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VoIP commoditises another business model

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“Mobile voice over IP (MVoIP) is taking off, and mobile operators are coming under considerable strain as a result,” says David Meintjes, MD of Connection Telecom.

David Meintjes, MD of Connection Telecom (image: Connection Telecom)

The rise of mobile soft phones

With the rise of smart phones, there has been a corresponding increase in generic soft phone applications – one user interface of MVoIP. In fact, along with a myriad of other phone apps, soft phone apps have become the new driving force behind mobile phone sales.

This has given device manufacturers increasingly more control over the phone user experience – previously the domain of mobile network operators (MNOs). MNOs know that if they don’t give subscribers what they want, they will not just switch devices, but MNOs too, to get the coolest devices.

Controlling the call

The most intriguing result of this so far has been a rise in deals where MNOs guarantee a certain amount of revenues to device makers, in exchange for the right to market their devices. Quite a turnaround in the balance of power! In losing their dominance over voice calls, MNOs may well be forced to share some of their voice revenues in time, to back up their guarantees to handset makers.

But it hasn’t stopped there – the iPhone has thus far shrewdly elbowed out generic soft phone apps, but other popular phones, such as the Android fraternity, have been more democratic, giving space to third-party application developers such as Fring and Viber. Whilst these services offer inconsistent quality – mostly due to coverage limitations of the GSM network, the network expansion and rollout of LTE will continuously improve the ecosystem to better support quality MVoIP. Thus, gradually, control over what is on the phone, including the routing of voice, is slipping away from the MNO to not just handset makers, but also developers of the applications on the phone.

A battle is clearly brewing for the right to provision new voice connections (circuit-switched and mobile VoIP). Who will win it

Holding one more ace

For now, MNOs still have an ace or two up their sleeves, despite VoIP commoditising their networks and traditional voice-focused business model.

But their choices are limited. Currently, MNOs must either stick with their current business model, thus losing voice traffic to new market entrants, or offer a MVoIP service of their own. In the latter process, they will have to undercut their highly profitable voice minutes in favour of lower-margin data throughput, but at least they will retain (ever-increasing but less profitable) voice traffic as one class of data service. Whichever route they choose, they must face the slow death of their super margin.

Many European MNOs have reacted by stifling VoIP traffic on their networks, but clearly those are the last kicks of a dying horse rather than the strategic thinking of a survival-assured innovator.

Writing on the wall

It is not all doom and gloom for MNOs’ voice revenues – yet. While some have run into difficulty, the biggest players can still capture substantial market share in the runup to maturity for MVoIP.

In time, however, these players will give way to the Frings and Skypes and VoIP service providers of the world, when universal bandwidth availability and quality commoditises their business voice-centric model completely.

Connection Telecom


  1. I‘m sick of the too many VoIP’s in the market. They claim so much and the output is duuhhh! It doesn’t work for me though! Does anyone know a quality standard VoIP that runs great on my iPhone 3G? Offering great voice quality but cheap Calls to mobile phones and landlines? Works on 3G? Supporting Group Video Calls is a plus as I need to commute for my business purposes.

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