The buzz about VoIP – voice over internet, using broadband to make free phone calls – is getting to be a cacophony. VoIP is going to revolutionise the telephony business: per-minute charging is dead: we’ll all have one bill for all our communications services, one phone, one phone directory.
Of course it’s not that simple, and the revolution – if it happens at all – is still a long way off. But VoIP does have some major pluses, and there are clearly major opportunities in VoIP for the reseller.
The idea is simple enough: the internet is almost always charged on a flat-rate basis, it’s possible to use the internet to carry voice signals and route them to another internet destination, so internet-to-internet calls should be (virtually) free.
Even if the call has to be moved off the internet on to a cellular connection for a mobile-phone recipient or a landline for a fixed-line user, the termination costs will be quite small.
That’s what happens in practice. Calls to another user of the same VoIP service are generally free; calls to other numbers are generally much cheaper than conventional landline or mobile services.
From the user’s point of view, though, there are some potential drawbacks. They’ll need to sign up with a VoIP provider, for a start: that’s an opportunity for the channel, but it can lead to demands for support.
Then there’s the perception that all VoIP calls should be free. Calls to users on the same service usually are; calls to users on other VoIP services might be; calls to non-VoIP networks won’t be.
The user probably won’t be able to retain their existing phone number, they probably won’t be able to call 0800 numbers for free, and in most cases they won’t be able to call 911 at all.
Call quality can vary widely, depending largely on what type of handset is being used and how good the internet connection is. — a VoIP phone has to share the available bandwidth with all the other traffic, particularly troublesome if it’s a WiFi connection. In the worst cases, calls can sound fuzzy or even interrupted into choppy
And users had better not live in an area prone to interruptions in the electricity supply – no power means no broadband connection, so no phone calls.
All of these issues can be handled, but it’s as well to get them out in the open right away.
Mobile VoIP and FMC
The immediate route into VoIP for many retailers will be the dual-mode phone, featuring both a SIM card and a WiFi radio to allow connection either via an ordinary cellular network or a WiFi-based link to broadband.
The SIM hooks into a conventional mobile contract or PAYG option, the WiFi and some associated software gets the user into a VoIP provider’s service.
Dual-mode phones will account for 14% of handsets sold to business customers in 2012, says Analysys, and there will be 4m in use in Europe at that date. Another analyst, Juniper Research, reckons dual-mode mobile handsets will generate almost $68bn of a total VoIP market of $82bn in the same year.
As Juniper’s Basharat Hamid Ashai puts it: “The handset market is moving to a stage where no one wants to carry two or three devices in their pocket, so the ability to have a single device for all calls is a compelling proposition.
“Most single mode VoIP over WiFi handset manufactures are actively either designing or planning to ship dual mode phones”.
But not everyone agrees: Ovum, another market analysis firm, thinks “everyone in the telecoms industry is still too focused on dual-mode phones … We predict that by the end of 2010, only just over 2% of mobile subscribers [in the US] will have purchased dual-mode services”.
Ovum says the people responsible for implementing FMC at the carriers are really sceptical that the devices and solutions are ever going to be “ready for prime time”.
Ovum’s analysts think a broader approach to fixed-mobile convergence is required, including identity convergence (using the same number, email address, usernames and passwords irrespective of whether they are working with a wired or a wireless device) and remote access and control – everything from remote programming of a DVR to over-the-air firmware updates).
“Overall, it’s time for a reality check and for carriers to move on to the forms of fixed-mobile convergence which have real potential for commercial launch,” says Ovum.
But just because a phone like the E65 or N95 has WiFi on board doesn’t mean that it’s instantly available for a true FMC (“fixed-mobile convergence”) solution. This is the high-value option – one phone and one phone number, making and taking calls over a fixed landline connection and a mobile network according to whichever is available and whichever will be cheapest for the user.
As well as a dual-mode handset and access to a broadband WiFi connection, it needs a supplier who can offer both mobile and broadband. BT’s Fusion kicked things off two years ago, but it was more a taste-the-water exercise than a big bang; it used Bluetooth rather than WiFi and involved a separate bill. The market is catching up, however, and Fusion is coming into its own with better handsets and more promotion. (And the newer BT Fusion Business service supports both WiFi technology and a single bill.)
Orange followed with the WiFi-based Unique phone launch last September with two phone plans, Canary 50 and Panther 65. Calls made within the home to other Orange mobiles and landlines are free on VoIP; calls started on VoIP continue to be free if the user leaves the house and the call switches to the mobile network.
