The mobility opportunity for fixed telephony and TV operators

The availability of increasingly sophisticated softphone applications and TV anywhere applications coupled with the widespread adoption of smart devices, provides fixed operators with an opportunity to enhance their services with mobility. And while it may not always be possible to monetise the mobility aspect directly, the enhancements provide significant value to customers, making them more likely to keep their fixed telephony and cable TV services and possibly even upgrade.

With softphone apps from companies such as CounterPath, fixed telephony operators can add mobility with minimal effort and cost. In developed markets smartphone penetration is already high and is increasing fast which means that a large proportion of fixed network customers could install a Skype-like app provided by their fixed telephony company. Many people are loath to give up their fixed phone and by giving them the opportunity to make and receive “fixed line” calls away from home the value of the fixed line is much enhanced. Furthermore, instead of a voice only product fixed operators can leverage those smartphones and tablets to offer rich communications including video calls. Thus even at home, answering a fixed call on a smartphone connected to WiFi will be much more attractive to telephony users than using their old fixed voice phone.

Increasingly large LTE bundles and proliferation of free WiFi or access via the phone network make it easy for fixed operators to effectively become OTT mobile players without investing a cent in mobile access networks. Upselling opportunities may exist by offering households additional personal fixed numbers with home call management features (call home, call one, transfer, group video call). The differentiator compared to Skype and other OTT services is that a fixed operator softphone app is linked to the existing home phone account. Customers can use their existing account and bundled minutes even when away from home. Most importantly, customers benefit from universal nature of the PSTN because they can fall back to the lowest common denominator of a simple voice call to any telephone number world-wide.

While fixed telephony operators who can benefit most from this opportunity are those who do not have a mobile offer, even those who have a mobile offer may see this this as an opportunity if their mobile rivals do not have a fixed network. While a few operators already have softphone app offerings in the market, as yet this is an under-exploited opportunity.

A fixed network OTT app is particularly valuable when used abroad. In February 2013, Syniverse published research which showed that “transient roamers” spent $8.7 billion on hotel Wifi and $3.9 billion was spent purchasing access to other paid Wifi hotspots. While traditional fixed operators may not be able to garner this revenue, it shows the value that people attach to being reachable and making calls without using cellular networks.

These developments mean that IP telephony is no longer a threat to fixed operators but an opportunity to deliver rich communications services to their customers anywhere world-wide.

However, the greatest opportunity lies with triple play operators (telephony, broadband, TV). An app which combines a softphone with a TV anywhere services would represent a huge value add to cable TV customers. Already TV consumption is moving rapidly away from TVs to other devices such as tablets, smartphones and laptops. Internet based TV delivery is racing ahead. Recognising this trend, several TV providers in Europe and North America offer apps that allow their customers to watch their favourite shows on other devices. Within the home the ability to watch TV on a tablet adds another outlet which is of proven value to cable TV customers. The ability to use a cable subscription out of the home is of course even more valuable. This need not be restricted to Wifi because with LTE mobile TV, at least in a limited manner, is already reality.

In an ideal world a family with a holiday home in another country could simply take their home phone and cable TV channel package with them and access all services through a broadband connection at their holiday home. While there may be issues over geographic limits of contents rights, these could be overcome. Certainly within the EU it will not be sustainable to restrict the consumption of digital content depending on which EU country it was purchased in.

For cable TV companies this would also be a defensive move as young people opt to watch on-line video rather than pay for cable TV. According to figures published by eMarketer, in 2013 for the first time adults in the US spend more time consuming major media on smartphones, tablets and laptops as opposed to TV. This illustrates that we have reached a turning point which will lead to a great deal of disruption in the telecoms and digital media industries.

By Stefan Zehle, CEO, Coleago Consulting

The end of geography and roaming in telecoms

Today most people are familiar with services such as Skype. Effectively a location independent mobile service, with Skype it does not matter where people call from nor does it matter where the called party is located. Geography has become irrelevant. By the end of Q4 2012, it was anticipated that roughly 50 per cent of international call traffic is likely to have taken place via Skype and similar services rather than traditional carrier traffic.

More and more people are installing Skype on their handsets or using Facetime on their iPhone, and they are getting used to the fact that calling from their mobile phones doesn’t necessarily have to involve the mobile operator. What’s more they also get video telephony. Increasingly people use WiFi on their smartphones, both at home, at work and in public places. The introduction of WPA2 as well as SIM based authentication which allows automatic connection to a WiFi network without signing in makes it easy for users to route their traffic via WiFi and opt out of traditional telephony.  Operators such as Rebtel in Sweden and Republic Wireless in the USA focus on this opportunity – these mobile operators that use WiFi offload “push” their customers to make calls using Skype like services.

The trend away from making standard mobile voice calls is accelerating with the adoption of LTE. For example, in contrast to older versions of the iPhone, the new iPhone with Apple’s iOS 6 upgraded FaceTime from a WiFi only feature to a cellular feature. AT&T Wireless was the first to allow customers to use FaceTime over LTE if they signed up to their new shared data tariff plan.

During 2013 we will see the start of a fundamental reshaping of mobile telecoms service offerings driven by new services based on the IP Multimedia Subsystem (IMS), the evolution of mobile wholesale as well as regulatory trends. Some operators may go all the way and break the link between the mobile telephone numbers and geography. After all it seems somewhat archaic that in a world where distance does not matter, mobile operator tariffs are still based on location and distance. Location is not an issue with Skype or FaceTime and this is one of the reasons for the success of these OTT operators.

Some operators have already introduced services based on IMS, for example in Canada the Rogers One Number service allows the seamless switching between a smartphone and computer. It allows mobile operators to leverage the proliferation of free WiFi connectivity to in effect extend their network coverage world-wide.  This allows mobile operators to fight back against OTT services such as Skype, WhatsApp and FaceTime by in effect becoming themselves an “OTT over WiFi” player.

There are also traditional mobile services that allow users to avoid roaming charges and thus take at least one aspect of geography out of equation that already exists for voice (Truphone, WoldSIM and other) and data (roamline.com, in collaboration with KPN). The business model is built on exploiting the difference between lower wholesale prices paid by MVNOs versus high inter-operator roaming tariffs by offering customer SIMs with multiple numbers in different countries.

The opportunity to take geography out of mobile pricing is not limited to roaming. For example, Turk Telecom launched a service in Germany and Belgium aimed at the Turkish ethnic segment in these countries. Customers are charged exactly the same amount to call numbers in Belgium or Turkey. Turkcell could add the ability to recharge linked accounts (a Turkish person working in Belgium can recharge the prepaid SIM of relatives in Turkey) and make small mobile payments across borders. Smart, of the Philippines is already going down this route, targeting the Filipino diaspora segment around the world.

As a result of these trends in international call pricing as well as roaming, Geography may soon become irrelevant.

Written by Stefan Zehle, CEO, Coleago Consulting