3’s Skype users generate more non-VoIP minutes, and churn less
Stats released yesterday from Juniper Research claimed that there could be 100 million mobile VoIP users by 2012, with mobile voice over WiFi usage perhaps draining $5 billion from operator voice revenues by 2015.
Juniper’s report author Anthony Cox said that “several more traditional operators” will have partnered with VoIP providers by 2012, leading to a significant uptake of mobile VoIP services.
But what lies behind such partnerships? Are operators beginning to see the value of mobile VoIP, or are they being forced to the table by the increasing “over the top” uptake of Skye and other VoIP services?
Here are some written Q&As we had with Juniper’s Anthony Cox. After that, we’ve got the views of Skype’s Russ Shaw, and Karl Good of Truphone as well.
Q (Keith Dyer):
What I’m interested in is whether you think mobile VoIP represents an overall opportunity for operators, or will inevitably threaten revenues?
A (Anthony Cox):
In the very long term, mobile operators will be using mobile VoIP to carry their traffic themselves, but that is a long way off. In the mean time, they have the possibility to form partnerships (Skype says it is working on several in addition to the two it has already). These partnerships would typically be a hybrid between voice over IP and circuit switched.
Mobile VoIP, via a downloaded application for example, is threat to traditional operators, but the extent to which it will undermine them in the medium term has probably been overstated. The pressure on voice margins through intense competition as mobile subscriber rates reach 100% is more of a problem.
Q:
You mention a $5 billion drop due to traffic being routed over WiFi but what is the upside of operator partnerships with VoIP providers, such as 3’s with Skype? Are there indications that operators see an upside, either in data tariffs, or customer retention, to mobile VoIP?
A:
First off, it could be a lot more than $5 billion, incidentally. 3UK’s partnership with Skype was initially designed to attract customers. Counter intuitively, 3 says that it has actually increased margins, by increasing voice revenue and bringing down churn. Three claims the following:
• Skype users churn less (14 percent) than non-users
• Mobile Skype users generate nearly 60 percent more voice revenue than non skype -users
• Skype users have a “margin uplift” of more than 20%
• Skype users are more likely to subscribe to a data add-on than non Skype users
Q:
And if operators do look to partner, what would be their strategy in doing so. Would operators look to tier VoIP QoS?
A:
Good question, probably not yet. It’s worth noting that voice over 3G networks is technically quite difficult. Latency and variable signal quality is the problem.
So how do things look from the VoIP service provider side of the fence?
Russ Shaw, GM of Mobile, EMEA for Skype said that operators are changing the way they think of VoIP.
“We are seeing evidence that many mobile operators around the globe have started to rethink their strategies towards innovative applications on their networks, including mobile VOIP. We already have solid partnerships with Hutchison 3 in the UK and Verizon Wireless in the US who are offering Skype to their customers.”
Shaw’s numbers from 3 roughly mirrored Cox’s figures. He said that figures from Hutchison 3 are showing that continuous Skype users among the customers of Hutchison 3 churn less and consume 17% more non-Skype voice minutes (3 Customer Survey, Aug. 2009).
“We strongly believe that there is no alternative for mobile operators on the road to customer loyalty than embracing innovation and forging alliances with mobile innovators like Skype,” he added.
Karl Good, Director of Applications at Truphone, said that good quality VoIP solutions allied to increased network demands were driving oeprtaors’ interest in VoIP solution.
“VoIP has continued to mature and today there are many good quality mobile solutions can offer an as good as or in some instances better than experience than a traditional circuit switched call.,” Good said.
“There are also practical reasons to look at VoIP as a complimentary solution to offer voice to operator customers – such as offering connectivity over IP networks where operators perhaps cannot effectively or affordably offer cell coverage in rural areas.
“Operators naturally are looking at ways of reducing traffic and traffic transit cost, VoIP again naturally fits here as a complimentary channel that can be used to backhaul traditional circuit switched voice traffic over an IP backbone, where operational costs are significantly lower than that of traditional cell network infrastructure.”