O2 is another possible candidate for a FMC service, having bought the broadband-based ISP Be some months ago, but it doesn’t seem too interested. O2 did trial an FMC service back in 2004 with patchy results, and last year CEO Peter Erskine said "Fusion is an interesting concept, but it’s small potatoes …. It is quite a difficult space to succeed".
Instead O2 has unveiled a ‘home zone’ tariff, offering free mobile calls from a nominated Favourite Place. This is being interpreted in part as a move to head off the cost-saving arguments for FMC, and it could certainly persuade some users to junk their landlines in favour of their mobiles.
Mobile VoIP without FMC
In the meantime, the simpler and easier-to-sell option is the over-the-air connection pioneered by fring and Truphone, which involve a small application downloaded on to the handset.
Truphone requires a WiFi handset – currently only Nokias are offered — and uses the SIP standard (see the box) to route network traffic. When a Truphone-equipped handset is not in WiFi range it reverts to being a normal mobile phone, with calls routed over GSM as usual.
Calls are always free to other Truphone numbers and those on other SIP connections; all other calls are charged at cheaper rates than the mobile operators’, often cheaper even than a conventional fixed line. There is no monthly subscription, no inbound charges and billing is via pre-pay.
Another interesting candidate is the UK based start-up barablu, which is promising free calls to other users along with free text messaging, free instant messaging, free voice mail, free conference calling for up to 50 people, and the ability to receive and send files documents emailed to the phone. It too works with WiFi enabled phones, and calls can transfer seamlessly WiFi to a GPRS network if the user moves away from a hotspot.
“This is the future of telephony,” says Marius O’Reilly, chief marketing office for barablu. “Apart from the obvious savings that can be made, this service offers much more freedom and is easy to use.”
fring is even simpler – it offers VoIP without needing a PC or a broadband connection, though it does offer the option of WiFi connection if the handset supports that. It does require a 3G phone and a 3G network; again, a small download is needed.
fring too is 100% free with no subscription costs; consumers simply pay for the data they use under their existing line rental agreement – indeed, the company’s policy will always be to provide basic communications free. Partners will be allowed to generate revenue through extra features on a revenue-sharing basis.
There are no additional hardware or location limitations. And fring was the first company to enable users to choose any SIP-using VoIP provider; it is preprogrammed to recognise several, but other providers users can easily be configured too.
Jajah is one of the slickest VoIP implementations around – and it just needs access to the web.
As co-founder and CEO Avi Shechter puts it: “fringsters can now simply choose how they want to call or chat with a one-click choice from their contact menu to other fringsters, to PC based IM buddies, or to landlines and other cellular phones using GSM, fring, Google Talk, MSN, Skype, SkypeOut or SIP.”
And if you want to check out the simplest option of the lot, take a look at Jajah. Unlike the others, it doesn’t require any downloaded software. You don’t even need a broadband connection. You do need a web browser on your phone; you enter your number and the number you’re calling, Jajah calls you back, when you pick up it then calls the other number, and you have the connection.
It’s simple and free as long as you limit your Jajah calls; premium services such as text messaging or scheduled calling are charged for, and the company also makes money (like all VoIP providers) from termination fees.
Jajah connects phone-to-phone globally and charges local rates – calls between members are free. Jajah recently scored a bit of a coup by presinstalling the Jajah link on the web browser service in the LG Prada phone.
Some mobile operators are quite deliberately restricting the ability of VoIP-enabled phones to make VoIP calls. That has applied in particular to the sexy new N95, which includes a complete SIP implementation in the firmware. That should enable them to make and receive calls via just about any VoIP provider via a WiFi connection, and that obviously removes the voice call revenue from the operators. Truphone for one has been lamented the fact that its users are being denied the N95.
Vodafone and Orange have both elected to install the N95 firmware without the SIP stack. This is an option offered by Nokia to the networks on a phone-by-phone basis; it also seems to apply to other integrated functions like instant messaging on the N95, which Vodafone has chosen not to install.
The N95 appears to be the first recipient of the new customisation collaboration arrangement Nokia announced last year with a number of operators. Customised variants of menus and other UI options have been implemented by Vodafone, T-Mobile and Orange.
But Orange for one says it doesn’t have a blanket objection to VoIP, pointing out that SIP-based VoIP is available on other N and E series devices on Orange contracts. O2, TMobile, and 3 appear to be offering the N95 with the SIP/VoIP capability.
