Home >> More Reports news >> This Article

Mobile VoIP in Europe Unlikely to Achieve Mass Market Soon

Published on:

Note -- this news article is more than a year old.

Fitch Ratings says today that mobile VoIP (voice over internet protocol) in the European telecoms industry is unlikely to achieve mass market take up for some time. However, as network quality improves, selective usage of mobile VoIP could start to impact operators' revenue from higher tariff services like international calls and voice roaming.

Mobile VoIP is attractive mainly for cost reasons. In similarity to fixed telephony, mobile VoIP creates a technology arbitrage opportunity between voice and data. Given the current pricing of mobile data packages, Fitch estimates the cost per minute of a mobile VoIP call using a 3G network is around 10-20 times cheaper than the cost of a normal mobile phone call. (Fitch compared the cost of a normal mobile call, based on the average price of minutes in a standard large minutes-inclusive bundle, with the estimated cost of a mobile VoIP call based on the average per unit price of a typical mobile data tariff.)

Mobile broadband take up is rising, which increases the potential size of the mobile VoIP user base. Fitch estimate that 25% of online European consumers now regularly access the internet from their mobile phones but up until now most European operators have not allowed VoIP services to be carried over their 3G networks. However, regulatory scrutiny is increasing, and mirroring recent developments in the United States, the agency believes that the number of mobile operators in Europe allowing VoIP on their 3G networks is likely to increase within the next three years. EU Information Society and Media Commissioner Viviane Reding has made it clear that the second round of roaming regulation introduced during the summer of 2009 stresses that "there should be no obstacles to the emergence of applications or technologies which can be a substitute for, or alternative to, roaming services, such as WiFi, VoIP and instant messaging services."

As with fixed line VoIP, Fitch expects there will good demand for mobile VoIP which is likely to be used by consumers for low cost international calling and to bypass international roaming charges while travelling. Nonetheless, there are several factors holding back the adoption of mobile VoIP over 3G. Network quality remains a problem. The 3G coverage required for VoIP remains patchy, and upload speeds are poor. More importantly, latency, the delay before the network delivers a packet of data, is roughly around 150-200ms or higher depending on network loading and signal strength. To place a good quality mobile VoIP call, latency should be below 100ms. Network quality and latency issues should be resolved as HSDPA (high-speed downlink packet access) handsets become more common and operators upgrade their networks, however, this will take time. Most current mobile VoIP applications are not easy to install and use on a mobile handset. As they are not supported by operators, they are usually not integrated with a handset and network functionality.

Furthermore, mobile operators are still bundling a large number of voice minutes and text messages together in their tariff plans. As long as users keep usage within the bundle, the low cost of using bundled voice and SMS remain relatively attractive given the unreliability and difficulty associated with VoIP. To protect their core revenue streams, operators are likely to continue to bundle voice and SMS with mobile data. In the event that mobile VoIP becomes more popular, Fitch believes that operators would likely rebalance their tariffs, making voice cheaper and data more expensive, to maintain profitability.

In the longer-term, mobile operators are likely to offer VoIP services themselves. This is likely to be part of the evolution of mobile networks when LTE networks (networks using the next technology standard after 3G) are deployed, possibly after 2012. When this happens, the cost of transporting voice calls should fall significantly. Mobile operators would essentially offer the same service as current mobile VoIP players, but with the benefit of greater scale.

Sign up for our free email news alerts

Sample Copy

Tags: voip  three  hsdpa  broadband  downlink  mobile voip  coverage  3g network  3g coverage