Monday, April 06, 2009

Is Skype finally challenging operators' voice revenues?

The news that there has been over 1 million downloads of Skype to iPhones in just two days is challenging mobile operators to face up to the fact that their voice revenues – which for better or for worse are still the bedrock of their financial health, despite all the talk of data services – may be truly coming under threat at last. While consumer advocacy groups (and VoIP providers) are arguing for operators to open up their network (so called ‘net neutrality’), mobile operators are looking to block Skype in the name of ‘network efficiency’ and ‘non-compliance’ of the application with their network.

The VON Coalition Europe (a group that includes Internet giants like Google, Microsoft, Skype and Intel) claims that operators are blocking or degrading of content, services or applications “for motives that extend beyond efficient traffic management.” With a typical Skype call normally only using 8 to 20kbps, which can be compared to the download of an average web page, Skype in many respects is considered a low bandwidth application. However, make a Skype video call rather than a basic voice call, and the impact on the network could be very different…

With so many claims and counter-claims flying around on the true impact of services such as VoIP on a mobile network, it can be hard to see what the true picture is. Are operators justified in blocking Skype because of the impact on their network? Or is this just a cover for their deep rooted fear that Skype is about to slay the sacred cow of voice revenues?

It perhaps takes companies like Actix* provide real insight into what the real impact of services such as Skype on a mobile operator’s network performance. Working with tier one operators in North America, Europe and Asia, Actix is at the heart of operators’ network status management systems, processing over 1 terrabyte of data every day on a typical tier network.

While there is a certain inevitability about VoIP as operators look towards LTE and an all-IP network, data loads are increasing over 3G (and more so with HSPA), pushing the cost-per-bit for ever higher. With the advent of LTE, mature operators will be left with at least three overlaying Radio Access Networks (RAN) to manage - 2G, 3G and 3.9/4G networks. With a large portion of the delivery cost of every bit being RAN-related, the challenging economics of mobile broadband will enforce the need for a much sharper focus on delivery cost per data bit if operators are to remain profitable.

So maybe both sides are telling the truth ... operators are fighting a rear-guard action because they fear the impact of opening up their network to yet more data which they cannot directly monetise, while VoIP advocates are right in pointing a figure at operators' basic revenue concerns as the real motivation for their opposition.

* Actix is an AxiCom client

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