTE deployment/subscriber. A 3G femtocell provides a strong 3G signal in the home, boosting coverage. But really this amounts to a subscriber having access services that reside in the mobile core network – namely voice & SMS. Sure there may be mobile data services like MMS, Mobile TV, or Visual Voicemail too, but the bulk of the interest, and revenues, are associated with voice/SMS.
In the move to LTE, subscribers will still want to make a phone call, so access to voice/SMS is critical. With Kineto’s Smart Wi-Fi client, smartphones can access VoLTE over Wi-Fi directly, no LTE femtocell needed.
As for mobile operator data services, many are being adapted to the new ‘all-IP’ world. Apps are able to directly access mobile data services over any IP network rather than only from within a mobile RAN.
It seems that Wi-Fi, when paired with VoLTE over Wi-Fi, delivers the same experience as an LTE femtocell. Access to internet services (Facebook, YouTube) happens directly over Wi-Fi. And Smart Wi-Fi with VoLTE support delivers calls/texts via Wi-Fi.
Let me know what you think. Can an smartphone that provides VoLTE over Wi-Fi remove the need for an LTE femtocell?
In the past, I have written about the growing trend of people not making phone calls and the implications for investment in VoLTE. In fact, a recent PwC study of US post-paid subscribers found the first ever decline in voice minutes of use in 2011.
Non-verbal 'social-network' communications has become prevalent and popular – think SMS, email, Twitter and Facebook – particularly for the under-30 crowd.
With mobile operators relying on 60-70% of their revenues from plain old mobile telephony service (POMTS – it doesn’t have the same ring as POTS), the trend away from telephony or even voice is disconcerting.
But the last company I would think of feeling the pain of this transition is Skype, who has redefined voice communications for the Internet age.
Yet according to an article in Adweek, Skype is launching a $12 million campaign that “rips into Twitter and Facebook”.
The ads, initially to be placed in/around London, take aim at the non-verbal SMS /Twitter /Facebook 'conversations' that seem to dominate today.
Of course Skype is a leader in (mostly free) voice and video conversations. I think it's ironic that Skype has chosen to spend advertising dollars on these orthogonal 'competitors' rather than going after traditional voice/telephony providers like mobile operators.
The implication, of course, is that the real threat to a company like Skype isn't other telephony providers, but in fact the general decline in people making calls.
No wonder Verizon dropped their iconic "Can you hear me now?" ad campaign.
Pricewaterhouse Cooper has been surveying the US telecom landscape for years. For the first time PwC recorded a decline in the average voice minutes of use (MOU) for US post-paid consumers.
Furthermore, the survey finds that, for the first time, mobile voice usage is starting to decline, triggered by the increased penetration of price-sensitive customers and the replacement of voice usage with data services such as text messaging and e-mail. The average minutes of use (MOU) per postpaid subscriber has seen a significant decline, shrinking from 720 MOU per month in 2010 to 638 MOU per month in the 2011 survey.
We all know that non-verbal “social-media” communications is on the rise – SMS, email, Twitter, Facebook. Now it’s actually starting to take a toll on voice minutes and revenues.
What are the implications for an investment in VoLTE?
There are two things set to impact the investment in IMS-based voice over LTE.
One item is an undisputed truth, the revenue per minute of voice continues its interminable slide towards rock-bottom. As industry pundit Dean Bubley posted the other day:
“The growing elephant in the room is the growing realization in the industry that mobile voice telephony revenues are declining.”
The point, from Dean’s perspective, is that it will be nearly impossible to find a return on investment for a massive new IMS/VoIP system. As he concludes to eloquently:
“What operator will want to invest in more expensive technology in order to provide a worse service in a declining market?”
Whammy #2 is one I don’t think gets the attention it deserves – namely that the generation of people, but particularly those under 30, would much rather text, email, Facebook, whatever… with their smartphone than actually make a phone call.
Across all age-groups/gender, the average number of voice minutes/month decreased 12% between 2009 and 2011.
In the same timeframe, the average texts/month increased 35% and 44% for woman and men respectively.
Perhaps adding insult to injury, the word “voice” didn’t even appear in the Nielsen report until page 24!
Maybe it's just not that interesting any more. The first 23 pages were filled with statistics about all the great over-the-top apps people use religiously.
As we head into the "buying season" also known as Christmas, there's no doubt mobile products/services are going to be big sellers.
Verizon is maintaining a commanding lead in the US LTE market and the global market in general. Just last week, analyst firm Telegeography published that Verizon had an estimated 60% of the total LTE subscribers worldwide with 3.1m.
It sounds like LTE is compelling for Verizon's subscribers. So I was a bit surprised when I heard an ad saying LTE was on sale at Verizon:
To be fair, it's just a little sale, a holiday promotion where new subscribers can get 2x the data for the same price. This got me thinking... if I can get 4GB of data/month for $30 on LTE, what does that cost on their 'old' 3G (EV-DO) network. Hummm...
The standard EV-DO data pricing as of Dec 2, 2011:
LTE data is 50% off. But wait... I thought LTE was compelling, super fast, wonderful, why would it be 50% the price of EV-DO?
Verizon's LTE is available in ~130 markets in the US, whereas AT&T has 'launched' service in 15, so they can't be facing competitive pressures.
I will posit one of the problems is battery performance. Verizon's 'dual radio' approach to addressing the voice over LTE problem is sucking electrons... fast. This was a known and acknowledged problem associated with a dual radio approach. I wonder if CS Fallback will do a better job of inspiring consumer confidence.
About two years ago, Kineto published an analysis of CS Fallback and, among other things, came to the conclusion that call setup times would be about 50% longer than a ‘standard’ UMTS call setup times.
Kudos to Zahid over at 3Gand 4G Wireless Blog for recognizing the problem.
It will be interesting to see customer acceptance of CS Fallback devices when they are finally introduced into the market.
In a very un-shocking piece of news, Verizon announced that their new SIP/IMS based VoLTE service won't hand calls back to their existing CDMA network.
Basically there's no compatibility between the CDMA network which Verizon uses today to carry hundred of millions if not billions of voice minutes, and it's new VoLTE voice network. Verizon is building an entirely new voice network, and is struggling to find a way to make the old and new compatible.
Of course a VoLGA solution supports seamless call handover to/from the existing GSM/3G networks. It did almost two years ago.
Is this causing a fragment in Verizon's market???