[February 9, 2005]

Mobile-to-VoIP Convergence Boosts ARPU

BY JOHANNE TORRES

A recent study conducted by RelevantC Business Group—a telecom industry research firm, found that the return on investment for GSM carriers as a result of converged mobile-to-VoIP (voice over Internet protocol) offerings could come as rapidly as eighteen months. The Chicago, IL-based firm’s study anticipates an increase in overall minutes of use as convergence allows wireless operators to displace or "steal" minutes from fixed-line phone providers in the office or home. The results of the study are good news to the highly-competitive mobile industry, as wireless carriers seek new sources of revenue while mobile usage and popularity continue to grow.

"The benefits of MobileVoIP leapt from the financial model, which is not always the case," noted Paul Catalano, a partner at RelevantC Business Group and author of the study. "We found cost-savings and revenue enhancements in expected and unexpected categories. Whether in a European or North American scenario, carriers should expect to realize this potential. This is a run-don't-walk kind of result for network operators," he added.

According to the study, the convergence of mobile and VoIP services, commonly referred to as MobileVoIP, is largely seen as bringing the economics of IP to the world of mobility—resulting in operators benefiting from lowering their overall costs and users winning from improved quality of service (QoS). Wireless reception is also being dramatically enhanced inside of buildings and the home, easing the weak point of cellular networks’ obtainable reach—a known source of frustration for consumers. Moreover, the study reveals that as converged networks enable new features such as a single phone number for home and office, and universal voicemail and e-mail, service providers using MobileVoIP are imminently able to bundle low-cost service enhancements that reach beyond basic mobile offerings.

The study examined business models and technology architectures of select European and North American mobile carriers. It broke down the composition of their subscribers' usage in detail, and the related costs for the operator. The results revealed that by migrating a percentage of network traffic to an IP network, the benefits of stealing minutes from the competition and utilizing a more efficient platform became apparent. The increased usage and features enabled by mobile VoIP were upsides to the average revenue per user (ARPU).

Key drivers identified in the study included:

• Increased minutes of use per subscriber, as usage patterns shift and subscribers convert in-building calls from fixed line to a converged service
• Increased subscriber growth due to differentiated service offerings such as single phone number and competitive pricing packages
• GSM network capacity savings, since MobileVoIP will enable the offloading of GSM traffic onto a VoIP network, largely eliminating future investments in capacity
• The study also examined cost drivers such as:
• Cost of installing and operating a VoIP network, if not already in place
• Changes in termination and roaming costs and revenue closely tied to regional billing models
• Technology integration and interoperability

The increased production of hybrid WiFi/Cellular handsets would seem to be a good reason to drive the findings of this study. According to Infonetics Research's latest report, worldwide WiFi VoIP-based handset revenue totaled $45 million in 2004 with unit sales totaling 113,000. The San Jose, CA-based firm’s report titled WiFi Phones Annual Worldwide Market Size and Forecast also sees a strong device sales growth through 2009 as enterprises slowly but steadily continue to deploy voice over wireless LANs (VoWLAN) technology. You can see a more in-depth coverage of this report in my recent article. (http://www.tmcnet.com/tmcnet/articles/2005/wifi-voip-handset-markets-research-infonetics.htm)

RelevantC Business Group
www.rcbg.com