It is possible to upgrade the firmware in flash memory to reactivate the SIP, but this would probably invalidate an Orange or Vodafone warranty.
For the independent retailer, the immediate opportunities lie in products or services. On the product side, the full portfolio would probably include a basic telephone adapter (connects an existing wired handset to a PC), a router — wired or wireless — that combines a telephone adapter, and a number of portable devices such as a cable-connected phone, a WiFi phone, a Bluetooth/WiFi headset like the Plantronics 510 or the Vonage V-phone, and of course a few dual-mode handsets.
Right now that basically means a few Nokias – “The Eseries have been specifically designed to address this scenario,” says David Hinc, Head of Managed Services for Unique Distribution. “These devices are the key enabler in conjunction with a VoIP platform provider to maximise the opportunity. Samsung is soon to enter this space with the i600 wireless smart phone.”
It doesn’t have to be WiFi, though – “most mid-tier Java enabled handsets have the capability of running the Truphone application (OTA downloadable) which when within a WiFi area will connect over VoIP”.
“We’re seeing that WiFi-only VoIP phones have more limited markets” says Jonathan Mendelson, Director of Business Development-Devices for global WiFi hotspot provider Boingo. He likes dual-mode phones as a proposition: “Users will still require the cell-based connectivity they have today with their mobile phones, and the WiFi/VoIP portion of the phone has to be treated as a value-add to the overall phone function.”
As for the services, many of the VoIP providers are looking for resellers of one kind or another.
At its simplest, this would be a ‘dealer’ or ‘retailer’ arrangement — a minimum-involvement referral scheme with a commission structure. The VoIP supplier typically handles all customer service, technical support, customer billing, any installation requirement, and the general account management; the services are sold with the VoIP provider’s branding.
Branded or white-label reselling can be an attractive proposition for a business with some marketing capability and its own billing functions. The reseller manages all billing and day-to-day queries, often on the basis of a single-bill deal. The VoIP provider will probably help out with marketing and sales support as well as technical assistance.
If you want to look like a completely independent VoIP service provider, the answer is to buy wholesale. A wholesaler agreement is always subject to minimum volumes, however, and can be pricey.
At the last count there were over two dozen VoIP suppliers offering something to the channel – if you’re interested, a reasonable starting point is one of the listing websites: try www.myvoipprovider.com (many of the names here are located outside the country but claim to provide a UK service) or the UK suppliers’ trade association ITSPA at www.itspa.org.uk.
So is VoIP a realistic option for the mainstream independent mobile phone retailer? Roy Timor Rousso, VP Product Marketing at fring, is bullish. “Our feedback from retailers indicates that mobile VoIP solutions in the market can provide a clear value proposition, brand differentiation and potential revenue path for value-added services.
“Retailers looking to enhance relationships with users after sale can generate and drive average revenue per user (ARPU) by supporting mVoIP applications, like fring and others. Solutions like fring also spur mobile users to purchase higher-end handsets, as the applications can unharness the potential of feature-rich handsets.”
Boingo’s Jonathan Mendelson thinks dual-mode devices are the key — and WiFi roaming is equally important. “If the phone has to be manually configured for each new network, then it creates a barrier to usage that minimizes success … [The retailer] should look for a VoIP solution that includes access to public hotspots, since a significant portion of the value of VoIP is the ability to call when on the road.”
But he doesn’t see training and support as an issue. “Training staff to properly sell a VoIP offering as an additional plan/service on the phone shouldn’t be any different than training them to sell data services or other value-added features. As far as end-user support, the VoIP service provider should be the primary point of customer interaction for supporting the product.”
And here’s Aaron Powers, VP of Business Development for VoIP provider Vyke Communications: “Correctly structured, mobile VoIP is not only a realistic option for the mainstream independent mobile phone retailer but a desirable one.”
He lists three big pluses – “a service-offering based competitive advantage vis-à-vis other mobile phone retailers; the cost savings offered by a mobile VoIP service will drive handset renewal as customers upgrade to dual-mode handsets; and a recurring revenue stream generated by ongoing use of the mobile VoIP service.”
Vyke’s view is that the most viable way for a mobile phone retailer to enter into the mobile VoIP market is via a white label or co-branded solution. “If the mobile phone retailer is providing the service as a white-labelled or co-branded service, then end user support should be provided by the underlying mobile VoIP provider. It is this provider that has the expertise to resolve customer requests as well as make the network changes required to assure the continual improvement / evolution of the service offering.
