Microsoft’s Skype Buy Highlights the Mobile VoIP Transition

May 16th, 2011 by · Leave a Comment

VoIP rarely gets the headlines these days, but Microsoft’s blockbuster purchase of Skype has brought to the fore a not particularly new yet increasingly important phenomenon.  The New York Times ran a piece entitled “Skype-Style Calls Force Wireless Carriers to Adapt” which framed the challenge facing wireless carriers, which despite the last year of press doesn’t have much directly to do with network neutrality, and here’s one response from the eternal voice of VoIP, Andy Abramson.  Specifically, it is the fact that for wireless carriers:

Mobile Data + VoIP = Revenue Loss

In the long run, it just can’t be any other way – whether the carrier responds effectively or not.  The move is from a model where the carrier is the only one who can sell voice minutes on a network to a model where many can and where the costs to do so are cheaper.  Sooner or later, all voice traffic will merge with data, and each data bit earns less revenue than a voice bit.  Of course, it also costs less, but nobody likes to explain revenue declines to shareholders.

The other item recently that brought out the same fact was KPN’s revenue disappointment, in which it blamed the movement of SMS text messaging off its own service and onto the internet.  The horrors!  But KPN seemed to declared its intention to impose charges on the interlopers daring to use the data channel to compete with SMS. Oh wait, maybe it is about network neutrality after all?

The industry had better hope not, as the defense of revenue streams one thinks one is entitled to is not going to gain much sympathy.  In the rest of the tech world, revenues get won or lost all the time and are replaced (or not) by new ones.  There is no question that somewhere in all this, the economics that get networks built are going to have to work out.  Costs must be recovered and profits must be possible, but there needs to be a positive way to go about it.  KPN is preparing to piss into the wind, and I do hope they change their mind.

The obvious, yet unpopular, solution is for wireless carriers to raise rates on their data plans to reflect their true costs of carrying those bits, rather than depending on revenue streams from premium products that aren’t so premium anymore.  Yep, who cares if it’s a dumb pipe if it’s profitable nonetheless.  Make the dumb pipe profitable, and then fight for more revenue via data apps like voice and messaging if you can – it’s the only way that makes sense to me.

And if competitive pressures make it hard to set pricing for dumb pipes that make sense, well then you’ve got irrational behavior.  Sooner or later that works its way out – painfully of course, but that’s life.

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Categories: VoIP · Wireless

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