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Summary

At this year’s LTE Voice Summit in London it was clear that there are two major forces fundamentally changing the way operators charge for voice calls: the gradual upgrade of circuit-switched networks to IP voice and developments in the way major Internet players are targeting voice. As a result, operators need to assess what role they want to play in voice’s all-data future.

With problems overcome and benefits proven, VoLTE launches are set to accelerate

The shift to IP voice through VoLTE and voice over Wi-Fi (VoWiFi) is happening gradually, with just 78 VoLTE deployments at end-3Q16 (10% of all networks) according to Ovum’s latest research. However, operators are likely to increasingly commit to VoLTE deployment because the associated technical challenges are rapidly being resolved. As vendors and device manufacturers learn from early deployment challenges, operators wanting to deploy VoLTE and VoWiFi are facing fewer barriers.

Although the benefits to end users of VoLTE are not as tangible as, say, the increase in data speeds from one 3GPP release to another, turning voice into data means that operators can free up spectrum for data, so that they can carry data traffic on their networks more efficiently and more cheaply. Even if VoLTE is treated by operators as a bearer technology rather than a way to offer services for the next few years, there are opex and capex savings to be had from implementing VoLTE – reason enough for an operator to start planning its migration to IP voice.

OTT players target the native dialer in renewed assault on telco voice

Although VoLTE turns voice into data, operators are still charging for it on a per-second-of-talk-time basis. This makes complete sense because this is how users think about their voice usage. If OTT players weren't looking to integrate increasingly tighter telephony services into their core messaging platforms, operators could just carry on selling voice minutes in gradually decreasing volumes year on year. The reality is, however, that operators are struggling to maintain a key advantage they’ve long had: enabling users to make and receive calls from the phone’s native dialer with ease.

A major development from Apple this year was the introduction of CallKit on iOS 10. CallKit enables developers to integrate VoIP calls into the iPhone’s native dialer, a move that weakens operators’ hold on telephony by making it much easier for users to handle app-based calls from the home screen. Although CallKit isn’t a new concept – a similar capability was already available on Android – it is sure to encourage VoIP players to promote their telephony services to all smartphone users, not just Apple’s. Indeed, in September, the same month Apple released iOS 10 for developers, Facebook enabled incoming calls from its Messenger app to be answered from the iPhone’s native dialer. WhatsApp users can also do the same. It’s surely only a matter of time before other major OTT players take this small step and further threaten operators’ hold on the native dialer experience.

In the all-IP near-future a quality network experience will be even more crucial

Just as messaging now takes place for many people around specific communities (e.g. WhatsApp, Snapchat, and Facebook Messenger), so too will voice calls. What does this mean for operators? On the face of it, it’s not good news for them, simply because consumers will not use their voice minutes or SMS. They will, however, use more data and migrate to higher data bundles through higher overall data usage, not just IP voice.

And here is one of the biggest opportunities for operators: Offer the best network experience possible and effectively communicate this to the market. Many of the leading 4G operators are taking this approach, and it’s helping them to win or maintain market share as well as upsell to users higher ARPU price plans through increased data usage.

At this year's LTE Voice Summit, some operators expressed interest in developing applications to compete with OTT players (e.g. Telefonica’s Tu Go). But history shows that operators will struggle to beat OTT players or content creators at their own game. Operators may find it more profitable to work with partners via an open API approach, emphasizing how open networks and the level of integration they offer will add value.

It’s clear that an operator that provides the best data experience will carry more traffic over its network than rivals that don’t have such a strong network in terms of coverage, speed, and reliability. Because the future of voice is data, operators must offer the best data experience possible. This may seem an unlikely, perhaps unsurprising, finding from a conference on the future of voice, but it’s one that will help operators compete for and win the most profitable users.

Appendix

Further reading

Best Practice in 4G Network–Focused Marketing Campaigns, TE0014-000412 (September 2016)

4G in Western Europe: Network Expansion and Subscriber Growth, TE0014-000418 (August 2016)

VoLTE/LTE-A Deployment Tracker: 2Q16, TE0014-000414 (July 2016)

VoLTE: Swisscom’s early commitment yields benefits, TE0014-000402 (May 2016)

Author

Paul Lambert, Senior Analyst, Europe

paul.lambert@ovum.com

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