”If the mobile phone retailer decides to go it alone, end user support is one more item in the list of services to provide.”
The Nokia N95 comes with just about everything else, so it’s hardly surprising that there’s WiFi on board too.
THE OFCOM RULES
In March Ofcom announced a new regulatory code for VoIP service providers.
It comes into force from June 2007, and requires VoIP providers to make clear …
• Whether or not the service includes access to emergency service
• The extent to which the service depends on the user’s power supply
• Whether directory assistance, directory listings, access to the operator or the itemisation of calls are available
• Whether consumers will be able to keep their telephone number if they subsequently decide to switch suppliers
• If consumers choose to take up a service that does not offer access to emergency services or which depends on an external power supply, the code also requires VoIP providers to:
• Secure the customer’s positive acknowledgement of this at point of sale (by ticking a box, for example)
• Label the capability of the service, either in the form of a physical label for equipment or via information on the computer screen
• Play a message whenever a 911 call is attempted, reminding the caller that access is unavailable.
• The VoIP industry body ITSPA called the regulations ““the most significant regulatory development in the Internet telephony market for over two years” and broadly welcomed them – though it does point out that VoIP will be subject to a stricter regulatory framework than any other technology within the UK telecommunications industry. The new regulations will also be hard to enforce against overseas-based VoIP providers, and UK consumers may not be aware of the disparity.
• And of course there’s the perennial argument that extra regulatory costs will put the UK industry at a competitive disadvantage against international competitors “and risk hindering the creative development of the industry at an early stage”.
Online for all
Another issue is the prevalence of Skype. Is there a consumer market for VoIP that can be satisfied by a retailer, or is that market already sewn up by web-based services like Skype?
The consensus is that the consumer opportunity for VoIP is potentially massive, which means there’s room for more suppliers and more channels to market. Here’s David Hinc of Unique Distribution: “Skype has undoubtedly become the ‘Hoover’ of this sector, but the Tesco Internet Phone model this is an ideal example of how VoIP can be applied to a consumer market.
“Right now customers can benefit from the Skype call savings without the need to be tied to a PC – IP VoiceLink from ipdrum provides full a mobility service via GSM to a mobile phone when simply connecting the device to a home PC.“ The IP VoiceLink is available exclusively from Unique Accessories.
Kerry Ritz, UK MD of VoIP provider Vonage, sees a lot of mileage in VoIP for landline replacement – “this area is the fastest growing market and, in my view, is more appealing to the consumer than distant online suppliers such as Skype.
"The immediate route into VoIP for many retailers will be the dual-mode phone, featuring both a SIM card and a WiFi radio to allow connection either via an ordinary cellular network or a WiFi-based link to broadband"
“Online VoIP services do not offer a practical alternative to traditional telephony whereas ‘landline replacement’ VoIP services do. For example, with a service such as Vonage, the consumer benefits from the call savings as well as all the usual features that come with traditional telephony providers such as BT. Features such as caller display, call waiting, call forwarding, access to emergency services, 3-way calling, voicemail etc. “
Here’s the view from another VoIP provider, Aaron Powers. “Vyke’s view is that seamless integration of the cost and feature benefits of VoIP into existing communication channels is a large part of the future of VoIP … We believe that the key to making a lasting and massive change in the way that people communicate is based on integrating VoIP into lightly modified or unmodified user behaviour.
“With Skype as it is today (and outside the opportunistic usage pattern of ‘hey, Tom’s online, lets see what he is up to’), the user needs to take extra steps to select and use an alternate communication technology. An integrated service would remove these extra steps and allow the user to take advantage of VoIP without having to adapt to an altered interaction model.”
Mobile VoIP looks a good bet, but maybe it needs s bit more momentum – and bit more buzz – to get the consumers queuing up at the stores. There’s no doubt though that business is convinced: a recent Business Intelligence survey reported that 80% of responding companies believe VoIP will help transform their working practices within the next two years.
They’re keen, listing a number of drivers — cost reduction, improved customer service, more flexible working in terms of location, and more. And 44% said they plan to spend more on VoIP and IP telephony in 2007.
Opportunity or what?
Roy Timor Rousso, Fring
Jonathan Mendelson, Boingo
Kerry Ritz. Vonage UK
David Hinc, Unique Distribution
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